Jun 20, 2013 (ACCESSWIRE via COMTEX) -- Movie production incentives are tax benefits offered to encourage in-state film production. Around since the 1990s, they were put in place to encourage economic growth by luring film companies away from other states and countries such as Canada. Incentives vary from state to state and include tax credits, exemptions, and other incentive packages such as cash grants, tax credits and rebates. . Advocates of the programs argue that increased economic activity and job creation are ample justification for the credits. Others say that the cost of the incentives outweigh the benefits, and that the money goes to out of state talent rather than in-state cast and crews. Studies of the costs and benefits of incentive programs show different levels of effectiveness, depending upon the incentives involved and the specific states.
In North Carolina alone, film and television production companies such as Lions Gate Entertainment (NYSE: LGF), Time Warner Inc. (NYSE: TWX), and TVB (HKG: 0511), took advantage of the state’s movie and television production incentives. The economic impact of the industry cannot be underestimated within the state. Over 8,500 jobs and $206.7 million in wages are directly related to the industry in the state. In 2011 alone, 24 major films and five TV shows were filmed in the state including The Hunger Games, Journey 2: The Mysterious Island and Homeland. Tax incentives in the state include a refundable tax credit equal to 25% of qualifying in-state production expenses if a minimum of $250,000 is met. The state has a $20 million per feature credit cap.
The emergence of Georgia as a key player in the space has been the most significant development of the past few years. More production companies have flocked to Georgia over the past few years to take advantage of an incentive system in the state that has no production cap. In 2008 the state passed the Georgia Entertainment Industry Investment Act which grants qualified production companies a transferable income tax credit of 20% for film and television investments of $500,000 or more. An additional 10% is given for all companies that embed a Georgia Entertainment promotional logo with the credits. The industry is responsible for 23,000 jobs and $1.3 billion in wages within the state. According to the Motion Picture Association of America a total of 48 movies were filmed in Georgia in 2010 and 2011 and the number is set to rise as Medient Studios (OTCQB: MDNT) has announced plans to build a $90 million movie studio in Effingham county near Savannah. It will be the largest movie studio ever constructed in the US.
MDNT, a Los Angeles based production and distribution company, inked a deal with the Effingham County Industrial Development Authority recently after considering other locations such as Pennsylvania, Michigan and New York, who also offer attractive incentives for film production businesses. The agreement works nicely to the advantage of both parties. The deal with the Georgia Department of Community Affairs and Georgia Department of Economic Development has the company receiving a $3 million grant for site preparation and building improvements. $750,000 will be released after the first 250 jobs have been created and maintained for a 12 month period. Another $750,000 will be released after an additional 250 jobs are created and maintained for 12 months. An additional $1.5 million will be released after 500 more jobs are created and maintained for 12 months. Over 1,200 jobs will be created as the result of the deal acting as a strong economic catalyst in the county.
For investors the news is good. With the uncapped 30% tax credits guaranteed by the state of Georgia, Medient Studios could become the highest margin/lowest cost multi-media production company in the United States and a highly attractive target for investors. The new production facility should translate into hundreds of millions of dollars in production, box office, and ancillary revenues for the company and create an equal amount in shareholder value over the next two years. Medient has a current market cap of $41 million and is trading at an attractive entry point of $1.15. The management team is solid and firmly committed to company growth. The bottom line is that this company is shaping up nicely and could be considered an investment opportunity for the long-term.
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