Trump's Film Tariff Announcement Sends Shockwaves Through Hollywood
Summary
In this podcast recorded just 24 hours after President Trump's announcement of potential tariffs on films shot overseas, industry veterans John Schramm (Head of Development at Kinolime) and producer Mike Gabrawy (Hotel Mumbai) discuss the far-reaching implications for filmmakers worldwide.
Key Takeaways
The independent film market could face collapse if tariffs are implemented
Costs would likely be passed from distributors to consumers
International storytelling and exotic locations could become economically unfeasible
The announcement compounds existing industry struggles including post-pandemic contraction, the double strike, and LA fires
Industry Response
Producers hope this is a negotiating tactic to bring production back to the US
There's desire for federal incentives that would make domestic production competitive
The 180-1 tax structure that has helped independent producers is set to sunset in 2025
Full Transcript: KL Podcast - Trump Film Tariffs Episode
Participants:
John Schramm - Head of Development, Kinolime
Mike Gabrawy - Producer (Hotel Mumbai), Kinolime Consultant
[00:00] John Schramm: Hey everyone. Thanks for tuning in. John Schramm here, head of development at Kinolime, and with us today is Mike Gabrawy, the producer of Hotel Mumbai and some amazing other films, who's also a dear friend and a consultant here at Kinolime. Mike, thanks for joining.
[00:07] Mike Gabrawy: Pleasure. Thanks for having me.
John Schramm: I know your phone must have been blown up the last 24 hours with this Trump news. I want to ask, you know, basically what's going on? Maybe you could tell us from your perspective out in Los Angeles and, you know, as a seasoned producer, tell us what's going on here with this Trump tariff.
[00:27] Mike Gabrawy: Well, I think it's pretty consistent with some of the other kind of announcements that Trump has made. I think it's created a bit of chaos and confusion in the industry as we try to parse through what the actual practical implications are going to be for our industry.
[00:39] So at this moment, and I'm on a handful of threads, we are on the eve of the Cannes Film Festival, the single most important international event to our industry. And frankly, this has just sent kind of reverberations and much in the same way that some of his other tariffs, you know, what he says today may not be what he says tomorrow. And I think that's where a lot of, there's a lot of ambiguity in what was said and how that's going to manifest in a practical way is still yet to be determined and yes, to be seen.
[01:16] I think this announcement creates more questions than it does provide answers. We don't know what that means, but, you know, if the past is any indication, this is a prompt to start having conversations and negotiations with international parties and partners to find the path forward.
[01:36] John Schramm: Now, you know, for those that may or may not know, people think Hollywood, right? That's where for a century we shot films. Maybe you can walk us through how common is it for a film shoot to shoot overseas nowadays in this climate and market?
[01:53] Mike Gabrawy: I think it's much more common to have films shooting internationally than it does to have them shooting in the US. I think the US subsidies that are provided in the US are not competitive in comparison to what you can get as far as government subsidies in places like the UK and Australia and Europe and Canada.
[02:12] So, producers, as we chase the bottom line constantly in a market that's contracting drastically, are looking for the most economical places to make a film that also work creatively. And that's the other challenge here—we're talking about IP, it's not a product. So you're making, I mean, Hotel Mumbai being a very good example of this.
[02:38] This is a movie that was shot half in Australia and half in Mumbai, and it would be very, very hard to double Mumbai in Atlanta. So how do you tell these international stories in a way, if the IP is born in America, how does that work now?
[03:01] John Schramm: Yeah. Let's just role play for a second. Like, what if this goes through, you know, from a producer's perspective, like how is this gonna change how you make your movies? What do you think this is gonna do for the industry?
[03:14] Mike Gabrawy: I mean, again, we don't have a crystal ball. We don't know, is he posturing right now? Is he just trying to get the partners to the table to have a more favorable deal? Is he trying to get the states to step up and spend more money or allow more money domestically to have films shot in certain states that aren't playing ball?
[03:29] But let's role play. What do you think is gonna happen? How is this gonna change how you make movies? I think it's just, I think he did it in a way that there could have been a more thoughtful way to unroll this. And I think there are conversations—he has these ambassadors, right? He has Mel Gibson, John Voight, Sylvester Stallone, his ambassadors, you know, Mel Gibson having done a number of films, having connections to Australia and having an Australian distribution company.
[03:55] I think that there were conversations already happening about a domestic US federal incentive. And I've always said that if you did one that was even modest in the 10, 15% range, you know, in Australia, the local producer offset is 40%. So imagine if you had a very small one as a federal incentive here, and you let the states compete on a regional level, that would be a really healthy ecosystem for independent producers to be able to access.
[04:25] There's also more specialized incentives. Like there's a 180-1 tax structure that allows for an accelerated deduction that we've been using. It sunsets this year, it ends in 2025. I've been able to utilize it on my last three movies.
[04:37] But I think if there had been an alternative path, the spirit of this is, I think it's needed, right? We wanna bring production back to the US but I think that right now, there is no path that makes sense.
[04:56] What this, in my opinion, what this does is it will potentially collapse the independent film market. Like, that cost is just gonna be passed on to distributors if there's a tariff, which I don't know how it works, because traditionally intellectual properties like films and television, they're not subject to tariffs in the traditional sense because they're usually imposed on physical goods, not IPs.
[05:27] So I don't know how that is gonna manifest, but the idea of having some sort of net there, but I think right now, if there were tariffs put on a film that would be passed onto a distributor and the distributor's gonna pass that onto the consumer, and then the consumer is going to pay more for something that they're already not paying for.
[05:47] So you have like a series of contraction post pandemic of the independent film space, right? Where the pay-one windows for these films, like during the pandemic, everybody was renting everything and watching everything they could get their hands on, there's a contraction afterwards. Then you have a double strike, then you have the more regional problem of LA having these devastating fires.
[06:06] And then when the industry is already after this double strike, that crippled the industry for many months, now you have put something that will in essence collapse the independent film industry. I believe there can be potential carve outs for studios and things like that, I don't know how you can look at this and not say the studios are shooting in Australia and the UK and all these places and bring it back.
[06:36] How is that going to work for them? So even if you carve out the studios or you make exceptions for certain US companies, I think the independent space, I don't know how you'd be able to survive this, without a government bailout on a domestic basis of how we finance movies.
[06:59] John Schramm: Yeah, I could see it just seems like the independent films are in dire straits right now and they're gonna be handcuffed. You know, maybe the slice of life coming of age movies or dramas set in anywhere USA would maybe be fine. But, you know, the action thrillers that are operating a certain space, that use international locations to, you know...
[07:19] I guess what Trump doesn't realize is that it's not that we're shooting overseas to take advantage of tax incentives, which is partially true. Part of it is the escapism and the exotic locations. I mean, look at White Lotus, right? Like, part of those productions being shot overseas is because Americans wanna see a different milieu. They wanna see different landscapes and locations.
[07:35] 'Cause we want, you know, Bond films, you know, James Bond movies, they thrive on that stuff.
[07:45] Mike Gabrawy: Yeah. I mean there's the whole creative conversation too. And you talk about White Lotus, like how are the streamers, their whole model is built on shooting abroad and exploiting internationally. Like how does that work if they're shows that being a perfect example of shooting in Thailand, right? Like how does that work?
[08:09] So I think there's just right now more questions than there are answers, but the one constant is like the timing of this being right before Cannes and literally, it really is the same way that there's so much uncertainty in other tariffs and other structures that have been said that I think it's hopefully something that will sort itself out.
[08:32] Is the independent industry in trouble? Yes. And it has been for about a hundred years. So that isn't going to change. There are still going to be people making films, and if you're making films here, you're still gonna be making films. It's just going to make them more cumbersome and harder in this configuration.
[08:50] And I don't know, broadly speaking, films are what, 20, 30% more expensive to produce now than they were a few years ago. And the market contraction means you're getting 25, 30% less for them in the marketplace. Well, how does that economically work?
[09:07] That's part of the struggle that all independent filmmakers are facing now. And it's gonna put a real pressure on the unions here to film, because again, part of the allure of shooting overseas is working with crews. Your dollar goes further in certain countries, right? Like Romania, there's crews out there, there's less restrictions.
[09:26] It's just like, I feel like it's gonna bust at the seams. And yeah, I don't know what will happen. I'm not doom and gloom. I feel like with roadblocks, the inventive, entrepreneurial mindsets seep in and change and will adapt. But man, I mean, talk about timing, you know, just like this guy picks the perfect time to drop bombs right before Cannes.
[09:45] I mean, that's what you guys will all be talking about over there and it's just, ugh, it's really, really tough. It could just be a knee-jerk reaction. Who knows what'll happen in a few days, but or maybe he's getting it to get the conversations going and get our international partners to maybe bend on a few things and or domestically, like, I think getting the states to cough up more money and make more movies here.
[10:02] But yeah, what he's suggesting would just be outrageous and really send the already shaky business. I mean, the mantra was survived till 25, right? We're here in 25. What's the next thing? You know what I mean? Like, avoid death till 28 or something. It's nuts.
[10:22] John Schramm: Yeah. I mean, the industry, exactly. The industry's reeling, but I think we don't know all he said he is gonna authorize the trade commission. So he is authorizing it. I mean, that's what I believe is part of the strategy to stir things up and to start the conversation.
[10:37] And there's nothing I think American producers and filmmakers would like more than to be able to shoot at home. Yeah. I mean, I did a couple of days of pickups on a movie that we shot in Los Angeles, and I was bemoaning how California, how can we have all the resources here and not be able to make movies in California.
[10:50] Everything is here between the best crews, all the talent, locations. You have these studio back lots that are ranches that every studio has a ranch that has myriad locations. It's the place to make movies. And yet we can't economically afford to do it.
[11:06] Well, maybe in this craziness, something good will come out of it. I'm hoping. So Mike, thanks so much for joining. I really appreciate it. And I'm sure your phone's blowing up, but thanks for taking the time today.
[11:19] Mike Gabrawy: My pleasure. Thanks for having me.
