Additional reporting by Katie Honan
Netflix led Tuesday’s third-quarter earnings call trumpeting good news: Subscribers are up by 2.4 million, after two quarters of decline. But the streaming giant’s other announcements signal continued turbulence. Netflix’s share price is still down 60% over last year’s high, and the company is clearly trying to boost revenue by launching a new lower-cost, ad-supported option — and by cracking down on password sharing.
The platform’s fortunes are intertwined with New York’s own economic fate. The episodic dramas and other content commissioned by streaming services like Netflix are the driving force for the city’s film and TV production business. That business both helped to boost the city’s recovery from the pandemic — and forms one of the key pillars of Mayor Eric Adams’ efforts to restore the economy to the growth the city saw before the pandemic.
The bet is so big that in the next few years the city expects companies to double the 2 million square feet of existing sound studio stages — located across some 60 facilities — by using a lucrative state tax credit that extends to 2026 plus additional tax breaks for new facilities.
“The playbook changed because of the pandemic with the shift to streaming and the massive amount of content that resulted,” said Kwame Amoaku, the city’s new deputy commissioner for film at the Mayor’s Office for Media and Entertainment. “I believe that if we build capacity here people will come and people will shift from other places to come here.”
Others are skeptical, arguing that the steaming services are due for a major contraction.
“Most of these services have tenuous financials,” warned Ross Benes, a senior analyst covering TV for Insider Intelligence. “Many will combine or shutter because most are losing money.”
Netflix said Tuesday that it believed its many competitors will together lose as much as $10 billion this year.
Consider some of the big projects underway.
In the next six months, Steiner Studios will break ground on a new 800,000-square-foot facility at the city-owned Brooklyn Army Terminal that will have eight sound stages at a cost of more than $300 million total, of which the city will pay in $75 million for infrastructure improvements.
Steiner is also expanding its presence at the city-owned Brooklyn Navy Yard, where it already operates the biggest studio on the East Coast. When that expansion is complete, Steiner will operate some 1.6 million square feet of studio space in the city.
In Queens, Robert DeNiro is moving ahead with building the $600 million, 775,000-square-foot Wildflower Studios in Astoria. The 11-stage, seven-story structure has been dubbed the first vertical production facility in the world.
Separately, the city’s Industrial Development Agency last month approved $22 million in tax breaks for a new facility in Queens, to be called Sunnyside Studios.
The 240,000-square-foot facility — developed by East End Studios, which is also building multiple stages in Los Angeles — will have pre-production space, production offices, studios and other facilities. The company estimated on its application for city funding that the total cost will be around $260 million.
Before the pandemic struck, the city’s film and TV business was booming. In 2019, its many strands — including motion picture and video production, talent acquisition, subscription programming, television broadcasting, advertising and media-buying, post-production and distribution — accounted for about 100,000 jobs, paid $12.2 billion in wages and added $64 billion to the local economy.
The streaming services were already playing a big role, with episodic TV productions that use New York City studios and street locations doubling to 80 series in the 2019-2020 season, from 29 in 2013-2014.
Production was halted by the pandemic and began recovering last year. This year, according to the film office, the city will likely see about 80 film and TV productions.
Key studios like Steiner, home base for the popular New York comedy “The Marvelous Mrs. Maisel” that recently filmed its fifth and final season, say they are fully booked. It is the same in Queens.
“I don’t have a soundstage available and the same would be true if you call any of the major studios,” said Hal Rosenbluth, president of Kaufman Astoria Studios. “We are doing “Succession” now. Maybe we will have an opening when they are done.”
The city’s film industry has prospered because of its natural strengths, and a big assist from the state and city. Amoaku emphasizes the city’s iconic images, neighborhoods and background available. “You can point a camera in any direction,” said Amoaku, “it’s the most target-rich environment ever.”
The city’s talent pool both in front and behind the camera is as well regarded as that in Los Angeles. And because so many actors, directors and writers live in neighborhoods like Tribeca, they want to work in their hometown for television series, which are filmed over long periods.
The film and TV industry is also one of the few in the city that provides a pathway to well-paying union jobs for people without a college degree — ranging from production assistants to carpenters to costumers to Teamsters.
Studio heads argue that the state’s controversial tax incentive is crucial because competition is intensifying. The incentive, which has been extended to 2026, provides as much as $420 million a year in tax credits for what are called “below the line” expenses, which exclude salaries for actors, directors, writers and producers.
Georgia has built a $4 billion a year filmcentric business while providing a 20% tax credit that includes the above-the-line expenses which New York excludes. California this year extended its $330 million annual tax credit to 2030, boosted the amount available for the next two years and added $180 million for studio improvements.
Across the Hudson River, Gov. Phil Murphy seems determined to get New Jersey a share of the business. In June, he signed a law extending the state’s tax break to 2034, giving projects credits of up to 35% of their expenses in certain southern counties and 30% in the rest of the state. It boosts the annual limit on these tax credits from $10 million to $30 million.
Netflix has also emerged as the leading bidder for a 30-parcel former Army base in Monmouth County on the Jersey shore, where it says it would build a major studio.
“We are facing a competitive freight train because of New Jersey and the money being spent on facilities all over the place,” said Rosenbluth of Kaufman Astoria.
The biggest threat to the city’s plans for expanding the industry would be a significant consolidation of streaming services — which include Apple TV+, HBO Max, Hulu, Peacock, Paramount+ and HBO — and a decline in the content they produce. Consumers have become more resistant to paying for more subscription services and have started to cancel some of them when prices rise. These companies get two-thirds of their revenue from subscribers and one-third from advertising.
Their spending is enormous, with Netflix alone budgeting $17 billion a year to produce episodic dramas and other programming.
“The amount of content that has been produced has been at historically elevated levels with 500 scripted shows produced in the last year and a few thousand unscripted shows,” said analyst Benes. “No one has asked for or ever wanted to watch that much programming.
The industry’s champions in city government remain confident.
“I think New York has a lot to offer over these other markets,” said Amoaku.