New Mexico spent millions in corporate incentives to bring a massive Netflix production hub to a struggling suburban development outside its largest city. Will it pay off?
A massive 300-acre complex in the middle of the New Mexico desert, miles from the site where the U.S. develops nuclear weapons, does seem like a good setting for a future episode of Stranger Things, the hit supernatural nostalgia trip from Netflix. That’s where the streaming series will shoot as it resumes filming its fourth season this year. But the crew from Hawkins, Indiana, was not drawn to Albuquerque by the nuclear mysteries or proximity to Roswell aliens. It took corporate tax incentives to lure Netflix to the Land of Enchantment.
The steaming platform is investing heavily in its Albuquerque production hub, located in a sprawling development on a desert plateau southeast of the city called Mesa Del Sol. In 2018, the company bought ABQ Studios, an existing production site, at a steep discount and promised to film a billion dollars’ worth of projects in New Mexico. The $30 million acquisition gave Mesa DelSol — a master-planned community designed by famed New Urbanist architect Peter Calthorpe that had fallen on hard times — a new lease on life.
“All the people whose names scroll at the end of the credits need to find a place here to eat, live and recreate,” says David Campbell, CEO of the limited liability company behind Mesa Del Sol.
In November 2020 Netflix doubled down, announcing plans for another billion dollars in projects and new developments, including post-production services, backlots, up to 10 new sound stages and training facilities, making it the company’s main North American production hub, and one of the largest film production complexes in North America. For the studio’s forthcoming Zack Snyder-helmed zombie-heist flick Army of the Dead, the studio built a simulated stretch of the Las Vegas strip here. (Netflix declined to comment for this story.)
To bring Netflix to town, the city and state offered substantial incentives: $10 million from state Local Economic Development Act (LEDA) funds, $4.5 million from the city in 2018, and an additional $17 million from the state and $7 million from the city in 2020, plus ongoing tax credits for filming that grows as the company accelerates production. By promising to stay in the city for at least a decade, Netflix becomes a New Mexico film partner and gets unlimited reimbursements for every shoot — up to 25-30% of the qualified costs.
The city’s mayor, Tim Keller, said in a statement that the move “put the spotlight on our city’s strong film economy and joined our brand to one of the top companies in the new global economy.”
Albuquerque’s new role as Netflix’s North American production hub will offer a case study in whether these kinds of industry subsidies ultimately pay off for the host communities. Local officials hope that the deal will not only spur local economic development, but seed a permanent film and TV production ecosystem in the region. Content creation is booming, making the search for studio space competitive: In December, Disney announced it would spending up to $9 billion a year on streaming content by 2024. To Alicia J. Keyes, who suggested Netflix buy ABQ during her 2018 stint as the head of Albuquerque’s film office, the incentives represent a smart investment in a growing sector, not an Amazon-HQ2-style race-to-the-bottom. “You are our partners — we’re investing in you as you’re investing in us,” says Keyes, a former Disney exec who is now the cabinet secretary for New Mexico Economic Development under Democratic Governor Michelle Lujan Grisham.
But others warn that betting on film production as an economic development strategy carries risks. Pat Garofalo, director of state and local policy at the nonprofit American Economic Liberties Project and author of The Billionaire Boondoggle, says such deals invite “perpetual competitive purgatory,” where states and cities have to constantly spend more to prop up the industry they paid to come in the first place.
Not surprisingly, many in the local film industry think it’s a boon. Ivan Wiener, founder and executive director of the Albuquerque Film & Music Experience, an annual festival, says Netflix has been a great deal for the city and the industry. Covid dampened enthusiasm and temporarily paused filming, including big Netflix projects such as the Idris Elba Western The Harder They Fall, but cameras are rolling again. Production in the first three months of 2021 was already double that of the last quarter of 2020, and this year should be “record breaking,” says Karen Criswell, the city’s film liaison.
“A recent casting call for extras for Stranger Things brought out like 4,000 people,” Wiener said. “That kind of attention is very impactful.”
Netflix’s acquisition and expansion in Albuquerque comes after the streaming wars triggered a TV production boom. An FX network tally of primetime TV shows in production has gone from about 250 a decade ago to 532 in 2019. Netflix, which now claims 20% of the streaming market, is arguably more responsible for that growth than anybody else; in a move akin to its New Mexico move, Netflix has also developed a massive content hub outside of Madrid, Spain.
“They spend so much money that they’re driving the industry,” said Robert Marich, author of the book Marketing to Moviegoers. “The vertical integration is unprecedented. They’re changing customs and industry practice for hiring talent, and spend so much money, everyone has to pay attention.”
Marich believes that as long as Hollywood needs overflow space for filming, Albuquerque’s bet on Netflix should be safe. The region has long billed itself as a cheaper stand-in for Southern California, as the 2012 documentary Made in New Mexico asserts. It’s close enough to existing studios to easily monitor productions, land costs are cheap, and the weather offers 310 annual days of sunshine. The last full fiscal year of pre-pandemic production brought $525.5 million into the state economy. Industry publication MovieMaker has anointed Albuquerque the best place to make films three years in a row.
The state’s history of filmmaking goes all the way back to 1898, when the short “Indian Day School” was filmed with a Thomas Edison-designed camera. Beginning in 2002, incentives began turning moviemaking into big business in New Mexico, earning the state the nickname “Tamalewood.” Breaking Bad, which shot here beginning in 2006 after incentives convinced producers to relocate from California’s Inland Empire, gave the city pop-culture relevance and still draws tourists looking to tour filming sites and buy blue-tinted fake meth candy. (The coordinates where Walker White buries money in the series actually lead to ABQ Studios.)
Wiener says Breaking Bad really changed the landscape; that same year it started filming, he started Reel Solutions, a local concierge and consulting company for the film industry. “The show captured Albuquerque as a character in the show,” he said. “Sometimes it takes those award-winning shows in front of people week after week to really bring attention to what’s happening in New Mexico.”
Other studios are also taking note: In 2019, Lionsgate and NBCUniversal announced plans to build a new downtown studio complex and half a billion in spending plans. As the industry has grown, stage space has expanded, and there’s now an experienced community of crew workers and below-the-line talent here.
Albuquerque and New Mexico also lack the downsides that dissuade producers, says Tom Nunan, a former producer and professor at the UCLA School of Theater, Film and Television who shot two seasons of the Crash TV series in town. “Incentives are one thing,” Nunan said, “but if you don’t have the infrastructure to feed these giant productions, or the artisans, the entertainment industry ultimately doesn’t save as much money because they need to fly crew in.”
Long-term, having this infrastructure and local talent on hand is a hedge against unpredictability in the streaming industry (Netflix’s Q1 results, which fell 2 million sign-ups short of subscription goals, sent the stock tumbling 11% earlier this month). “I’ve never seen an investment in sound stages that doesn’t pay off,” said Nunan. “If they build it, they will come. I think everyone wins from this. There’s no villain anywhere. This is one Hollywood story with a happy ending.”
Keyes says that the incentives it grants to Netflix are indeed creating local jobs and businesses: When the streamer bought ABQ, it promised to create 900 new jobs and stay for a decade. Currently, she says, the city’s film community has more than 1,500 local union crew members who make an average of $52,000 annually. Netflix also has used more than 2,000 local vendors, including niche firms that provide film set security, rental cop cars, and the breakaway glass used in stunts. Companies like Crafty Apes, a full-service special effects house that has hired local visual effects artists, have opened offices in town, and Wiener says the city has been a magnet for wardrobe talent and boutique film-related companies, often moving from California and other film hubs like Louisiana.
“Like stadiums, there’s no good way to do this. We’ve literally seen this movie before.”
Albuquerque’s higher education sector is also getting in on the action. The University of New Mexico has facilities across the street from the steaming giant’s studio, and Central New Mexico Community College is launching a film accounting class in partnership with Netflix; both have seen some of their film students hired for shoots, and a more formal program with the streamer is still under development.
Molly Ryckman, vice president of sales at Heritage Hotels & Resorts, says increased film production has impacted occupancy and on-premises restaurant sales. A cluster of Heritage businesses, including Hotel Chaco and Hotel Albuquerque, as well as Sawmill Market, all located in the gentrifying Sawmill District, have seen “huge growth” since 2019. Since restrictions on filming began to ease this past January, she’s starting to see a rebound, with crews and talent staying at locals hotels.
But the biggest winners from Netflix’s expanding presence may be its neighbors at Mesa Del Sol. Originally envisioned as a “green” city of 100,000, the suburb’s residential growth stalled out after the Great Recession. Now, new homes are again going up. The development already houses a 1,250-employee back-office facility for Fidelity, the financial management firm, and has plans to eventually include 37,000 housing units spread over 22-plus square miles of parks, offices and mixed-use development. Some of that housing, says Campbell, will be designed specifically as seasonal rentals for film talent.
“Netflix only announced expansion five months ago, but I’ve already gotten lots of inquiries from people who could be contractors for Netflix,” he said. “They’ll find a home here, too.”
All this enthusiasm hasn’t entirely drowned out the lingering questions over the value of the tax incentives. State representative Rod Montoya, who represents the rural community of Farmington, has called the programs a “giveaway of our money to people in other states,” saying that state gets about 45 cents for every dollar it spends. Pat Garofalo, who writes about the negative impact of public subsidies, claims the Netflix deals struck by New Mexico and Albuquerque are a “swindle.”
“Every independent analysis that has looked at this finds these types of film incentive programs are paying back pennies on the dollar,” he said. “Like stadiums, there’s no good way to do this. We’ve literally seen this movie before.”
Albuquerque is hardly the first city to be seduced by the economic promise of making movies. There’s a long trail of towns that tried and failed to become the next Hollywood, including Austin, which began to bill itself as the Third Coast in the late 1970s in a bid to lure film and TV productions. Beginning in 2000, Garofalo notes, numerous states poured money into film production incentives, only to see productions chase lower costs and move out when financially or politically expedient.
Georgia, for example, set up a similar set of tax breaks for filming starting in 2005, offering 30% transferable tax credits. Since the program started, the state has issued $5 billion worth of credits, a bonanza that helped attract scores of productions, including Black Panther, The Walking Dead and the previous seasons of Stranger Things. But economists have raised questions about the viability and cost of the tax credits, especially now that calls to boycott the state over its restrictive voting laws have led some productions to shoot elsewhere. (Kristin Wiig, for example, moved her latest film from Georgia to Albuquerque, while Will Smith relocated a big-budget shoot to New Orleans.)
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Albuquerque has also been on the other side of these disputes. In 2011, Marvel filmed the original Avengers in Albuquerque, said Wiener. When Marvel began planning its next movie project, then-Governor Susanna Martinez said she wouldn’t give them the incentive money they were seeking, according to Wiener. That decision cemented Georgia as a center of production for Marvel, a relationship that lasts to this day.
Garofalo agrees there’s value in having production jobs here, but so much money is spent to attract “transient vaporware” that it’s simply not a sustainable way to invest.
Despite the risks, supporters of the region’s economic embrace of the film industry are optimistic: Once more hot shows and films are produced there, Marich says, it’ll guarantee years of steady work and give the city a halo effect. Ten productions have recently finished or in the works right now, according to the state film office, including the final season of Breaking Bad spin-off Better Call Saul. Keyes says that Albuquerque is in the midst of signing a third large studio partner, a deal that should be announced in June, and state economists predict that the 2020 Netflix expansion alone will bring $4.19 billion in economic output in the state over the next decade.
“I see productions doubling over the next two years at least,” said Wiener. “It’s going to be massive.”