Economic and Fiscal Impacts of Texas’ Moving Media Industry
The Economic and Fiscal Impacts of the Texas Moving Media Industry in 2007
|Studio feature films||$750,000|
|Independent feature films||$11,636,100|
|Commercial, corporate and sports||$91,950,000|
Source: Texas Film Commission.
Source: Texas Film Commission.
Each year, the Texas Film Commission collects data on spending by various components of the media industry in the state. The Commission further breaks down spending for the five largest metropolitan areas in the state. In 2007, total spending was almost $345 million, with video games accounting for the largest share (see Table 7). Commercial production was second and television was third. Austin led the state with about $143 million in spending followed by Dallas-Fort Worth with $128 million (see Table 8). Houston was a distant third.
Spending by media producers in Texas has a “multiplier” effect so that the overall economic impacts are actually greater than the initial level of expenditure. In order to estimate total economic impacts, we have used an input-output model called IMPLAN. Developed by the Minnesota IMPLAN Group, this model provides estimates of total state-level economic activity – including direct, indirect and induced impacts – from initial spending by a given entity. The direct effects include items like a film producer’s payroll, contract labor, purchases and rental of equipment and commissary supplies. Indirect effects capture the activities of a company’s vendors. For example, the accounting firm providing bookkeeping services to a video game company rents office space, purchases computers and pays its telephone bill. Induced effects include the impact of the employees of all these firms spending a portion of their earnings on goods and services in the state (local) economy. Each of these impacts is adjusted to account only for that portion of spending that stays in Texas. For example, on average only 57 percent of direct spending in film production activities stays in the state while only 33 percent of video game industry spending remains in Texas.
The IMPLAN results are summarized in Table 9. Reported industry spending of $344 million had a total state economic impact of about $522 million. Labor income – i.e. salaries and wages – generated by the initial spending of the Texas media industry totaled almost $99 million statewide in 2007. Direct, indirect and induced employment attributed to Texas media activity came to 2,421 on an FTE basis while other property income totaled almost $44 million. Property income includes rents, royalties, dividends and corporate profits.16
Importantly, the Texas media industry has a significant fiscal impact. According to the IMPLAN model, in 2007 indirect business taxes amounted to more than $8.8 million. About 70 percent of these revenues were realized by the state of Texas and the other 30 percent by local governments and school districts. An initial comparison of revenues with the costs of the new Film Incentive Program suggests the program is paying for itself (see Table 9). Grants awarded through March 2008 amounted to $4,519,042, and an additional $1,423,863 in incentive grants is projected for the rest of fiscal 2008 for a total of $5,942,905. This was considerably less than the $8.8 million in tax receipts generated by media industry spending. If we just look at additional state tax receipts from media production, new state revenues exceed outlays by about $232,000.
|Activity||Value||Output||Labor Income||Employment||Other Property Income||Indirect Business Taxes|
|Studio Feature Films||$750,000||$1,242,750||$249,750||7||$95,250||$22,500|
|Independent Feature Films||$11,636,100||$19,281,017||$3,874,821||109||$1,477,784||$349,083|
|Commercials, Corporate, Sports||$91,950,000||$152,397,655||$30,610,494||864||$11,610,054||$2,727,672|
Sources: IMPLAN and Texas Film Commission.
As discussed above, it is likely that a sizeable amount of filmmaking, television, commercial production and video game development spending across Texas is not captured by the Film Commission data. Total spending could easily exceed $500 million annually with an economic impact in excess of $700 million and additional millions in state and local tax revenues. For example, the spending data tracked by the Texas Film Commission do not include outlays for part-time or contract workers, nor do they include dozens of other local businesses that benefit from on-location production. These businesses may include accounting and payroll services, dry cleaners, neon suppliers, helicopter services, gas stations, florists, lumberyards and dozens of other small- and medium-sized businesses.
Of course, there are other real economic benefits from having a thriving media industry in Texas that cannot be easily quantified. For instance, films and television shows that emphasize the natural or cultural amenities of Texas are simultaneously conveying “free” advertising messages that may boost the convention and tourism industry in the state. The link between movies and tourism is perhaps best described as follows:
Essentially, movies become “pull” factors (attractions) situated in “push” locations (tourism generating areas). The attractions of a destination are transferred to the locations of potential tourists as opposed to being firmly and immovably ensconced… Pull factors can be the classic tourist attractions of sun, sea and sand, or of cultural, social and activity based origins. Push factors are predispositions to travel implying physiological or psychological motivations.Consumers exposed to the constant bombarding of advertising become immune to it. When viewing movies, consumers are able to experience attractions vicariously without leaving the security of home and without the hard-sell impressions inherent in paid advertising… Movies which create major interest are likely to reach wider audiences with less investment than specifically targeting tourism advertisements and promotion.17
According to a recent study prepared for the Office of the Governor’s Economic Development and Tourism Division, travel and tourism is one of the state’s most important “export-oriented” industries with a total economic impact of $56.7 billion in 2007.18 State revenues generated by travel spending, primarily sales and bed taxes, were estimated at $2.9 billion in 2007.19 Were it not for the state’s free media exposure from film and television, these tourism-related revenues would probably have been smaller.
Media exposure may also help “sell” Texas to families and businesses as an attractive place to live and work. Would Texas and its major metropolitan areas have led the nation in population gains, in-migration, job growth and business relocations and expansions over the past 30 years in the absence of media exposure? Would Texas rank number two among the states in corporate headquarters? There is no way to know for sure. But clearly Texas’ portrayal through moving image media has helped to create an identity that bonds Texans to the state while at the same time marketing Texas to the rest of the world as a good place to live, work and recreate.
Finally, the moving media industry is typically “non-cyclical.” That is employment and payroll tend to grow steadily regardless of the health of the national economy. Given the likelihood of a prolonged national recession, and slower growth in Texas for the next several years, expansion of the moving media industry can help provide stability to the Texas economy.