The global film production incentive race has been escalating for years, with countries and states competing fiercely for production dollars. Now California has escalated this competition.
The state more than doubled its annual film tax credits from US$330 million to US$750 million. More importantly, they made these credits refundable for the first time since 2009.
This changes everything for those of us working in international production.
As Managing Director and Head of Production of Wave Films, I've spent over a decade bringing international productions to Singapore, and more recently to Malaysia, and the Philippines. My first reaction to California's expansion: it creates additional competition for productions currently considering Southeast Asia as a filming destination.
The Budget Squeeze Behind the Arms Race
The timing reveals something crucial about where the industry stands today.
I've watched budgets tighten across the board.
Streamers and broadcasters are willing to spend less and less money on productions they commission. Distributors and sales agents are willing to pay less for finished content.
This creates a vicious cycle. Lower sales prices mean tighter production budgets. Tighter budgets make incentives more critical to project viability.
The independent film world gets squeezed hardest. Big studio productions still have more wiggle room, but smaller productions face brutal math.
The Refundable Credit Game Changer
California's refundable credits target exactly this pressure point.
Previously, productions needed California tax liability to benefit from the credits. Now they can receive cash back regardless. This puts California in direct competition with international cash rebate systems.
The math could suddenly favor staying home. Flying crew and cast overseas costs serious money. If you can shoot domestically and get cash back, why travel?
I see the strategic divide forming clearly. For specific settings your film might require, there will always be shoots traveling overseas. However, for more generic backdrops, there might be a greater urge to stay within the US.
Generic versus specific. This distinction matters more than the percentage points.
Southeast Asia's Competitive Response
Malaysia currently offers one of the region's strongest incentive through its FIMI program. But the 30% cash rebate on production expenditure also requires a rough US$1.2 million in local spend.
However, I still call it very competitive despite California's new refundable structure.
My reasoning cuts through the percentage game. The cost of labor and things in general is much cheaper in Malaysia compared to California. Your production budget is going to be lower, and you get the 30% on top of that.
Lower base costs plus incentives versus higher base costs plus incentives. The math still works, but the margin shrinks.
The global incentive race now includes over 100 programs worldwide. Countries like Colombia offer 40% cash rebates. Hungary provides 30% plus another 7.5% for local cultural elements.
Everyone's escalating.
The Location Trump Card
Our ultimate competitive advantage can't be replicated in California.
The exotic backdrops we can find here because of the variety of locations, different cultures, different religions, different people, different architectural styles is obviously very different from North America or Europe.
Singapore's utopian metropolis. Malaysia's rainforests. The Philippines' islands and beaches.
These aren't generic backdrops. They're specific settings that justify international production regardless of incentive percentages.
In the end, it's going to come down to locations because locations are of such great importance for any film. However, the math and financials need to make sense.
The New Production Reality
California's move signals a fundamental shift in how established production centers compete.
Legacy advantages like infrastructure and talent pools no longer suffice. Even Hollywood must now compete financially with aggressive cash rebate programs.
For production service companies like Wave Films and others in our position, this creates a new competitive dynamic. Generic backdrop projects become harder to win. Unique location projects become more valuable.
I see the industry splitting into two tracks: convenience productions that stay close to home, and destination productions that travel for irreplaceable settings.
California's US$750 million bet assumes they can capture enough of the first category to justify the investment. The projected 40-50% increase in film jobs suggests the math could work.
But it also forces those of us running international production hubs to sharpen our unique value propositions.
The incentive arms race just entered a new phase. California fired the opening shot. Now we all must decide how to respond.
The question isn't whether other regions will escalate their own incentives. It's whether we can afford not to.