Business analyst Mark Lacter joins KPCC once a week for an in-depth look at economic issues in Southern California.
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KPCC's business analyst Mark Lacter talks about what's going on with the film industry in Southern California.

Susanne Whatley: On Tuesdays we talk about the latest business stories with Mark Lacter. Mark, it’s been a strange year at the box office… what’s going on?

Mark Lacter: Remember the movie “The Tourist”? – Angelina Jolie, Johnny Depp, action-adventure Got panned by the critics…
…Also did really badly at the box office. Well, it turns out that “The Tourist” has finally found its audience – and it’s overseas. The film has grossed more than $200 million at the international box office, which is more than three times what it did domestically – and this is a prime example of how Hollywood has come to rely on overseas moviegoers, especially in places like Asia, Latin America, and Russia, and it’s especially true this year, where the U.S. box office is still down about 10 percent from 2010. To give you an idea, the latest “Pirates of the Caribbean” installment is approaching $800 million, and almost 75 percent is coming from international sales. And the sequel to “The Hangover” was opened around the world on the same weekend it opened in the U.S., because the original did so well overseas.

Whatley: I’m surprised a comedy did so well overseas.

Lacter: Yeah, they normally don’t compared with the action adventure stuff. But movie companies are discovering just how broad the overseas audience can be – and also how lucrative that business can be, in some cases more successful than in the United States. It’s always been important, but now it’s critical.

Whatley: So a hedge fund manager could work on Wall Street or in Hollywood.

Lacter: Well, movie-predicting is a little like stock-market predicting – nobody knows anything. But a movie like “The Tourist” might have worked better overseas because Johnny Depp happens to be very big in Asia, especially in Japan (Angelina Jolie is also more popular overseas than in the U.S.), and it also might have worked because when it comes to storyline, style will often win out over substance, which is why, for example, the James Bond movies always do well overseas. In other words, if it’s dumb and pretty and fast-paced, it can find a home almost anywhere. By the way, this year’s box office is finally picking up speed in the U.S. over the past few weeks – just in time for the summer movie season. And as usual, big-budget sequels appear to be the answer.

Whatley: On top of that, the state Assembly has approved a tax credit incentive for films and TV shows. What’s the effect?

Lacter: Looks like the program is going to be extended for another five years – that, of course, assumes the state Senate and Gov. Jerry Brown go along. The incentive gives production companies tax credits for certain kinds of expenses, and there’s no question that since the legislation was first enacted couple of years ago, California has picked up some business. Matter of fact, ABC is moving its series “Body of Proof” back to California from Rhode Island because of the tax credit – and also because the governor of Rhode Island wants to dismantle the tax credit program that brought the show to Rhode Island in the first place.

Whatley: The California program has become very popular…

Lacter: That’s right -- so much so that there aren’t nearly enough tax credits to go around. The California Film Commission just announced that 27 productions will receive a total of $100 million in credits, and that fills up the annual allotment. The question is whether the movie and TV productions bring in more revenue to California than the amount that the state would lose in taxes. The film commission says that many filmmakers live in California and would prefer to shoot here instead of traveling to some other location. But cost/benefit numbers are still muddled, and besides, the most questionable aspect of the program is how it favors one industry over others. Frankly, it just doesn’t do much for the California economy and it also seems to sets a bad example of what government should be doing

Whatley: Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA