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Bold growth plans at hollywood studios

By MICHAEL CIEPLY

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LOS ANGELES — Film counts are down. Production is going elsewhere. And yet big Hollywood studios are planning to expand.

Years into a slump in the local production of movies and television shows, several of the largest California-based studios are laying plans to build sound stages, postproduction facilities and offices in what might become the most aggressive growth spurt in recent Hollywood memory.

The Walt Disney Co., NBCUniversal and Paramount Pictures all have large, long-term expansion plans on the books. The construction would follow recent face-lifts and incremental growth on and near the lots owned by the three other major studios — Fox, Sony Pictures Entertainment and Warner Bros.

The resulting transformation would seem to put a glow of health on an industry that was bruised by a writers strike in 2007, then battered by recession, piracy and digital competition — yet remains optimistic about filmed entertainment and its production in and around Los Angeles.

Some observers are puzzled.

"It doesn't make sense," said Peter Guber, chief executive of Mandalay Entertainment Group, a sports and entertainment company. He spoke by telephone as he drove to the set of his latest film, "The Voices," a horror story filmed in Berlin.

After becoming chairman of Sony Pictures in 1989, Guber ordered a top-to-bottom overhaul of the studio's Culver City lot. More recently, though, he looked at an opportunity to buy a midsize lot here, but backed away. "It doesn't appear there will be that much more production," Guber said of the near-term prospects.

One closely watched barometer of the business is not promising: The number of location shooting days in Los Angeles County has remained below peaks achieved in 2006 and 2007, according to state and local officials.

"We're still seeing TV shows and films leave," said Amy Lemisch, the executive director of the California Film Commission.

Still, last month the Los Angeles Business Journal noted that Disney, NBCUniversal and Paramount were planning three of the largest commercial developments in Los Angeles County, with a combined cost in the billions of dollars, serving as the blueprint for substantial growth in movie and television facilities at all three.

Each of the projects follows a logic of its own, but they all reflect Hollywood's determination to remain a force here by planning enough physical expansion to contain operations well into the future.

"Being in control of your destiny is better than being at the mercy of others," said Christine M. McCarthy, Disney's executive vice president for corporate real estate, sourcing and alliances, and the company's treasurer.

At its Grand Central Creative Campus in Glendale, Disney has authorization through 2032 to build up to 3.2 million additional square feet in a 125-acre light industrial compound. The campus already houses its interactive division and other operations on ground that once housed a local airstrip.

Growth in Glendale would most likely exclude movie and television operations, according to people briefed on the company's approach, who spoke on condition of anonymity because of uncertainty about exact plans.

If approvals are granted, Disney is hoping to build as many as 12 soundstages on its 890-acre Golden Oak ranch about 20 miles to the northwest. That would almost double the number of stages Disney currently owns on its lot in Burbank, and a nearby television-oriented facility — an expansion that might allow Disney to reduce space it now rents from others.

At Paramount, a $700 million expansion on the studio's Hollywood district lot will occur during the next 25 years, assuming the plan survives a review process whose next hurdle is the release of an environmental impact report.

Part of the challenge is to integrate operations on an 87-year-old lot that was acquired piecemeal, beginning with two adjoining properties, one belonging to Paramount, the other to RKO Pictures (and, later, Desilu Productions), while increasing office and production space.

Along the way, the studio expects to create large stages surrounded by enough open pavement to let crews create a base camp with their wardrobe and catering trucks, rather than threading them around a cramped, 56-acre compound in which stars — including Desilu's Lucille Ball — used to have bungalows of their own.

"We're preparing for the next hundred years" by obtaining approvals for potential future growth, said Sharon J. Keyser, Paramount's senior vice president for real estate, government and community relations.

Perhaps the most breathtaking expansion plan is at NBCUniversal, where the company will build a pair of 500-room hotels, and knock down an amphitheater to make room for a Harry Potter theme park attraction, as part of an upgrade that may cost $1.6 billion.

All of that was approved last month by the Los Angeles County Board of Supervisors, after nearly a decade of negotiations. Corinne Verdery, NBCUniversal's chief real estate development and planning officer, said the studio is now authorized to build up to 1.45 million square feet of new production facilities.

In the past, physical expansion has not always signaled health in the entertainment business. In Pontiac, Mich., for instance, a new studio defaulted on a large bond payment last year, after that state's incentives program was trimmed.

In Los Angeles, the major studios will try to avoid such jolts by building in phases that should match construction with actual need. Verdery, for instance, stresses that NBCUniversal's newly approved plan, like Paramount's, is more about having the right to build than about specific expansion. (Warner Bros., operating under approvals given long ago, has added stages and other facilities totaling 600,000 square feet in Burbank, according to Jon Gilbert, its president for worldwide studio facilities.)

To some extent, the new plans may also reflect brighter corporate prospects, as studio profit margins have improved since 2007. In a March report, Michael Nathanson, an analyst with Nomura Securities, pointed to shrinking costs, growing international box-office sales and an apparent end to the declines in home entertainment revenue as signs of a new stability in Hollywood.

Still, the studio plans seem a bit bold, given that productions have been migrating to states and countries that offer subsidies more generous than those in California.

Robert A. Kleinhenz, the chief economist for the Kyser Center for Economic Research at the Los Angeles County Economic Development Corp., said there was a slight uptick in county entertainment employment in March. But the annual employment figure was stuck at 117,300 in 2012, well below a recent peak of 132,200 in 2004, he noted.

The total number of films released by the major studios and their subsidiaries — no matter where they were produced — fell to 128 last year, down 37 percent from a recent peak of 204 in 2006, according to the Motion Picture Association of America — a decline that helps explain the drop-off in location shooting here.

Ed Duffy, a business agent for Teamsters Local 399, speculated that studios might expect to fill their new space with a flurry of small films, Web productions and reality shows — the sort of thing that normally does not create much work for the Hollywood unions.

"What their vision is, I can't tell you," said Duffy, who nonetheless applauded the expansion.

Verdery at NBCUniversal said it is all about making a stand.

"We're going to give it everything we have to keep production here," she said.





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