Make Hollywood great again

After the president of the United States announced a possible 100% tariff on

movies "produced in foreign lands", Hollywood woke up to a doomsday

feeling. Just at the announcement of such measure, with no clear definition

on how it would work, the stock market took a plunge on Netflix, Disney,

Paramount Global, Lionsgate and Warner Bros Discovery stocks (more on

Variety).

The Ambassador

One of Trumps ambassadors, actor Jon Voight, is behind the policy proposal

claiming that tariffs will incentivize domestic film production. The

comprehensive plan was submitted by him and his manager to the president

with the goals of increasing US filmmaking. Voight’s plan involves a

combination of federal tax incentives, tax code changes, co-production

treaties and infrastructure subsidies for theater owners, production and

postproduction companies, according to a press release sent out on Monday

(more on Vulture). While the release only briefly mentioned tariffs, it was the

POTUS focus on his social media.

The POTUS

After describing foreign productions as a “national security threat” and

creating an uproar, the president tried to calm things down by reassuring that

“I’m not looking to hurt the industry, I want to help the industry”. One

practical question needs to be answered: tariffs usually apply to goods

(merchandise or possessions), and a tariff on intellectual property (ideas

and inventions) would be extremely hard to apply and reinforce. In this

clarifying Forbes article, entertainment attorney Schuyler Moore explains

that the proposal is not viable - not only because of the nature of tariffs, but

for multiple reasons.

The Governor

The president had someone to blame for the “very fast death of the movie

industry in America”. He told reporters that the U.S. film industry “has been

decimated by other countries taking them out, and also by incompetence,

like in Los Angeles, the governor [Gavin Newsom] is a grossly incompetent

man, he’s just allowed it to be taken away from.” (CNBC). Gavin Newsom,

who last October has pledged to increase California’s film incentive from

$330 million to $750 million per year, has just proposed a $7.5 billion federal

film incentive as a response. “Now it is time for a real partnership to Make

America Film Again”, he said on social media, shifting the state incentive to a

national level proposal. (Deadline)

The Executives

The truth is that placing tariffs or other trade barriers on foreign-made

products may not make business any easier for Hollywood studios and

streamers. Many American movies and shows are shot on location outside

the United States not only due to tax breaks, but to cheaper labor, diverse

landscape, different union rules, financing and co-production agreements.

The Market

The main question is: could a simple (but exorbitant) tariff reverse the

offshore production trend that has slowly been building up over the years

and has many layers? Just as reference, ProdPro data shows that from 2021

to 2024 the spend on film and TV series in the US dropped from $26 billion

to $19 billion. In the rest of the world, it rose by more than $1.6 billion (THR).

The Trump Tariff Trope

We know that placing tariffs on movies that are shot outside the US could

put Hollywood in an agonizing situation. But if we look at the Trump Tariff

Trope, we know that none of the announced tariffs are in place – yet. As

CNN puts, if the extra taxation on film productions shot abroad passes, it will

be the first. But there are many others in line that were announced before.

The Community

No matter where the tide takes us, we are here to help you navigate the

markets. Reach out if you want to share thoughts and discuss it further.

Please, pass this newsletter along if you think it can help other people. This

is a non-AI, old school way of discussing what matters, when it matters. I

hope you enjoy it!

Best,

Laura