The Economic Impact of the Motion Picture & Televis ion Product ion Industry on the United States

2006 ReportWith contributions from:

Edward Jay Epstein, Author of The Big Picture, The New Logic of Money and Power in Hollywood

Eve Troeh, Reporter for National Public Radio

Harold Vogel Author of Entertainment Industry Economics, A Guide for Financial Analysis

A Message from Dan Glickman............................................ 2

Introduction....................................................................... 3

Report highlights................................................................ 5

Creating high quality jobs.................................................... 6

Developing small businesses and entrepreneurship................ 7

Generating tax revenues...................................................... 9

Competing successfully around the world............................ 10

Production around the country........................................... 11

Making an impact in states............................................... 13

Letters from governors...................................................... 16

Investing in infrastructure and community development....... 19

Promoting tourism............................................................ 21

Providing leadership in the digital age................................ 22

Surveying the future, addressing challenges........................ 23

Endnotes.......................... 24

Methodology..................... 25

Acknowledgements............ 26

Above: XXX: State of the Union, courtesy Columbia Pictures; photo by Zade Rosenthal Cover, front and back: Courtesy Columbia Pictures, DreamWorks LLC, Lionsgate Films, New Line Productions,

Paramount Pictures, Twentieth Century Fox, Universal Pictures, Warner Bros. Entertainment.

Table of Contents

On behalf of the Motion Picture Association of America and our six

member studios, I am pleased to present the industry’s first nation-

wide economic impact report.

The report underscores that an industry known for its creative

product is also an economic engine responsible for bringing billions

of dollars and hundreds of thousands of jobs to communities across

America. We can all recount the “unforgettable” moments from our

favorite movies, scenes that make us laugh, cry, cheer, wonder, and

believe. Less well known is the enormous and ongoing impact of

our industry on the American economy.

Over 1.3 million Americans are employed as a result of the

motion picture and television production industry.

On-location production creates jobs and generates tax revenues

in cities and towns all across the United States, contributing

an estimated $200,000 a day into the coffers of the localities

where they film.

The American motion picture industry also carries a positive

balance of trade around the world and a $9.5 billion trade

surplus.

For decades, the motion picture and television production industry

has been a cornerstone in keeping the American economy strong

and growing. Today, we are bringing that same leadership and vi-

sion into the digital age, with significant investments and advances

in in-theater digital technology and new delivery platforms being

developed each day. We are committed to keeping our industry at

the forefront of the worldwide entertainment market and to ensuring

that our contribution to the U.S. economy continues to grow.

Thank you for reading this report. I believe you will find it is an

interesting, informative and entertaining look at an important Ameri-

can enterprise – the motion picture industry. See you at the movies.

Sincerely,

A Message from Dan Glickman

PAGE 2

“The American motion picture and television production industry has grown

into a vibrant artistic and economic force worldwide. It would have been

difficult to predict at the birth of the American motion picture industry that it

would mature into the significant source of economic growth and employment

covered in this report. From its founding at the beginning of the 20th Century

by European immigrants showing talking pictures in arcades, nickelodeons,

and small exhibition halls, the industry has evolved into a vast complex of

businesses producing a visual culture now experienced by most of the world.

The continued evolution and growth of the industry is not an accident, but the

result of a willingness to change. The movies, television, and Hollywood evoke

images of glitz, glamour, and the red carpet. That image fails to capture the

challenging creative process of putting a story onto film, and the business of

show business. To survive as businesses over the years, the industry has con-

sistently reinvented itself. By the time talking pictures were introduced in the

late 1920s, about two-thirds of the population went to neighborhood movie

theaters every week. By the end of the 1940s, the advent of home television

drew away a large part of the 90 million Americans who went to the movies in

an average week. By the late 1980s, even though the population had nearly

doubled, annual ticket sales had fallen from 4.6 billion in 1948 to 1 billion.

In the best tradition of show business, the industry has followed its audi-

ence and worked to redefine the business. The studios not only licensed their

Purpose of the Report

The creative output of the American

motion picture and television production

industry is widely recognized around the

world, yet its contribution to the nation’s

economy is seldom recognized. This re-

port, prepared by the MPAA using data

from studios, networks, payroll compa-

nies, guilds and government statistics,

illuminates the industry’s impact on the

national economy. While the numbers

presented in this report are impres-

sive, it must be kept in mind that they

are a conservative snapshot of a global

industry. Due to the breadth and com-

plexity of the American motion picture

and television production industry, this

report does not fully quantify the impact

of its activities upon all the individuals,

businesses, and governmental entities

that benefit from those activities. The

total economic impact is likely much

greater, and more far-reaching, than this

report reveals.

Introductionby Edward Jay Epstein, author of The Big Picture: The New Logic of Money and Power in Hollywood

movie libraries to television, they produced original programming for the broad-

cast networks and for television stations around the world. After VCRs became

commonplace in the American home in the 1980s, they created a huge rental

market for videos. In the 1990s, with the arrival of the digital revolution, the

studios followed their audience into the home with DVDs and video-on-de-

mand and other digital delivery platforms.

Throughout it all movies have continued to be a driving force in the new equa-

tion. The global movie culture continues to be shaped by Hollywood’s movies,

stars and technology. By transcending the bounds of national tongues, and

being more accessible than newspapers, books, and other print media in many

parts of the world, it has provided a near universal way of looking at the way

people relate to society.”

PAGE 4

Left: Coach Carter, courtesy Paramount Pictures Above top: The Chronicles of Narnia, courtesy Disney/Walden; photo by Phil BrayAbove bottom: Madagascar, courtesy DreamWorks Animation SKGRight: Four Brothers, courtesy Paramount Pictures; photo by George Kraychyk

The creation of motion pictures and television programs

is one of the nation’s most vital and valuable resources.

In 2005, the motion picture and television industry generated:

. over 1.3 million American jobs;

. an average salary of $73,000 for direct employees;

. $30.24 billion in wages to workers in America;

. $30.20 billion in

revenue to U.S. vendors

and suppliers;

. $60.4 billion in

output to the U.S. economy;

. $10 billion in income and sales taxes; and

. $9.5 billion in trade surplus.

Report highlights

Above: The Island, courtesy DreamWorks Pictures and Warner Bros. Pictures; photo by Merrick MortonRight: King Kong, courtesy Universal Pictures

Another 231,000 were freelance workers, including actors, directors, writers, and techni-

cal or craft specialists. While freelance employees account for more than half of the

industry’s workforce, it’s important to note that freelance is not synonymous with “part-

time” as many work full time.

The industry produces high quality and high paying jobs. The average salary of those directly

employed in the industry was $73,000 in 2005--nearly 80 percent higher than the average

salary nationwide.1 It is worth noting that the calculation of both the payroll and the average

salary figures excludes salaries paid to highly compensated talent.

The industry also generates what labor analysts call “indirect” jobs through companies such as

movie theaters, themed retailers and restaurants, video rental stores, and tourist attractions.

Nearly 1 million people were employed in such jobs.

Creating high quality jobs

With a payroll of over $30 billion, the motion picture and television industry is a major pri-

vate-sector employer. In 2005, the total number of U.S. residents employed by the motion

picture, commercial and television production industry was over 1.3 million.

Over 180,000 people were directly employed as studio, independent production com-

pany, or core industry supplier staff. Core industry suppliers include film labs, special

effects and digital studios, location services, prop and wardrobe houses, research ser-

vices and film stock houses, video duplicating services and stage rental facilities among

others.

PAGE 6

Direct payments for goods and

services to vendors by the industry

added $30 billion to the nation’s

economy in 2005. These pay-

ments not only go to specialized

businesses that exclusively serve

the entertainment industry, such as

wardrobe companies and camera

equipment firms, but also to gen-

eral suppliers serving a number of

other industries, such as caterers,

lumberyards, apparel retailers and

florists.

One of the most unique characteris-

tics of the motion picture and televi-

sion related industry is its decentral-

ized nature. More than 160,000

firms around the country were

involved in the industry in 2005 -

from production to distribution, and

working for independents as well

as major studios. Approximately

85 percent of these firms employ

fewer than 10 people.2 In essence,

the motion picture and television

production industry is largely entre-

preneurial and dominated by small

businesses and individuals.

Additionally, independent produc-

tion companies produce an increas-

ing percentage of feature films and

television programs. 65 percent

of the films released in the U.S.

in 2005 were produced by inde-

pendents, up from 43 percent in

1995.3

The graphic at the right illustrates

the vast array of individuals vital to

bringing a motion picture or televi-

sion program to fruition.

Few industries in the world are as

large and yet depend so heavily on

an economically diverse work force

based on regional networks collabo-

rating on projects.

Entertainment Industry: Share of Total U.S. Firms by EmployeesTotal U.S. Firms = 164,736

36%

36%

12%

9%1%1% 3%

2%

1

2 to 4

5 to 9

10 to 24

25 to 49

50 to 99

100 to 249

250 to 499

500 to 999

1,000 to 2,499

2,500 to 4,999

5,000 or above

unknown

Less than 1%

Right: The Hitchhiker’s Guide to the Galaxy, courtesy Touchstone Pictures

Developing small businesses and entrepreneurship

What goes in... What comes next...

PAGE 8

Illustrating the Production Workflow

Communities throughout the U.S. and in other countries zealously promote entertainment

development because the industry attracts capital and earns revenues that create local

jobs and generate tax revenues critical for public needs.

In 2005, just two types of taxes paid by the motion picture and television production in-

dustry - taxes paid by industry workers and sales taxes on goods and services - generated

approximately $10 billion in public revenues in the United States.

Generating tax revenues

Total tax revenues included $3.1 billion in income taxes at the fed-

eral level and $1.5 billion in income taxes at the state level, along

with $4.7 billion in additional unemployment, Medicare and Social

Security taxes.

Other taxes paid, but that could not be quantified for this study,

include corporate income taxes, property taxes and business license

taxes. Also not included are tax revenues generated by indirect

employment.

Above top: Aeon Flux, courtesy Paramount Pictures; Above bottom: Chicken Little, courtesy Disney EnterprisesRight top: Four Brothers, courtesy Paramount Pictures; photo by George Kraychyk

Right middle: Bewitched, courtesy Columbia Pictures; photo by: John BramleyRight bottom: Interpreter, courtesy Universal Pictures

Competing successfully around the world

We live in the age of a global economy in

which trade and technology are bringing the

world closer together. The American motion

picture industry plays a pivotal role in expand-

ing the U.S. economy through the arts, the

latest technology, and international trade. In

2005, the enduring entertainment value and

appeal of US films around the world earned

$10.4 billion in audiovisual exports, a 20 per-

cent increase since 2000. Moreover, the US

motion picture industry is one of the few in-

dustries that consistently generates a positive

balance of trade. In 2005, that surplus was

$9.5 billion, a total larger than the combined

positive trade balance for telecommunications

and computer and information services, and

was 12 percent of the entire US private-sector

service trade surplus.4

The American motion picture industry has not

achieved these remarkable successes in the

export market without overcoming great obsta-

cles, some of which still hobble the industry’s

ability to grow. The two principal challenges

are piracy and market barriers. Piracy outside

of the United States sapped $4.8 billion from

the American industry in 2005. Stopping

those losses will depend on first, improving

intellectual property laws in many countries

and second, ensuring that those laws are fully

enforced.5

In addition, in some key markets, the mer-

chants of pirated products have the markets to

themselves; the legitimate motion picture in-

dustry is denied fair access to the market due

to quotas and other forms of discriminatory

government policies. Future export growth de-

pends on worldwide audiences having the free-

dom to decide for themselves which movies to

attend, without being hampered by intrusive

government policies and market barriers.

The positive balance of trade the motion

picture industry generates is an important

aspect of maintaining the economic stability

and competitiveness of the nation. The export

of audiovisual services is a reliable engine of

employment growth, generating jobs that on

average pay 13 to 18 percent more than the

median wage.6

PAGE 10

365

Top production states7 in 2005

CaliforniaNew York

NevadaArizona

North CarolinaMontana

New JerseyLouisiana

New MexicoIllinois

10

97

237

8

1

Motion picture and television production growth produces dramatic benefits

for the U.S. economy and its residents, benefits that are spread throughout the

country.

With 699 feature films produced in 2005, nearly all of the 50 states had full

or partial feature film production activity during 2005 - plus television program

and other production activity, which is also spread around various states.

Production aroundthe country

1

Right: Lost, courtesy ABC, Inc; photo by Bob D’amico Extreme right: The Fog, courtesy Columbia Pictures;

photo by Rob McEwan

All numbers were provided by the state film commissions. There is some variation in inclusion definitions based on each commission’s methodology. In California, of-ficial data is not recorded by the film commission. Estimate is conservatively based

on published production reports and location permits.

16

281

22

23

15

3

1

2

5

221

11

5

2

4

36

5

64

12

6

15

13

16

182

2

2

PAGE 12

23

19244415

4

15

19

Making an impact in states

30 states have found motion picture

and television production to be so

beneficial to their economies that

they have enacted specific incen-

tives to increase production in their

states. What follows are summaries

from various states on how produc-

tion activity benefits their residents.

Arizona’s film com-

mission found that during 2003 (the

most recent year for which data is

available), $21.9 million in wages

was earned by Arizona residents from

612 direct and 1,092 indirect indus-

try jobs. The film industry generated

more than $107 million in direct

economic activity with an additional

$94.1 million of indirect activity. The

state believes that these numbers

have risen substantially since 2003,

particularly with the enactment of

an incentives program in January of

2006.9

California, the

heart of the American motion picture

and television industry, was one of

the primary locations for 365 produc-

tions in 2005. In terms of economic

activity, the industry generated a total

of $42.2 billion, split almost equally

between payroll expenditures and

payments to vendors. Approximately

266,000 people were directly em-

ployed in the motion picture and tele-

vision industry in California, with an

average salary of $80,600. Including

indirect employment, the number of

people working in California as a result

of the industry totals over 500,000.10

Connecticut is a popular production locale for film-

makers both because of its proximity

to New York City and because of the

state’s new production incentive pro-

gram. In addition to 8,000 film jobs

and 18,000 support jobs, the film in-

dustry generated $2.5 billion in gross

state product, including $1.2 billion in

personal income, in 2005.11

Illinois in 2005 benefited

from expenditures totalling $100 mil-

lion in production dollars from feature

films alone. A new tax credit, which

went into effect in May 2006, is ex-

pected to grow that amount.12

Oscar-winning film Walk the Line shot over 45 days in Memphis and

Nashville in 2004. Producers spent about $10 million in Tennessee,

creating a total economic impact of $18 million to $20 million.8

Montana expe-

rienced $53 million in production

related spending in the past 6 years,

resulting in an $81.4 million impact

on its economy, plus 930 full time

equivalent jobs in the film industry

and 444 jobs indirectly. The film

industry also generated $4.3 million

dollars of tax revenue for Montana.13

Nevada continues to

benefit from various television and

film productions set in locales ranging

from the bright lights of Las Vegas to

the remote ghost town of Rhyolite, fol-

lowing in the path of such classics as

The Godfather Part II, Rain Man, and

Casino, which all filmed in part in Ne-

vada. The Nevada Film Office found

that in 2005 film and TV production

contributed $102.5 million into the

state’s economy in 2005, with actors,

directors and crew personnel showing

up for 3,210 workdays.14

New Jersey has benefited from its proximity to the

production hub of New York City, re-

sulting in a film economy of $83 mil-

lion as of 2004 (up from an estimated

$61 million in 1999). This growth

was spurred in part by legislation

awarding a tax credit to filmmakers, as

well as state-sponsored incentives.15

New Mexico

is seeing major benefits from financial

incentives initiated in 2003 to draw

filmmakers to the Land of Enchant-

ment. The state has taken in about

$260 million in expenditures by

production companies since that time.

The Governor’s office estimates the

state has benefited to the financial

tune of about $780 million in total,

once the economic impact generated

by the money as it passes through a

variety of hands in the local economy

is calculated.16

New York City

in 2006 hosted the highest number

of film, television, commercial and

music video shoots in its history. In

2005, there were just over 31,500

“shoot days,” but the number jumped

10 percent to over 34,700 in 2006.

Independent productions accounted

for 90 percent of the 250 feature films

shot in New York City in 2005. There

was a $1.5 billion economic benefit

in 2005 from the “Made in N.Y.”

incentive program, which has created

thousands of new jobs by bringing

$2.4 billion in business to New York

over the past two years.17

North Carolina’s

production incentives drove spend-

ing on features, television programs,

commercials and other productions

to $300 million in 2005. The recent

hit film Talladega Nights: The Legend

of Ricky Bobby was filmed in North

Carolina.18

Pennsylvania

has seen its share of film productions

lured by state incentives, and the state

quantified the resulting economic im-

pact to the state in 2005 at $249 mil-

lion. Recent productions choosing to

film in Pennsylvania include Invincible

and the 2006 CineVegas honoree The

4th Dimension.19

Utah finds that film produc-

tions have become an enormous eco-

nomic development opportunity. The

state’s Motion Picture Incentive Fund

helped bring several productions to the

state, including World’s Fastest Indian

and High School Musical, which will

see its sequel shot in Utah as well.20

Using the Two Dollar Policy, by Marian Rees, Independent film producer, whose

company has produced 37 films on location.

“To demonstrate the positive impact of filming on the local community, during one

production I decided all per diems would be paid to the crew in two dollar bills,

which, when spent on the cleaners, laundry, restaurants, grocery stores, and other

shops would be tangible evidence of the money ending in local merchants’ hands. In

meeting with business leaders I gave them a picture of the positive financial impact

our production would make, but the ‘persuaders’ were the two dollar bills that seemed

to float through the town, soon to become collectors’ items. Our two dollar policy be-

came a part of our philosophy for every future film. That, and always leave a location

the same if not better than when we arrive.”

PAGE 14Left: Walk the Line, courtesy Twentieth Century FoxAbove: Monk, courtesy NBC Universal Photography Department

by Eve Troeh, independent radio producer filing regularly for

NPR, Weekend America and others.

“Film and television production is expected to contribute

more than $400 million to Louisiana’s economy in 2007.

The industry has boomed since the state passed tax credits

five years ago, and has come back stronger than ever since

Hurricane Katrina.

Production helps Louisiana retain and attract creative human

capital. On the set of the $150 million Paramount feature

The Curious Case of Benjamin Button in New Orleans, a

local church choir sings as background talent. Locals in

jobs from lighting to craft services talk excitedly about their

careers.

Some, like actor Lance Nicholls, have even moved back to

their home state. “I was living in Los Angeles for about 24

years, but to be able to come back and have opportunities in

features, it’s perfect.”

Malcom Petal is CEO of the local studio Lift Films, which

employs up to 500 people, and pays wages that start at

$20 an hour. He says production builds Louisiana’s middle

class. “There’s a job for every trade: carpenters, electricians

and hairdressers. Every business in town gets used: the

hotels, dry cleaners and car rental services.”

Petal, who used to be a lawyer for oil and gas companies,

also points out that film is a non-polluting industry.

A new set of tax credits encourages entrepreneurs like Petal

to build soundstages, post-production houses and film

schools to make Louisiana’s film industry even more self-

sustaining.”

Spotlight: Louisiana

PAGE 16Left: XXX: State of the Union, courtesy Columbia Pictures; photo by Zade Rosenthal

Letters from Governors

PAGE 18

“ A $25 million expansion and renova-

tion of the Queens, New York site of the Mu-

seum of the Moving Image began in February

2005 to include new galleries, an outdoor

theater, an educational center, and a new col-

lection storage facility.21

“ The Jacob Burns Film Center in

Pleasantville, New York broke ground in Janu-

ary 2007 on a $12 million 25,000 square-

foot media and education center, scheduled

to open in 2008.22

“ LIFT Productions plans to build a

$100 million 320,000 square-foot, nine

block long film studio in New Orleans,

Louisiana that will include soundstages and

post-production facilities as well as vocational

facilities to train film industry workers such

as hairdressers, electricians, costume design-

ers, set builders, and camera operators.23

“ Director George Lucas pledged $175

million to the University of Southern Califor-

nia’s film school, in Los Angeles, California,

in 2006 to build a 137,000 square-foot com-

plex in an effort to meld the film industry’s

story-telling skills with digital technologies.24

“ Silvercup Studios, the largest

independent television and film production

complex in the Northeast, is adding a 3rd

location in New York in the form of 2.2 mil-

lion square-foot of space for $1 billion. The

complex will include a 500-ft.-high com-

mercial tower, two residential towers, eight

soundstages, a catering facility for up to

8,000 people, and 100,000 sq. ft. of cul-

tural space.25

“ Metro Productions built a $1 mil-

lion 10,000 square-foot production facility in

Richmond, Virginia. The facility includes a

fully-equipped 40-by-40 soundstage, a green

Investing in infrastructureand community development

In addition to direct

entertainment pro-

duction payrolls and

expenditures, the in-

dustry actively invests

in infrastructure and

facilities that have

a positive effect on

community develop-

ment and real estate

markets. Here are a

few samples of such

capital projects.

room, three editing suites,

an audio suite and a graph-

ics suite that includes 3-D

capabilities.26

“ A 1.7 million square-

foot movie studio constructed

during 2005 has been part

of a redevelopment project in

Downey, California. The proj-

ect has converted 80-acres

of a 160-acre aerospace

manufacturing facility into

Downey Studios, with more

than 300,000 square-feet of

shooting space, ceilings as

high as 62 feet, and a foot-

ball field sized water tank. 27

“ In June 2006,

Lionsgate Entertainment

announced plans to build a

$15 million film studio in Rio

Rancho, New Mexico.28

“ WorkshopLive

opened a new recording and

video production studio in

Pittsfield, Massachusetts in

June 2005, utilizing contrac-

tors and construction firms

from Berkshire County and

other parts of Massachu-

setts.29

“ Stone Five Studios

broke ground in Provo, Utah

in June 2005 on a new

42,000 square-foot facility

to include two fully-equipped

film and TV and soundstages,

a recording studio, and sev-

eral video editing suites.30

“ In December 2005,

Screen Gems Studios of

Wilmington, North Carolina

announced plans to build a

larger soundstage to attract

bigger budget projects. The

studio also consulted on a

project in North Stoning-

ton, Connecticut that would

include an entertainment

complex.31

Filmmaker George Lucas

completed construction on the

$350 million, 23-acre Letterman

Digital Arts Center in the Presidio

of San Francisco, California in

2005. The campus integrates

three Lucas units: Industrial

Light + Magic (visual effects),

LucasArts (videogames), and

Lucasfilm Ltd., the corporate par-

ent. Beyond its state-of-the-art

technical features, the campus

sets a new standard for sustain-

able development by, among

other things, recycling 80% of

the building materials from the

site’s demolished Letterman Hos-

pital, restoring 17 acres to open

park space for public use, and

utilizing features that increase

energy and water efficiency by

more than 30%.32

Spotlight: Letterman Digital Arts Center

PAGE 20Above: © Lucasfilm Ltd. & TM. photo by Tina Mills.Left: The Longest Yard, courtesy Paramount Pictures

Motion picture and television production also has a

beneficial impact on tourism - another vital engine

of economic growth. Entertainment-related attrac-

tions and film industry landmarks are well known

as promoting tourism in Hollywood. Not as well

known is the important role films play in promot-

ing areas for tourism all around the country. In the

Annals of Tourism Research, researchers concluded

that, on average, a location featured in a success-

ful film could expect to see visitors increase by an

average of 54 percent over the next four years.

Promoting Tourism

by Martine White

County Film Commissioner

Santa Barbara Conference & Visitors

Bureau and Film Commission

“The film Sideways was inspired by

experiences in the wine country in

Santa Barbara County, California. The

Santa Barbara County Film Com-

mission began working with Director

Alexander Payne and the Sideways

team during pre-production, familiar-

izing and connecting them with the

local community, who embraced the

Sideways crew while they made their

home in Santa Barbara County and

the Santa Ynez Valley for 47 days of

shooting and four months of pre-pro-

duction in 2003.

The Commission decided to use Side-

ways to launch a movie tourism niche

marketing campaign, working with

the film producer and a local artist

to create a Sideways tour map based

on the locations featured in the film.

The map, which has been re-printed

three times due to demand, highlights

18 locations from the film. To date,

120,000 maps have been distributed

and over 65,000 people have down-

loaded it from santabarbaraCA.com.

When the Golden Globe® and Oscar®

nominations sparked even greater

interest in the film, the hotels in the

Santa Ynez Valley and businesses fea-

tured in “Sideways, The Map” reported

business was booming, as consumers

and Sideways fans began flocking to

the wine country. Tasting room traffic

was on the rise at Santa Barbara’s

60+ tasting venues and demand for

Santa Barbara County wines skyrock-

eted nationally. Overall, we forecast

an impact of 15 percent on tourism

revenue to the county over the next

four years.”

Spotlight: Sideways and Santa Barbara

Above: Sideways, courtesy Fox Searchlight Right: Star Wars: Episode III - Revenge of the Sith, courtesy Twentieth Century Fox

The American motion picture industry

is a world leader in developing and

deploying new technologies. The

industry’s demand for new media,

special effects, and enhanced sound

and visual quality, has resulted in

innovations that enhance the viewing

experience and advance the progress

of science and the public interest. In

recognition of these advancements the

major film studios have been awarded

over 1,000 patents in a variety of

fields both expected and unexpected.

The range of ideas and their lasting

impact is impressive. Whether it is

synchronizing music and dialogue on

film, marrying the concept of 3D and

color film, introducing surround sound,

developing the DVD, or developing

and implementing the first commercial

monorail, the industry has continued

to press the boundaries of what is

feasible.

In addition to enhancing the enjoy-

ment of filmed entertainment, the

industry’s inventions serve the public

good. For example, rather than en-

force their film restoration patents, the

industry has freely shared that tech-

nology to enable restoration of many

old, fragile filmed works from the early

20th Century. Industry members are

also developing technologies to protect

the environment, such as through

implementation of a low emission

launch system for firework displays.

The industry is also leading the way in

providing filmed entertainment to con-

sumers whenever and wherever they

want it. Through digital cinema, next

generation DVD formats, and digital

rights management technologies the

industry is facilitating new business

models that will create more choices

for consumers while also discouraging

digital theft. Already the industry is

delivering content through digital cin-

ema, high definition DVDs, streaming

on demand, download to own, peer-

to-peer technology, social networking

sites, and mobile devices.

Providing leadership in the digital age

PAGE 20PAGE 22

Will the economic contributions of the

industry continue to increase? The answer

is “yes.” Forecasters predict the demand for

motion picture and television products will

continue to grow, as the methods for deliv-

ering them to the consumer evolve. Ana-

lyst Harold Vogel states, “[t]echnological

development has been the driving force

behind the growth of the entertainment in-

dustries. Development of technology leads

indirectly to an increase in leisure time

availability and leads directly to qualita-

tive improvements and cost reductions in

manufacturing and distribution.”33

New distribution capabilities boost demand

for entertainment products, and the enter-

tainment industries overall are expected

to continue to grow at faster than average

rates.34 Legal and diplomatic measures

opening foreign markets, as well as increas-

ing modern theater construction overseas

will spur further demand.

At the same time, however, there are

serious challenges ahead to domestic and

overseas success, including piracy, the risk

of filmed entertainment market saturation,

global macroeconomic trends, and poten-

tial fragmentation brought about by local

content, targeted development subsidies,

and protectionist policies pursued by cer-

tain foreign countries and states.

Within the U.S., many factors will help

determine whether entertainment produc-

tion continues to expand. One of the most

important is the political and regulatory

climate. Practical, cost-effective measures

to enhance industry operations, includ-

ing federal production tax incentives, will

increase the probability of entertainment

industry growth and hence the growth of

the U.S. economy.

Surveying the future,addressing challenges

by Harold L. Vogel, Author of Entertain-

ment Industry Economics, 7th ed. forth-

coming May 2007. New York: Cambridge

University Press.

“The introductions of television, home

video, cable, direct broadcast satellites,

and DVDs have all had an historically

important and ultimately beneficial impact

on the economic landscape in which

filmed entertainment is produced and dis-

tributed. But digital/Internet technology is

already proving to be much more profound

and disruptive than any of these earlier

innovations. Traditional business models

and strategies are becoming increasingly

ineffective and are now in the process of

unusually rapid adjustment and transi-

tion. Whenever this happens, the market

demand shifts dramatically toward those

who possess new types of knowledge and

skills and displaces those who do not.

Newspaper headlines typically do not

present the whole story of the dynamism

of expanding opportunities that the new

technologies quietly originate a few new

jobs at a time. If history is any guide,

transition into the new age of digital

filmed entertainment will ultimately have

an enormous positive effect on the in-

dustry and on the overall economy of the

United States.”

Changing, growing

1. Bureau of Labor Statistics.

2. LEK Analysis, Dun & Bradstreet Marketplace Database.

3. MPAA Worldwide Market Research.

4. The U.S. Department of Commerce, Bureau of Economic Analysis,

Survey of Current Business, Oct. 2006. Audiovisual services definition: the

affiliated and unaffiliated transactions between US and foreign residents

of film and television tape rentals, which covers the rights to display,

reproduce, and distribute US motion pictures and television programming

abroad.

5. MPAA/LEK Piracy Loss Estimates Report 2005.

6. Business Roundtable, Trade Resource Center, Trade and Jobs: Why

Trade and Investment Liberalization Creates More and Better Paying Jobs.

7. State film commissions. There is some variation in inclusion definitions

based on each commission’s methodology. In California, official data is

not recorded by the film commission. Estimate is conservatively based on

published production reports and location permits.

8. Chattanooga Times and Free Press, “State Film Incentives Await Ap-

proval,” Chattanooga, TN, 11/18/06 .

9. Phoenix Business Journal, “Filmmaker expands Hollywood studio to

Phoenix,” Laura Newpoff, Phoenix, Arizona, 05/01/06. Arizona Department

of Commerce, “Analysis of the Film & Video Industry in Arizona,” Phoenix,

AZ, 12/2004.

10. MPAA Worldwide Market Research.

11. Variety, “Global Shooting Guide: United States,” Josh Marks,

11/05/06. Connecticut Center for Economic Analysis, University of Con-

necticut, “The Economic Impact of Arts, Film, History, and Tourism in

Connecticut,” 2006.

12. Variety, “Global Shooting Guide: United States,” Josh Marks, 11/5/06.

13. “The Big Sky on The Big Screen Act: A Film Industry Incentive,” by

the Montana Film Office, Park Helena, MT, 4/20/05.

14. Las Vegas Review-Journal, “Pretty as the Pictures,” Chris Jones, Las

Vegas, NV, 1/28/06.

15. Herald News, “A ‘Sopranos’ effect; Area film, TV productions are a

growth industry,” Ed Beeson, Passaic County, NJ, 11/18/05. New Jersey

Motion Picture and Television Commission, “The 20-Per-Cent Solution,”

www.njfilm.org, 1/16/06.

16. The Santa Fe New Mexican, “Hollywood on the Rio Grande,” Robert

Nott, 12/1/06.

17. Variety, “Global Shooting Guide: United States,” Josh Marks, 11/5/06.

New York Post, “N.Y. turns into Cinema City”, Hasani Gittens, New York,

NY, 1/19/07.

18. Variety, “Global Shooting Guide: United States,” Josh Marks, 11/5/06.

19. Ibid.

20. Deseret Morning News, “State wants to increase movie incentive fund,”

Brice Wallace, Salt Lake City, UT, 01/11/07.

21. Associated Press Online, “Museum of the Moving Image to expand,”

New York, NY, 01/11/05.

22. The New York Times, “Art house to get a campus,” New York, NY,

01/14/07.

23. The Times-Picayune, “Film producers not scared off, Katrina hasn’t

hurt state’s movie business,” New Orleans, LA, 10/12/06.

24. LosAngelesBusiness.com, “Lucas to give USC $175M,” Los Angeles,

CA, 09/20/06.

25. New York Construction, “Details unveiled for studio project,” New York,

NY, 07/01/06.

26. Richmond Times-Dispatch, “Video firm Metro Productions moving to

new facility,” Richmond, VA, 11/08/06.

27. California Construction Link, “Back from the dead in Downey”, July 1,

2005. Los Angeles Times, “Hangars are Hollywood’s next big thing,” Los

Angeles, CA, 09/10/06.

28. Albuquerque Journal, “Council Approves Lionsgate Package,” Albu-

querque, NM, 06/15/06.

29. BusinessWire, “WorkshopLive opens Pittsfield recording and video

studio facility,” Pittsfield, MA, 06/10/05.

30. Daily Variety, “Utah breaks ground on new facility,” 07/07/05.

31. Star News, “FILM CLIPS / Planners of studio complexes study Wilm-

ington,” Wilmington, NC, 12/29/05.

32. Lucasfilm, Ltd. A New Vision for the Digital Arts.

33. Entertainment Industry Economics, by Harold L. Vogel, pg. 469. New

York: Cambridge Press, 6th Ed.

34. Ibid.

Endnotes

PAGE 24

Left top: White Noise, courtesy Universal PicturesLeft middle: The Constant Gardener, courtesy Focus Features; photo by Jaap BuitendijkLeft bottom: Munich, courtesy Universal PicturesAbove: The Office, courtesy of NBC Universal Photography Department

The Motion Picture Association of America (MPAA) de-

veloped its report on The Economic Impact of the Motion

Picture and Television Production Industry using a number of

data sources, including Bureau of Labor statistics, Interna-

tional Trade Administration reports, and various other propri-

etary and publicly-available data. The following companies

participated in an annual survey:

o Studios and Networks: The Walt Disney Company,

Metro-Goldwyn-Mayer Inc., Paramount Pictures, Sony

Pictures Entertainment, Twentieth Century Fox Film Corp.,

Universal Studios, Warner Bros., Dreamworks, NBC Inc.,

ABC Inc., CBS Broadcasting Inc.

o Payroll Companies: Cast & Crew Entertainment Ser-

vices, Entertainment Partners

o Unions and Guild/Producer-Union Health Plans:

Directors Guild of America, Motion Picture Industry Health

Plan, Screen Actors Guild, Writers Guild of America

These participants supply employment, payroll, vendor

expenditure and tax information to enable the Association to

build a comprehensive picture of the size, scope, and future

of the industry. The expenditure and payroll data is provided

by zip code, allowing for the measurement of the economic

impact of the industry on a county, city, and community

basis. The major guilds and unions, as well as their health

plans, and the Bureau of Labor Statistics provide additional

information on industry employment.

For the purposes of the report:

Direct employment refers to individuals employed through

production activities. It includes both regular full-time and

freelance employees paid by the studios, networks, inde-

pendent production companies and commercial produc-

ers directly, and indirectly through payroll companies. A

freelance employee is an individual who worked on a daily,

weekly or project basis. Freelance employees include actors,

directors, writers, camera operators, grips and other produc-

tion personnel.

Indirect employment refers to individuals employed by

the industry through movie theaters, themed retailers and

restaurants, video rental stores and tourist attractions. Ad-

ditional individuals are accounted for through a wide cross-

section of employers such as florists, apparel and accessory

retailers, automobile dealers, restaurants, caterers, dry

cleaners and thousands of other vendors who supplied the

production community.

The information collected includes all motion picture,

television, and commercial production functions, drawing a

comprehensive picture of the industry’s economic impact.

The survey was previously conducted in 1998 and 2003,

focusing on California. 2005 is the first year the survey has

been conducted focusing on the entertainment industry’s

economic impact on the entire country.

The Bureau of Labor Statistics no longer publishes employ-

ment data based on the U.S. Standard Industry Classifica-

tion (SIC) codes for individual states. Therefore, for the

purpose of this study, the North American Industry Clas-

sification System (NAICS) had to be converted to SIC codes

using a combination of the 1997 Economic Census: Bridge

Between SIC and NAICS and the 1997 NAICS and 1987

SIC Correspondence Tables.

Since the category 7819 of “Allied Services to the Motion

Picture Production” was reallocated under NAICS into a

number of different industry classifications, correspondence

tables were used in an effort to capture comprehensive

employment figures. The same correspondence tables have

been used in both the 2003 and 2005 reports.

Methodology

Left: The Legend of Zorro, courtesy Columbia Pictures and Spyglass Entertainment; photo by Andrew CooperAbove: The Wedding Date, courtesy Universal Pictures PAGE 26

AcknowledgementsThis Economic Impact Report was compiled under the

leadership of the Motion Picture Association of America with

the assistance of many important groups and individuals.

First thanks go to the participants in the study, listed below.

Individuals at each of these companies worked tirelessly

to provide the MPAA with the survey data. Without their

assistance, the report would not have been completed. The

participants include:

The Walt Disney Company

Metro-Goldwyn-Mayer Inc.

Paramount Pictures

Sony Pictures Entertainment, Inc.

Twentieth Century Fox Film Corp.

Universal Studios, Inc.

Warner Bros.

ABC Inc.

CBS Broadcasting Inc.

Spelling Entertainment Group Inc.

Entertainment Partners

Cast & Crew

L.E.K. Consulting, L.L.C. provided invaluable assistance and

guidance in reviewing the MPAA survey data.

We would also like to thank the following for their contribu-

tions:

Edward Jay Epstein, Author of The Big Picture, The New

Logic of Money and Power in Hollywood

Ryan Ratcliff

Marian Rees, Independent Film Producer

Eve Troeh, Reporter for National Public Radio

Hal Vogel, Author of Entertainment Industry Economics, A

Guide for Financial Analysis

Martine White, County Film Commissioner, Santa Barbara

Conference & Visitors Bureau

The Academy of Motion Picture Arts & Sciences Library

AFTRA Health & Retirement Funds

The Alliance of Motion Picture and Television Producers and

its president, J. Nicholas Counter who provided additional

guidance.

Directors Guild of America - Producer Pension and Health

Plans

Motion Picture Industry Pension & Health Plans

Screen Actors Guild - Producers Pension and Health Plan

Special thanks to California Governor Arnold Schwarzeneg-

ger, Illinois Governor Rod R. Blagojevich, Louisiana Gover-

nor Kathleen Babineaux Blanco, Montana Governor Brian

Schweitzer, New Mexico Governor Bill Richardson, New

York Governor Eliot Spitzer, New York City Mayor Michael R.

Bloomberg, Pennsylvania Governor Ed Rendell, and South

Carolina Governor Mark Sanford

This publication includes images from CorelDRAW™ 8

which are protected by copyright laws of the US, Canada

and elsewhere. Used under license.

Published & designed by MPAA Strategic Planning & Research, January 2007

Copyright © 2007, Motion Picture Association of America (MPAA)

All data, copy and images are subject to copyright and may not be reproduced, transmitted or

made available without permission from the MPAA or the copyright holder. All rights reserved.

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