A Pandemic of Closures

Another one bites the dust. In tragic news for California, the state just lost another big-name business. EA’S Pandemic Studios was a beloved maker of video games, and will cease to function, at least physically, in California. In an interview with Kotaku, the studio’s CEO, John Riccitiello, blamed the loss of the studio on ridiculous levels of taxation and the high price of living in the state, and explained that as a businessman, working in California simply no longer made sense.

“For good or for bad, we are taking down headcount in California because it is really expensive,” Kotaku said.

According to Kotaku, in the interview Riccititello cited “recent regulatory changes” and the lack of tax incentives in the state, and further claimed that it costs “two to three times more to employ developers in that state [California] than it does in Montreal, the U.K., Eastern Europe or China.” Unfortunately for about 200 employees of Pandemic, the perhaps business savvy move translates to lost jobs.

Tragic, but realistic: there is only so much money state lawmakers can squeeze out of businesses and the wealthy, before businesses and wealthy individuals simply pack up. Some individuals and businesses will retain their business in California for sentimental reasons, but after a certain amount of abuse, even they will exit the Golden State in order to find true opportunity. What happened to the idea of California as a state of innovation, creativity and a place to buck the status quo? Raising taxes on businesses has been done before, and done badly, on the East Coast.

Unless lawmakers hope to continue to scare away business interests, they need to seriously consider the fact that smart businesspeople will not spend extra overheard forever. Pandemic Studios is just one entertainment provider, but it is representative of a growing problem: California is known as the movie capital of the world, but why would filmmakers continue to throw money away to film here, when it is significantly cheaper to film elsewhere?

Officials in other states recognize that the market is opening. For example, in Arizona, the Arizona Department of Commerce offers a number of benefits and tax breaks to those who come to film in the state. These include a Transaction Privilege Tax Exemption and an income tax credit. In Oregon, the Governor’s Office of Film & Television offers cash rebates in the form of rebates on 20% of “Oregon-based goods and services” used, in addition to a “cash payment of up to 16.2% of wages paid to production personnel.” The office also points out that there is no sales tax in Oregon. Compare that to prohibitively high filming prices and an increasing sales tax in California, and it becomes easier to see why some businesses would rather close and/or relocate outside of California, than to stay in this beautiful state and hemorrhage cash.