Skydance is officially Los Angeles’ new Fortune 500 company, but for how long?
In a message to employees last week, CEO David Ellison said he was determined to keep the company in Hollywood: “We’re not going anywhere.”
But the consent decree between Ellison and 12 state attorneys general does not require him to maintain a headquarters in Los Angeles. And the last two months have proven that the threat of departure can be powerful leverage should Ellison need anything from state government in the future.
“I think our attorney general and all of us were in a no-win situation when we had a company that seemed very willing and able to leave California,” Rep. Laura Friedman told NBC LA. “Personally, I don’t believe this was an idle threat, and if it had happened it would have been devastating for Los Angeles.”
Los Angeles has lost a series of corporate headquarters over the past 15 years, including Northrop Grumman, Occidental Petroleum, Toyota Motor North America, AECOM, SpaceX, Public Storage and KB Home. Companies often cite California’s high cost of living, taxes and hostile regulatory environment as reasons for their decision to move to Texas or another state.
“It’s a parade of horrors,” said Larry Kosmont, whose real estate consulting firm has long studied the cost of doing business in California. “If you were to fill out an order for businesses to leave, California would get an A on the exam.”
California’s leaders are also vulnerable to the charge that they allowed businesses to flee by failing to reform business regulations.
“Other states have improved their tax and regulatory measures. California has not improved,” said Sarah Bohn, vice president of the Public Policy Institute of California, which has found that corporate flight is indeed increasing. “The trend is not going in the direction you want it to go. »
In this context, losing Paramount would have been a powerful symbol, even if all that was moving was a small headquarters. And that threat — even if Ellison doesn’t need it right now — remains available in the future.
Under the agreement with the state AGs, Skydance will not sell either the Paramount or Warner Bros. lots. for at least five years. The agreement also provides for an increase in production volume. The issue of the location of the company’s headquarters was not included in the agreement, although it appears to have been discussed.
“I believe the future of this combined company is in Los Angeles for the foreseeable future,” Attorney General Rob Bonta said in announcing the consent decree last week.
Ellison’s commitment, however, comes after he made a similar commitment and then walked back from it in response to Bonta’s antitrust lawsuit. In a letter to Friedman and Sen. Adam Schiff in February, Ellison promised that the combined company would “stay true to our roots” in Southern California.
The question of what more needs to be done to keep film and television jobs in Los Angeles remains relevant at both the federal and state levels. Congress is considering a U.S. incentive, while California lawmakers are expected to consider next year whether to eliminate the $750 million cap on the state incentive and whether to modify the program to include outsized costs.
“We have to fight to keep Hollywood in Hollywood,” Xavier Becerra, the Democratic candidate for governor, said during a CNN debate this week. “And I said I will do everything I can to make sure that happens.”
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