Special Report: Entertainment – Soundstage Gold Rush


As most industries brace for an economic downturn amid higher interest rates, Hollywood is experiencing a continuing boom that is filling its Los Angeles production hub to overflowing levels.

The video streaming revolution has sparked a wave of big-budget TV shows and film productions that mostly add to pre-existing Hollywood production and act as a catalyst to expand the local sound infrastructure.

The Los Angeles area is the world leader in sound stage capacity, with 5.4 million square feet of stage space, surpassing competing production centers: 4.7 million square feet across the UK, 3.3 million in Toronto/Ontario, Canada and 2.4 million square feet in New York. In Los Angeles, that’s 398 sound stages in 57 facilities, according to FilmLA, the nonprofit agency licensing the production.

Emphasis is on “certified” sound stages which are permanent Hollywood installations with fire department approvals in hand, versus multi-purpose warehouses requiring security approvals


for each use by movies and TV programs. A series of constructions underway or on the drawing boards will increase the number of certified sound stages by 27% in a few years, FilmLA estimated earlier this year, in what the industry sees as a long overdue expansion.

In Hollywood, “soundstages have been underbuilt over the years,” said Adam J. Fowler, founding partner of CVL Economics, a West Hollywood-based entertainment consulting firm.

But now “we have a lot of industrial space being reallocated,” he added. Soundstage occupancy by most estimates is in the mid-90s percent range across the region, which is essentially full capacity.

Lack of land

The building boom in the historic Hollywood working region is targeting infill locations in urban areas because vacant land is scarce.

One such project to capitalize on growing demand is a sound stage plan at the site of a Los Angeles Times print shop at 8th and Alameda streets. Atlas Capital Group plans to start with six sound stages and eventually expand to 17 on site
Also in the traditional working area, a massive modernization of the existing sound installations is underway.

“The biggest action continues to be urban infill campuses” in Hollywood’s traditional production area, according to Carl Muhlstein, international director of brokerage firm Jones Lang LaSalle Inc.

“These are the ones who are at the heart of the ecosystem and with whom it is easiest to interact with talent.”
But due to high demand and lack of space, businesses are expanding outside the traditional area to areas like the Santa Clarita Valley, Pacoima, and even the Inland Empire. New companies continue to infiltrate; in early October, a multi-stage facility called Super Studios was proposed for Banning.

There is little concern about overbuilding, experts agree, because the demand for production is continuous. Television series, which are a staple of Hollywood, can be longtime tenants in the same sound stages for years or even decades.

City of Television.

In a measure of the growing weight of production, Los Gatos-based Netflix Inc.’s programming budget, which is heavily skewed toward original productions but also includes acquisition of existing content, has skyrocketed to $17 billion. dollars a year these days, roughly double its overall content budget of 2016.

Basic cable television operator FX Networks now has well over 500 big-budget, scripted prime-time television series a year, up from just 182 series in 2002. FX Network announces release data annually industry television series.

These numbers are global, but Los Angeles gets a big chunk. On the streaming side, these include streaming TV shows such as “Star Trek: Picard” on Paramount+ and “American Horror Stories” anthologies on Hulu that are produced locally. Sound stages are also used to produce music videos, commercials and industrial films.

Private equity interest

Private equity firms — purely financial investors — are leading the charge to build and modernize sound stages, lured by an industry with high demand for production rentals but inadequate infrastructure. They also take into account the fragmented operators in the industry and the expectation of an easy exit as one or more players buy competitors to regroup.

Biggest for Los Angeles appears to be Hackman Capital Partners and its subsidiary MBS, which own Culver Studios, Radford Studio Center, Television City Studios, MBS Media Campus, Raleigh Studios, Saticoy Studios, and Sony Pictures Animation Studios. Square Mile Capital Management, based in New York, partners with Hackman for the studios. Earlier this month, Hackman completed a $1.6 billion capital raise for its HCP Studio Fund from a diverse group of institutional investors. HCP Studio Fund has a global focus but will be locally connected to Radford Studio and Saticoy Studios.

Last year, Hackman unveiled a $1.25 billion investment to upgrade Television City, a facility it bought in 2019 that was previously owned by broadcaster CBS.

Main role

Despite chronic underinvestment in infrastructure, Los Angeles is still well positioned to maintain its leadership in television and film production. That’s because the industry ecosystem is rooted in the Hollywood region, led by the big five movie studios: Walt Disney Studios and Warner Bros. in Burbank; Paramount Pictures in Hollywood; Sony Pictures Entertainment in Culver City; and Universal Pictures.

Their own physical studios house productions and also provide hands-on logistical support for their television and film projects made in nearby sound stages. If a production requires a hands-on inspection, executives don’t have to fly to visit the set.

Another magnet is California’s financial incentive program offering hundreds of millions of dollars in tax credits each year, which is authorized until 2025 and will likely be extended. California launched the program in 2009 to combat financial lures from other states.

“There are three legs on the stool: incentives, crew, and infrastructure,” said Hollywood CFO Joseph Chianese. “LA obviously has the crews. The infrastructure is being modernized. When it comes to incentives, the state and the governor have clearly improved programs and have had bipartisan support.

Chianese is senior vice president and head of the production incentives practice at Entertainment Partners, a Burbank-based production finance, management and business services firm.

While the entertainment and streaming industry is experiencing positive economic momentum, some in the industry are complaining that the government is erecting unnecessary barriers. There are criticisms that state and local governments are more concerned with supporting other projects, such as affordable housing, than helping Hollywood’s big employers fight government bureaucracy. Additionally, the state of California is sporadically considering legislation undermining talent exclusivity in employment contracts and in the gig economy covering part-time workers, which angers many in the industry.

The production boom is driving up wages, and Hollywood is now talking about the idea of ​​limiting skyrocketing content costs.

As far as rich content spending goes, Netflix reportedly shelled out $465 million for Daniel Craig’s current mystery “Glass Onion: A Knives Out Mystery” (and sequel rights) after its predecessor was made for just $45. millions of dollars. Elsewhere, Amazon Studios spent a


grossed $465 million on its “Lord of the Rings: Rings of Power” miniseries, twice the cost of a brilliant Hollywood sci-fi movie. And streamers regularly hire expensive theatrical talent for made-for-streaming productions, such as Martin Scorsese’s $170 million mob film “The Irishman,” which sported an all-star cast. However, competitive pressures driving spending remain strong, and so Ari Emanuel, chief executive of Beverly Hills-based Endeavor Group Holdings Inc., which owns talent agency WME, told a conference call. investors in September “don’t burst anybody’s bubble, I don’t see it.

Emanuel said that for an unnamed streaming show that WME was working on, the cost reached $17.5 million per episode, which is about four times the spend for a typical one-hour cable or TV show.

“Last time I checked, it’s over,” Emanuel said dryly.
There are, however, pockets of real spending cuts in Hollywood. Big studio owner Warner Bros. Discovery is pursuing post-merger cost reductions, but the uneven reductions are exceptions to the larger trend of escalations.

Philip Sokoloski, vice president of integrated communications at FilmLA, sees the current sound stage boom as key to the region maintaining its leadership. Analysis by FilmLA found that sound stage certified square foot capacity has only increased by 4% in the Los Angeles area since 2019, compared to 34% in the UK and 43% in Toronto/Ontario, Canada .

“If we don’t invest in modern sound infrastructure, we won’t attract the kind of projects we want,” Sokoloski said. “We ask them to be globally competitive.”


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