BusinessReport.com

Last summer, the state’s budding motion picture industry was in the throes of its best year. For the fifth consecutive year, the industry was experiencing double-digit growth, and revenues from movies and TV shows shot and produced here were expected to approach $1 billion—nearly twice as much as was spent the year before.

But as 2008 comes to a close, the statewide industry is bracing for a dramatic downturn in business. With increased competition from other states, a still-unresolved labor dispute between the Screen Actor’s Guild and the major studios and a credit market that is making lenders reluctant to finance independent films, state officials fear revenues could be off by as much as 50% in 2009.

“I think you’re still going to see movies being made here,” says Sherri McConnell, director of the state’s Office of Entertainment Industries Development. “But we have to be concerned and aware that some of those production numbers are going to go down.”

That’s a far cry from where Louisiana was earlier this year. In the first three months of 2008, production companies spent more than $600 million in Louisiana—and that’s only counting films with budgets large enough to qualify for tax credits. When you factor in smaller independent movies, TV shows and commercials, the total for the year was expected to approach $1 billion.

In 2007, by comparison, direct spending by the industry in the state was in the range of $400 million to $500 million, according to state officials. That’s nearly twice as much as it was in 2005 and four times as much as it was in 2003, the first full year the tax-incentive program was in place.

Those are just partial numbers, however. The state only keeps track of projects that are large enough to qualify for tax credits. Dozens of independent movies and TV commercials were too low-budget to qualify. They added millions more to the total. And when you factor in the economic multiplier, the industry has had an economic impact on the state of at least $1.3 billion over the past five years.

But things have changed in just the past few months. For one thing, there’s more competition. Some 42 states now have tax-incentive programs designed to attract movie and TV producers. Most of those have been modeled after Louisiana’s. Some are even more generous.

New Mexico is a close competitor; so is Florida. Several states in the northeast have recently jumped into the game and are also attracting attention. All of which means Louisiana has to work harder than ever to maintain its strong position as an attractive location.

Then there is an ongoing labor dispute between the Screen Actor’s Guild and major Hollywood producers. Actors have been working without a contract since July; many producers are holding back on projects, concerned about a strike possibility. Their reluctance to move forward is trickling down to studios in Louisiana.

“There are a number of productions that we’re talking with that can’t get the green light until this SAG issue is settled,” says Robert Bayham at Celtic Media Centre, a local studio complex near Airline Highway and Interstate 12. “They can’t get completion bonds even if they get a waiver from SAG.”

Above all is the credit crunch, which is affecting movie producers just as much as it is small-business owners and homebuyers. Banks are reluctant to lend—especially to the smaller, independent producers who are the bread-and-butter of Louisiana’s industry. Investors are also tighter with their wallets.

“Independent films are rarely finding financing these days,” says Michael Newport of Raleigh Studios, the California-based operator of Celtic Media Centre. “This is the worst market ever for independent features, and the large studios are doing deals that were put in place before the credit crunch hit so that’s locking up money.”

Which is why the state and individual studios are becoming creative in their approach to luring new business. No longer confident that it will continue to just come, as it has since the tax-incentive program was created, they’re being more proactive. One of the most visible examples of that is a recently announced partnership between Celtic, Raleigh Studios, First Bank and Trust in New Orleans and Blueroom Post, an upstart postproduction facility.

Essentially, the four entities are collaborating on a marketing initiative to attract movie business to the state, offering producers financing, high-quality production facilities and postproduction work all under one roof.

“What we’re hoping to do is stimulate film growth in Louisiana by putting everything under one roof,” Newport says. “It’s ultimately a one-stop shop.”

The state is also becoming more creative in going after potential business. It’s targeting more television productions, especially major TV series like The Disney Channel’s Imagination Movers, a new show being produced in New Orleans.

“Larger studios like Disney can come here now and shoot the whole package,” McConnell says. “So we have an initiative to go out and market to them, and they’ve had enough good experience here that we can get in the door.”

Even though the outlook is not terribly rosy, industry officials note there are still plenty of opportunities for Louisiana. At a trade show last month in California, representatives from the state observed a slight decrease in the attendance and amount of interest over previous years.

“But there was still a tremendous amount of activity,” says Jennifer Day, director of the New Orleans Office of Film and Video. “Because Louisiana has spent the past six years building an industry and refining the program, we had a steady stream of people coming to talk to us.”

Day is optimistic New Orleans could see as many as nine major movie projects in the first half of 2009. But that’s a more optimistic projection than most in the Capital Region are giving. They’re more cautious in their assessment of what the next year will bring.

“We’re going to prepare for the worst,” McConnell says, “and do our best to make sure it doesn’t happen.”