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May 20, 2013

Hollywood Betting Big on Massive Studio Expansions

Paramount ExpansionJust when you thought filmmaking was migrating to the seemingly greener grass of independent film studios, a peculiar thing occurs: 3 major Hollywood studios, Disney, NBCUniversal, and Paramount are reported to have massive, long-term studio expansions in the works. In light of lower film counts and production going elsewhere, why are these studios initiating the "most aggressive growth spurt in recent Hollywood memory" and what, if anything, does this mean for independent film?

The expansion plans of all 3 studios is pretty impressive. According to a recent New York Times article:

-- the Los Angeles Business Journal noted that Disney, NBCUniversal and Paramount were planning three of the largest commercial developments in Los Angeles County, with a combined cost in the billions of dollars, serving as the blueprint for substantial growth in movie and television facilities at all three.

So -- why again? Obviously, each studio has its own reasons to build and expand, but each one has a similar goal in mind: "to remain a force here [in Hollywood] by planning enough physical expansion to contain operations well into the future."

And boy -- what an expansion. Disney will build up to 3.2 million additional square feet at its Grand Central Creative Campus in Glendale through 2032. Disney hopes to build a television-oriented building and 12 sound stages, almost doubling the amount of stages they have now.

Over the next 25 years, Paramount is looking at a $700 million expansion in the studio's Hollywood district. Paramount hopes to increase office and production space, but their main reason for the overhaul is to integrate their 87-year-old fragmented properties, which were acquired and pieced together over time.

NBCUniversal's expansion/upgrade plan truly dwarfs those of Disney and Paramount in comparison. With a $1.6 billion investment, their plans include: 2 500-room hotels, a Harry Potter theme park, a 1-acre trailhead park, community design, as well as over $100 million invested in transportation improvements. NBCUniversal has an entire website dedicated to informing you about what's to expect with the expansion. They also have a FAQs section complete with a bunch of videos that spell out their overall plan in detail.

Universal Lot

All 3 studios, especially NBCUniversal share the sentiment that expanding will help them keep production in-house, which they think is better for the industry. Universal Studios President and COO Ronald Meyer explains:

The evolution plan -- it's not only great for Universal Studios, but I think it's great for Southern California. The healthier our studio is, the more opportunities for employment. We'd like to keep production in the Los Angeles area, and growth here gives us that opportunity.

President and General Manager of NBCUniversal Studio Operations Michael Moore (No, not that Michael Moore) says:

Almost 10,000 people a day come to just the studio property alone. A typical television show can have anywhere from 200 - 250 people working on it. A feature film can go up as many as 4 or 500 people. So, a lot of the evolution plan is about having the facilities to host those productions. The more of our own productions we can have here on the lot, the better it is for the industry -- the better it is for the job climate.

With shrinking production costs, rising international box office sales, and an "apparent end to the declines in home entertainment revenue", it's no wonder why major studios would expand their operations since Hollywood is finding its balance. Still, production has been finding luck in states and countries that offer better breaks and subsidies than Hollywood.

So, what does this mean for independent film? Are we about to enter into the next golden age of Hollywood cinema? It's still unclear, and based on the available information one could only speculate. I will say this, though -- I never saw this coming. I always thought the Hollywood studio system was on its way out, but perhaps the giant box office smashes, which in the last several years have soared above the $1 billion mark, give the major studios enough --inspiration to keep moving forward.

What do you think about these Hollywood studio expansion plans? Are these plans really for the good of the entire film industry? In what ways, if any, will independent film be affected by this?

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22 Comments

Very interesting. I wonder when if at any point it will become insanely "in your face" as one tries to navigate SoCal.

May 20, 2013

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That was actually a real concern for the community, which is why NBCUniversal came up with their "No Residential Alternative" plan. Here's a quote from their FAQ section:
"When we started this project nearly seven years ago the Plan included 3,000 residential units on the studio backlot. After hearing from community members and local elected officials who expressed concern about the potential impacts of the residential portion of the Plan on our surrounding neighborhoods, we removed that component from our project."

May 20, 2013

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V Renée

My initial reaction is fear.

May 20, 2013

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I'm excited for this for one reason. As a hopeful VFX worker, I see this as a way to fight the subsidy wars currently going on. Instead of having to move to Vancouver, India, or wherever a studio wants me to go to get a tax credit from a subsidy, now I can instead just stay in LA and not have to relocate.

Does this negatively impact independent movies? I don't see how. Hollywood and independent movies have largely been separate, so I don't see how Hollywood trying to shoot movies it funds in LA would impact independent movies elsewhere.

May 20, 2013

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Dave

Well, I don't think this has to do with doing vfx in house, unfortunately or fortunately for some, studios won't turn their back to subsidies just yet, free money.

May 20, 2013

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Marcus

I believe this is Hollywood's last ditch effort. Along with major studio expansions we're also seeing massive studio mergers and a rise in inflated marketing budgets. This is really the studio's way of securing their assets as profits are at an all time high. As mentioned, with decreasing production costs and the need for expansive marketing budgets dissipating, we will soon see the number of independent films increase and, most importantly, get distributed. This is the road to the full democratization of the film industry.

May 20, 2013

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Eddie Avinashi

I don't see Hollywood going away any time soon. The foreign box office has increased by a billion dolls a year the last few years. http://www.mpaa.org/resources/3037b7a4-58a2-4109-8012-58fca3abdf1b.pdf

We have a lot of democratizing and revolutionary film making tools that will keep getting better. It is just going to take a lot more impact at the box office from low budget stuff to really shake Hollywood in any significant way.

May 20, 2013

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Dan

I wouldn't be concerned at all. Independent film and Hollywood have been coexisting just fine. There's an audience for both.

May 20, 2013

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Development like this goes up when the capital is low risk, the studios are taking advantage of their strong credit ratings, dirt-cheap debt, and friendly subsidies programs. The biggest overcome to large development plans like this is still intellectual capital, the government has made getting the money as easy as it's every been in recent history, but the market is changing too rapidly for most people to plan solid ventures.

May 21, 2013

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I agree with you-- I was going to mention the fact the cost on money for projects like this is (in some sense) free or better than free, so this might have kick-started their plans.

May 30, 2013

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TylerBreeden

Would all this expansion cause wages to go down for rank and file production people? It seems like it might . Seems like they're building an ever bigger factory and talent becomes more of a commodity than a valued skill. But I don't know the biz side too well.

May 21, 2013

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Earnest reply

Interestingly that news comes when a powerful billionaire of the East coast is seriously exploring to build the biggest movie studio in South Florida to attract US and European productions. Coincidence?

May 21, 2013

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Stephane

Industrial robots such as these
http://www.youtube.com/watch?v=v5cp7LVKRhU
http://www.youtube.com/watch?v=YYJW2P_tT1I
and other unusual, innovative and expensive gear may require some extra space to experiment with:D

May 21, 2013

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Hypoesis

I believe nobody from the "outside" ever gets a real insight into what studios earn on their movies - they lie when they have to pay royalties (Lord of the Rings, Coming to America, The Last Unicorn etc.) so why should we, both as audiences and workers ever get proper numbers? What if all those apocalyptic news from Hollywood is simply propaganda in order to lower wages, just like corporations do in every other market segment worldwide...

May 21, 2013

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mariano

Marketing cost a lot

May 21, 2013

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DIO

Renee: Where did you get the idea that production costs are shrinking FOR HOLLYWOOD STUDIOS? Nothing could be further from accurate, although such costs are plummeting for indie filmmakers. I am a national-media journalist who writes about the movie business, and I can assure you there is nothing studio execs and producers worry about more than the skyrocketing costs of production and marketing. As for the "expansions," the fact is that the studios are finally understanding that their 100-year-old business model is eroding. It was always based on a sort of monopoly when it comes to distribution in theaters (and until about 60 years ago they OWNED the theaters until a court ruling broke up part of their monopoly). Now, with VOD, new digital distribution platforms, an explosion of new cable channels and the ever-growing footprint and ambitions of YouTube, they see the handwriting on the wall -- and will adapt and expand accordingly. And they will likely continue to dominate the media/entertainment market for obvious reason. But their longstanding "big blockbuster" model will start to fade away as the number of films continues to decrease, while they expand production into the new world of digital media. it remains to be seen how indie cinema will evolve and grow, but it certainly will.

May 21, 2013

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John B.

"Nomura analyst Michael Nathanson notes -- major studios have slashed their overhead in recent years, resulting in margins ahead of 2007 levels and minimal profit decline."

http://blogs.barrons.com/stockstowatchtoday/2013/03/25/hollywood-has-rea...

May 22, 2013

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V Renée

This either/or way of looking at Hollywood vs. Indie is false in many ways. Audiences are fractured and segmented like no other time in history and people spend more time looking at screens for entertainment than ever before. There is a massive global audience coming on-line in the next 25 years - billions of people - who will be under employed and in need of bread-and-circus - IE cheap entertainment. Screens are everywhere in our lives and they need to be filled with content. This trend will explode in the near future. Don't think this expansion is about feature films - it is about "content" - games, reality, hybrid interactive entertainment the likes we have never seen before. AND the independent filmmaker, storyteller will have more opportunity to make and distribute there work at the same time but for the most part these will be artisans - much like the local boutique clothing store, the local made micro-brew and the farmers markets. You will make a living, it will be hard work, and you will have a very small (relatively speaking) but very committed audience. It's already happened. FInd your niche audience and serve them.

May 21, 2013

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Matthew

Matthew nailed it. That is precisely the revolution -- and the demand for "content" will be incredible. Unfortunately, but understandably, the big media and entertainment companies will still control much of it, for obvious reason, but there will be an ongoing democratization of creation and "freelance" production, because of tools like DSLRS and the BMCC. Just look at the size of the audiences for the Top 100 YouTube channels now, and how relatively low-tech the production values are. But a lot of those (young) folks are making a FORTUNE every month. That is the future -- and it is exciting. And anyone can play. And talent and the ability to identify a niche audience and give it something it wants will be the key to success. No doubt about it.

May 21, 2013

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John B.

"Just when you thought filmmaking was migrating to the seemingly greener grass of independent film studios."

Thinking that is naive to say the least. Corporations never lose.

May 21, 2013

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maghox

"Naive" is being polite. Considering that this site is supposed to present a form of at least marginally competent journalism -- and not unfounded opinions that fly in the face of obvious facts -- it's stupid and embarrassing.

May 22, 2013

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John B.

All three studios are surronded by residential property. Universal has a lot of land, much of it taken-up by City Walk and the Tour, but they do have vacant land. Disney has little land, that's why they are expanding their operation at the Grand Central Business Park (a former airport). Paramount has a large lot.

Remember thsse studios have been in operation for a long time, and some of the stages are VERY OLD (1920s/30s), and in need of updating or replacement.

Most studio jobs are Union, so there aren't many minimum wage jobs. Most Non-Union productions pay below minimum wage, 'cause they can (lots of people want to work in the Movie Biz).

This expansion won't have any effect on Indie Production, but will make a lot of money for Caters, Dry Clearners, etc.

BTW for those of you who don't know there are more than a few Rental Stages in L.A. Raleigh Studios, The Lot, etc. Check-out the L.A. 411 http://la411.com/Sets_Stages/category-cid-50506.htm

May 22, 2013

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c.d.embrey