California Attorney General Rob Bonta has settled his litigation with David Ellison, ending a long-shot bid to delay or disrupt the merger and acquisition of Warner Brothers by Paramount Skydance.
Ellison is required by the agreement to do everything he was already doing, such as making “blockbusters”, but now according to a formula devised by state attorneys general, who are of course sure to be experts at such matters.
Leave aside the politics and the properties, however, and the move out of Los Angeles remains the same. Ellison has reportedly lived in the Nashville area for over a decade, giving him more than enough time to consider a move from Los Angeles, and Bonta’s lawsuit has reportedly finalized his decision to do that. Both push and pull factors are at work in this decision, if true.
This move is still going to happen, I believe, even though Bonta has stopped trying to fight it, because the logistics of the move favor Paramount’s business interests. The ‘triangle’ of Austin, Nashville, and Atlanta has advantages versus Los Angeles for movement of people, machines, and ideas from office to lot to set. It reduces exposure to political risks. We just saw a demonstration of those risks.
There are other risks that get reduced by the move. Much attention is paid to California tax incentives, location shooting headaches in Los Angeles, and red tape. All of those analyses are legitimate, but mine is a specialized application of military-historical research. The starting point of my analysis is the friction created by the city of Los Angeles against the corporate movement of Paramount assets on a daily production basis through sheer transportation geography. LA is the prison that keeps Paramount incarcerated.
In city planning, this is called the ‘last mile problem’: the part of any journey between LAX and any part of Hollywood, including Burbank or Paramount Studios, that is spent in traffic gridlock. Both major highways add at least an hour of overland travel time to any flight, to or from LAX to Paramount. Burbank has its own airport, of course, and Southwest has flights to and from Austin and Nashville, but this hardly alleviates the highway congestion.
By personal comparison, the drive time between Nashville and Atlanta is about as long as the drive time across the length of LA, roughly four hours. A Nashville executive can visit a set in Atlanta and return the same day in a company vehicle just as easily as an executive in LA can visit a set in the outskirts of Los Angeles and return on any given day in the same vehicle.
Presently, a crew lands on the ground in LA and burns union hours before the camera ever rolls. In all three cities of the triangle, the airport is already at the gateway to production centers. Intermodal linkage provides a robust ‘triangle network’ of highways and airports that lead from airport to doorstep, wherever shooting locations are. The benefits accrue most if Paramount moves production machinery out of the LA basin gradually, over the next 4-5 years, to Austin.
My theory is testable — eventually. These changes will take years to become visible. If I am correct, the center of mass of the Paramount motor pool will shift east, to the geographic center of the American interstate highway network. A robust production network will connect each node of cultural production, old and new, to the whole country with higher efficiency, so that Paramount can take advantage of any production tax incentive anywhere in America — or the world.
While this new system will have a direct economic impact, likely saving Paramount hundreds of millions of dollars over a decade, that fiscal impact is a rounding error compared to the more significant savings in opportunity costs identified here. In order to make the promised 30-32 movies a year that the merged company is obliged to make by all the merger terms now agreed, and still make a profit, Ellison needs a flexible, hardened, ready-made logistical network — one that includes LA, but without being locked inside the Hollywood penitentiary.
Here ends my executive summary. Premium subscribers have access to the full analysis below.
Three days of the condor movement
Movie making requires a surprising number of vehicles, including specialized ones. Grip trucks for lighting and electrical equipment, honey wagons to remove sewage from remote sites, and racecars for the next Tom Cruise film all get stuck in gridlock just like any other kind of wheeled vehicle.
Staging yards in the Valley are relatively cheap, but crossing the LA basin with a convoy is not. Austin, Nashville, and Atlanta all have their own traffic problems, but they also have more robust highway networks to alleviate congestion. Austin enjoys key cost advantages over LA over the long term. Storage will be as cheap, or cheaper, while movement across the lower 48 states will be rationalized.
If I am correct, Paramount lighting condors will leave LA for sets across America and park in Austin without returning to LA. Equipment will then travel to sets all over America from Austin without returning to LA. Eventually, someone will process the paperwork to register each vehicle outside of California. As the mass of Paramount’s motor pool shifts eastward, Ellison will reduce his exposure to the risks of LA production.
To explain this point, I have created two conceptual maps. They are not hyper-accurate. They merely illustrate the very basic geography of what I think is about to happen. Right now, the “magazine” of Paramount vehicle logistics is on the left side of America, so that Teamsters require more than two days to reach most of the country with any piece of rolling production stock from LA.
Here is what Paramount ground logistics might look like in five years. Again, without being hyper-accurate, the map shows how a two-day driving distance will now reach most of the lower 48 from the “hinge depot” at Austin. Equipment positioned in Nashville or Atlanta can reach anywhere on the east coast in two days. Fewer Teamster days will be required for any single movement.
Ideally, Paramount can turn this efficiency into tighter production schedules, allowing more profitable content, with the same number of union drivers. One potential outcome is that many of these drivers will relocate to Austin, where they will find an immediate cost of living bonus versus California.
Just because Paramount preserves a union job does not mean the union driver has to stay in LA. Many will choose to move so that they spend fewer nights in hotels. Most of Paramount’s condors live in LA, right now, along with their drivers, but this can change. If Ellison wants, the mass of people and the motor pool will move gradually from sheer economic pressure.
The condors can live wherever there is cheap lot space with a fence and electrical power. Pavement is their natural habitat. The people will find the new digs quite compelling.
By dint of previous experience in hosting movie and serial production, Atlanta already has a market of movie-making vehicles for rental. Beyond the Austin city limits, there are already dressing room trailers on set lots. Nashville has less movie production equipment available, but plenty of buses and limousines and catering trucks and Winnebagos. Local vehicle fleets and markets already exist across the triangle, and they will grow, while the ones in LA will diminish, if I am correct.
What Paramount will have created, in due time, is a second Hollywood production center, distributed across three nodes. Production will continue in LA as warranted. Risks to production schedules can be managed through the new intermodal distribution network. Better yet, there is a real time savings advantage in moving people and decisions out of LA.
Atlanta also has the advantage of being in the same time zone as New York. Nashville and Austin are only one hour behind Washington. A decision on the east coast is made at a morning meeting three hours before the west coast executive has fought their way through traffic to get to the office.
Telecommuting only resolves some of these issues because of the time difference. This daily opportunity cost is eliminated if content production decision-making moves to the triangle. The ideal result will be faster, better, cheaper films and shows. To get there, Paramount will make aggressive use of their new, better airport options.
A tale of triangle cities
Further reductions in production friction are available through air travel. It happens that the triangle has two very solid airlines with good national coverage, including the west coast, that have established bases in the triangle. Atlanta is the fortress hub of Delta, while Southwest is strongly distributed across all three triangle airports.
This is a robust set of air travel resources that distributes risks versus LAX. Every flight within the triangle is a short haul route, that is, about two hours or less. Same-day internal meetings become realistic, which is not true for LA. A single storm (or wildfire) will not disrupt the whole system.
Atlanta is the connective organ. It is the world’s busiest airport, and Delta’s primary hub, with banks of planes going to most of the United States. Atlanta also has strong international reach. Physical assets — Turner, CNN, and related infrastructure being absorbed in the Warner Bros. merger — are already located in Atlanta, and Georgia has an established studio complex south of the airport.
Nashville airport hosts British Airways direct flights to London, which has become a production tax haven for American content. Southwest flights from Austin to anywhere in the US, or back again, have the same shorter-haul advantage over LAX that 5-ton trucks enjoy. The geometry is the same. Fewer hours are spent in the air or on the ground by everyone, because math.
Executives in the triangle can visit production sites in two cities in one day. Talent can move faster from the geographic center of the nation than from its western edge. Within the triangle, the overlapping business day with New York is longer than it is in Pacific Time, no matter what time you fly.
For all the reasons explained above, LAX is a congested coastal gateway where the door-to-door time is routinely worse than the flight time. Ground movement is a daily tax on air travel for Paramount, too. The more production Ellison moves to the triangle, the less ‘tax’ he pays.
The highways, the scarce staging space for vehicles, the expense of operating production vehicles, and a slow, costly permitting environment in LA are production risks. They are reduced most by moving the talent east, too. The most visible sign of change will be the accretion of people in the triangle over time, as they flee LA.
Pull factors and the push to leave
Paramount consists of both properties — things, ideas — and people. Star talent can still live in LA and fly to the triangle for every content block, if they want, at least for now. No drastic sudden change will happen because none is necessary. Melrose and Burbank lots can remain open for the agreed-upon five years. Paramount will maintain their flag in LA, though to what degree remains to be seen.
The new logistics of Paramount work better however if everyone, including the stars, decides to live in Nashville rather than LA over the long term. The triangle provides an increasing amount of production efficiency as the executives, creators, and sundry professionals required to produce video and film content relocate to it.
Actors and directors alike will find pleasant relief from onerous state and local income taxes in Nashville. Paramount personnel in Austin will find the cost of everything is lower. Georgia too has cost savings that Paramount’s people will feel in their wallets. Indeed, that is already being reported.
Paramount is reportedly looking for office space in Nashville. They will need new building options for 400,000 feet, as their requirements exceed what the market can provide, but every square foot will be cheaper to build than anything built in LA.
Construction starts will be a sign of serious commitment to moving — and the people will follow the incentives. They won’t have to be told.
“I’ll go to Nashville right now”, one anonymous Paramount executive tells Page Six, “get a gorgeous house and pay it off fast. Your fuel costs are lower. Your life improves dramatically.”
The corporate culture of the company is already relocating. A combination of push- and pull-factors is dislocating human capital from California, and in a very real economic sense, liberating Paramount’s people.
Lakefront properties are abundant within a Friday afternoon’s drive time of Nashville, and nice ones are astonishingly cheap compared to any LA luxury residence. Our anonymous Paramount executive can enjoy their new second home away from the city, maybe with kids and jet skis, every week.
Moreover, this anonymous executive is telling the talent about the difference in the cost of good living versus LA. Union drivers might like Austin, and union electricians might prefer Atlanta, each with its own attractions. The point is that leaving LA will actually feel like freedom, to many.
The ease of movement in the triangle, reducing delays and congestion in production, will be felt as more time at home and less time moving. This is a powerful pull factor in the new design of Paramount.
Bottom line: better, faster, cheaper content
Amateurs discuss tactics. Professionals discuss logistics. This maxim of military affairs applies just as well to a business, which must pay for things and people to be in certain places at certain times, as it does to an army. The film and TV business has become the movie and streaming business. It consists of a small army of people.
For a variety of reasons — the decline of physical media sales, too much superhero slop — Paramount must conduct this business with greater efficiency now to meet production targets, and still profit. Reports of corporate reorganization in the triangle are realistic, for there are cost efficiencies, both in money and in opportunities, to be gained in the transition.
As explained, this process will be slow. But David Ellison has a fiduciary duty to his shareholders, and the cost of relocation over five years is a rounding error in Paramount’s books. It will be most visible as the most visible talent relocates to the triangle. If it happens, it will enable Paramount to actually meet their state-AG-imposed film production quotas.
Altogether, the efficiencies described here might save Paramount a few hundred million dollars. That is a back-of-the-envelope calculation from someone without a degree in logistics. It is pitiful compared to the savings in delays between decision and implementation. Time is money, therefore speed saves. Paramount wants to make the most of every available production credit, everywhere.
I have relied on my military understanding of logistics to combine the human factors with the use of interior lines (the triangle) to show how the new logistics of Paramount will function in a dislocation of production mass and human resources from LA. This story will ultimately be told as an economic and political and cultural history. But all wars, including culture wars, are fundamentally macroeconomic affairs. Logistics are fundamental to them all.
If the 5-tons keep deadheading back to Van Nuys after Georgia wraps, then my hypothesis has failed. If the stars all still live in LA instead of Nashville in five years, then my hypothesis has failed. On the other hand, if Paramount ‘suddenly’ announces they are leaving LA after all, in five years, then it was not a shootout adventure escape. It was a Shawshank Redemption. It was a caper that required patience and planning — and robust logistics.
Alberta Will Not Be The 51st American State
Albertans go to the polls in October to decide Question 10, a referendum on whether to begin the process of thinking about possibly planning to maybe leave Canada, some day. Polls show that the measure is unlikely to pass. However, the other nine questions are probably going to fare well with voters.