Variety: Sony and Warner Bros. Gear Up for Political Fight for Las Vegas Studio

Story from Variety:

Sony and Warner Bros. are preparing for a heavyweight fight in Las Vegas, as both studios seek state funding to build rival production facilities.

The companies are looking to expand their footprint outside of Los Angeles, and Las Vegas is only 75 minutes away by plane. As with nearly all location decisions, the key factor is whether the state is willing to offer a tax incentive.

Nevada leaders want to diversify the Las Vegas economy, which relies overwhelmingly on tourism and gaming. But they have balked at the price tag to fund both projects.

That has set up a competition between the studios over which would pack a greater punch.

Warner Bros. is a bigger studio, and is proposing a bigger project with a higher volume of film and TV production. Sen. Roberta Lange, who is sponsoring it in the legislature, argued in a statement that Warner Bros.’ “ability to keep the studios full starting from day one is a key difference maker.”

Sony’s studio would be smaller — and less costly to the state — but would be part of a larger commercial development, including retail and hotels.

“We can show, and demonstrate, and earn our votes,” said David O’Reilly, the developer of the Sony project. “This project is going to deliver the most economic growth.”

Nevada currently offers $10 million a year in film incentives — not much compared to other states. Just in the Southwest, New Mexico awards up to $120 million a year, plus an unlimited credit for its “film partners” — Netflix and NBCUniversal. Arizona approved a $125 million-a-year incentive in 2022.

In 2023, Lange proposed increasing the Nevada credit to $190 million a year over 20 years. Mark Wahlberg, a Las Vegas resident, was a prominent supporter, along with Jeremy Renner, who pushed to include funding for film projects in northern Nevada, where he lives. The local construction trades and the Las Vegas branches of IATSE and the Teamsters also pushed for the incentive.

At the time, the two studio projects teamed up to lobby for the bill, which would have subsidized both. But the bill stalled as the state instead focused on a $380 million incentive package to build the new A’s baseball stadium on the Las Vegas Strip.

According to sources familiar with the negotiations, it became clear that state leaders — including Republican Gov. Joe Lombardo — felt they were reaching the limit of the public’s appetite for subsidies. The state had previously granted a $750 million stadium subsidy to attract the Raiders to Las Vegas. Spending nearly $200 million a year on movies was simply too much.

Lawmakers had to pare down their ask, which meant that the two projects, which had been allies, were forced to become rivals.

The Nevada Legislature meets every two years, so the next opportunity to pass a film incentive will come next spring. The two projects will be represented by two different bills, each with its own sponsor.

Lange is backing the Warner Bros. project, which would be built at a UNLV business park in southwest Las Vegas. The details have yet to be finalized, but proposal is expected to cost around $100 million a year in tax credits, plus millions in additional funding for production elsewhere in Nevada.

Sandra Jauregui, the Assembly majority leader, is supporting the Sony project, which would cost the state $80 million a year. Another $25 million would be set aside for productions elsewhere. Wahlberg is also a supporter, having played a key role in bringing Sony to the table.

Sony and Howard Hughes Holdings, the development company, plan to build 10 soundstages in Summerlin, a master-planned community on the western edge of Las Vegas. The project would be part of a $1.8 billion commercial development, which would include as many as three hotels.

Proponents have commissioned an economic impact study, which contends that the state would see a significant return on its investment. The Warner Bros. team is expected to release its own report showing as much economic benefit or more.

Both teams are focused on the strengths of their own projects. But as the conflict has started to take shape, they have also started to allude to the weaknesses of their opponents.

O’Reilly, the CEO of Howard Hughes, noted in an interview that Sony has a “rock solid balance sheet” — a contrast to Warner Bros., which is burdened by $40 billion in debt.

Warner Bros., meanwhile, has touted its scale — $20 billion in annual spending on content — inviting an adverse comparison to the smaller Sony.

Warner Bros. says it plans to spend at least $500 million a year on production once the Las Vegas studio is complete, or $8.5 billion over 17 years. The Sony studio would see about $270 million a year in production spending — though only a third of that would come from Sony. The remainder would come from other production companies who would lease the space.

Film incentives in other states typically are not tied to a particular facility, making the Nevada bills unusual. The concept originated with Birtcher Development, which began conversations five years ago with UNLV about how to incentivize the construction of soundstages at the school’s Harry Reid Research and Technology Park.

Films and TV shows set in Las Vegas often film exteriors there, and then shoot the rest on soundstages in L.A. Building stages in Las Vegas would bring those jobs to the state, with the goal of building up a local crew base over time.

The construction of both projects would be privately financed. The subsidy would apply to productions that utilize the facility. As proposed in 2023, the tax credit would be 30% of production costs, matching the going rate in Georgia and other states. 25-Warner Bros. joined the UNLV/Birtcher team in August, announcing its commitment for $500 million a year in production spending. If the studio can deliver that volume for an annual subsidy of $100 million — i.e., 20% — it would be more cost effective than the Sony project, which is still around 30%.

But that’s a big “if.” No legislative language has yet been drafted and the numbers remain in flux, making it hard to do a reliable price comparison. The Sony team notes its proposal includes a lot of additional development that would generate jobs without any subsidy.

The sides are also jockeying over who would be a more reliable partner. The Sony team notes that Howard Hughes already owns the land on which the studio would be built, whereas Warner Bros. and Birtcher are leasing land from the UNLV Research Foundation, giving them less flexibility and control.

Sony has also said its project is “shovel ready,” though it’s not clear how quickly either project would be built.

In Arizona, the tax credit bill approved in 2022 was designed to incentivize the construction of soundstage facilities in the Phoenix area. Soon after the bill passed, two projects announced that they would break ground the following year.

Since then, however, there have been few updates about either project. Read More About: Mark Wahlberg, Sony, Warner Bros.