Geoforum 37 (2006) 739–751www.elsevier.com/locate/geoforum

Behind the scenes: How transnational Wrms are constructing a new international division of labor in media work

Susan Christopherson

Department of City and Regional Planning, Cornell University, 307 West Sibley, Ithaca, New York 14853, United States

Received 23 March 2005; received in revised form 16 January 2006

Abstract

Predictions that work in Welds such as computer programming, architecture, and graphic design will be globally sourced have raisedthe specter of job losses among skilled workers in high wage economies. One of the most interesting cases tied to this controversy is thatof so-called “runaway” motion picture and television production from the traditional center of entertainment media production in LosAngeles to non-US satellite production centers. Although runaway production is an old complaint in the entertainment media industries,the production location decisions of media entertainment Wrms since the mid-1990s look considerably diVerent than those in the 1980swhen a similar alarm was raised. Among the critical diVerences are: (1) the location of an expanded range of production activities inregions outside the “headquarters” location of Los Angeles; (2) the ability of transnational Wrms to access multiple, self-organized andnetworked pools of skilled labor in production locations outside Los Angeles; and (3) the expanded role of the sub-national state inreducing the overall production costs of transnational Wrms, including those attendant to their use of skilled labor pools. The current con-troversy provides an opportunity to consider how transnational Wrms use international out-sourcing to address their need for high-skilledand specialized labor in the production process. It also contributes to the on-going theoretical debate over how transnational Wrms arecombining the advantages to be derived from territorial agglomeration with those of substitutability of labor skills in multiple locations.© 2006 Elsevier Ltd. All rights reserved.

Keywords: Out-sourcing of skilled work; Media industries; Media unions; Labor geography; International division of labor

1. Introduction

“Competition should Xourish. It is citizens in eachcountry who decide what movies they want to see,what TV programs they want to watch. This kind ofcompetition stirs creative juices. It lifts the level ofquality in the creative community. When a govern-ment tries to defy that truth, the future of its nationalindustry is put to hazard.

Jack Valenti

The Motion Picture Association of America1

E-mail address: smc23@cornell.edu1 Jack Valenti Press Release, February 7, 2002. Available at: <http:

//www.mpaa.org/jack/2002/2002_02_07b.htm>.

0016-7185/$ - see front matter © 2006 Elsevier Ltd. All rights reserved.doi:10.1016/j.geoforum.2006.01.003

Predictions that work in Welds such as computer pro-gramming, architecture, and graphic design will be glob-ally sourced have raised the specter of job losses amongskilled workers in high wage economies. One of the mostinteresting cases tied to this controversy is that of so-called“runaway” motion picture and television production fromthe traditional center of entertainment media productionin Los Angeles to non-US satellite production centers(Coe, 2000, 2001; Scott, 2005). Although runaway produc-tion is an old complaint in the entertainment mediaindustries, the production location decisions of mediaentertainment Wrms since the mid-1990s look considerablydiVerent than those in the 1980s when a similar alarm wasraised. Among the critical diVerences are: (1) the locationof an expanded range of production activities in regionsoutside the “headquarters” location of Los Angeles; (2)

740 S. Christopherson / Geoforum 37 (2006) 739–751

the ability of transnational Wrms to access multiple, self-organized and networked pools of skilled labor in produc-tion locations outside Los Angeles; and (3) the expandedrole of the sub-national state in reducing the overall pro-duction costs of transnational Wrms, including those atten-dant to their use of skilled labor pools. 2

The current controversy provides an opportunity to con-sider how transnational Wrms use international out-sourc-ing to address their need for high-skilled and specializedlabor in the production process.3 This issue is of criticalinterest to the entertainment media industry labor force,which is composed of project-oriented workers who areconcentrated in international territorial production com-plexes, and highly unionized. The increased power of trans-national Wrms vis-a-vis these regionalized media laborforces has intensiWed pressure on the powerful mediaunions to reduce their wage demands, alter compensationpackages, and loosen work rules across what are nowmulti-national production centers.

Transnational Wrms using skilled labor to produce crea-tive or innovative products, face a particular set of prob-lems. The Wrst of these problems is labor supply – thecontinuous creation of a suYciently large and skilled work-force, outside the historically sustaining framework of theWrm. The second problem is control of the wage bargainingpower of skilled workers in an unpredictable labor market.The third problem concerns Wrm needs to obtain Xexibleproduction conditions, governing hours of work and work-ing conditions – what are generally called “work rules”.

In looking at how these problems were solved in the1980s and how they are solved in the early 2000s, we can seethe impact of changes in both inter-regional, and inter- andintra-Wrm competition. Simply put, as regions have becomemore competitive with one another internationally, thetransnational media corporations (TNCs) have taken stepsto consolidate and concentrate their economic power. Con-

2 This article draws on earlier research on runaway production and eco-nomic development policy (Christopherson and Storper, 1989; Storperand Christopherson, 1985). The current analysis draws on recent (2001–2004) interviews with union leaders, public oYcials, producers, studioowners, and industry lobbyists in New York, Washington, DC, and LosAngeles; policy reports on regional competition in media production inthe US and Canada and analysis of secondary public employment dataand proprietary data from unions and entertainment payroll companies.

3 Because it has come to focus on access to skilled labor, the policy de-bate over “runaway production” also provides an occasion to examine thecontemporary labor question in the media industries. While the processesattendant to the vertical disintegration of production from the 1950s to theearly 1980s have the subject of considerable examination and debate (cf.Aksoy and Robins, Blair and Rainnie, 2000; Christopherson and Storper,1989; Storper and Christopherson, 1987; Hozic, 2001), the horizontallyand vertically integrated production regime that began to emerge in themid-1980s has received much less attention (Balio, 1998; Christopherson,1996, 2002; Gomery, 1998; Scott, 2005). A consideration of labor issuesand production politics has been particularly neglected in analysis of thenew Hollywood that has emerged since the deregulation of the industry inthe 1980s and 1990s. This is a major gap given the central role played bylabor skills in media industries and the historical role that unions haveplayed in organizing the industry (Christopherson and Storper, 1989).

glomerate control of entertainment media distributiongateways has given them enhanced control over what isproduced and how it is produced (Epstein, 2005). This con-trol over both the production and distribution of coreentertainment media, such as episodic (series) televisionand feature Wlm, has increased TNC bargaining power vis-a-vis labor and regional governments.4 In an inherentlyrisky business, conglomeration (and its manifestation, con-centrated power) has enabled TNCs to shift risk and thecost of sustaining a project-oriented creative workforce tothe regional state.

At the regional scale, the rationale for taking on theseburdens is that they will build industry capacity, create newwell-paying jobs, and enable the region to compete in theglobal economy. Evidence from regions competing to hostTNC media production suggests, however, that inter-regional competition primarily beneWts the media conglom-erates and may actually undermine the ability of regionalcomplexes to develop comparative advantage in specializedsegments of the industry.

Some of the reasons behind the change in the balance ofpower between transnational Wrms and the regions are welldocumented. They can be traced to an altered internationaltrade environment in which TNCs move more easily acrossnational borders, diVerentiating among various kinds ofeconomies and the comparative advantages they provide(Kogut, 1984, 1985; GereY et al., 2005). At the same time,the devolution of national responsibility for social welfareand economic development to the regional scale has height-ened tendencies toward “disorganized” or competitivecapitalism, including at the regional scale (Brenner, 2005;OVe and Keane, 1984; Lash and Urry, 1987).

In addition, however, the changing power balancebetween TNCs and regions has been shaped by two otherprocesses intimately connected with contemporary global-ization: (1) the promulgation of an ideology of endogenousregional growth (Lovering, 2001; Martin and Sunley, 1997)and (2) changes in national regulatory regimes governingcompetition. Altered regulatory frameworks have resultedin concentrated economic power under the banner of creat-ing globally competitive national champions.

In the US-based transnational entertainment mediaindustries, the concentration of power has come about withchanges in the policies that govern inter-Wrm competition.Of particular signiWcance are: (1) the abrogation of the“Paramount decision” which limited ownership of distribu-tion venues by media producers, and (2) the revocation ofthe regulations limiting production by the television net-works (the so-called “Wnancial syndication” rules). The past20 years have witnessed horizontal integration across mediaindustries (network and cable television, motion pictures)

4 Core industries products are more expensive to produce but have anextended life as proWt-makers. They also compose a central component ofincome for the entertainment industry workforce. As project-based work-ers, they compose an income combining work from the core projects withthat from lower budget and shorter proWt-life vehicles.

S. Christopherson / Geoforum 37 (2006) 739–751 741

and vertical integration of production and distribution. Inthe highly concentrated media entertainment industry ofthe early 2000s the enhanced bargaining power of the enter-tainment TNCs has paved the way for new location strate-gies (Christopherson, 1996, 2002).

In what follows I examine how transnational media cor-porations have used political strategies to reshape marketconditions and foster inter-regional competition and, ulti-mately, to reconstruct the international division of culturallabor (Miller et al., 2001). The goal of these strategies is notonly to reduce labor costs but to control and reproduce amulti-regional creative workforce (Peck, 1992). As a Wrststep I examine the interests of transnational Wrms withrespect to innovative product production. I then look at theorigins of the altered balance of power between mediaTNCs and regionalized labor, and its consequences forregional–territorial production complexes. Finally, I reXecton how the political strategies of media TNCs can add toour understanding of the fragmentation and out-sourcingof skilled work and of the particular character of contem-porary globalization.

2. Firm labor strategies in innovation-oriented industries

In industries or industry segments where a premium isplaced on control and exploitation of innovations, Wrmsattempt to monopolize innovations, if only for a brief time,in order to maximize their proWts until the product noveltywears oV and the products become standardized. We seethis “cycle of innovation”, as (Galbraith, 2000) describes it,in a wide variety of products including new drugs as well asmedia products. Large transnational Wrms have particularadvantages in monopolizing innovations because they canexert control over the distribution of innovative products(using the enforcement capacity of the state, for example)and extend the time–space of innovation exploitation(Krugman, 1990; Grossman and Helpman, 1991).

Innovation however, requires a skilled and creativeworkforce that is expensive to acquire and diYcult to main-tain. Some analysts of the new economy, including Galbra-ith, attribute the growing inequality in US labor markets tothe increasing need for innovation and skills in an interna-tional division of labor in which US Wrms are at the short-term innovative end of the production spectrum. He assertsthat, rather than higher returns to education, the need topay more to maintain the innovative portion of the work-force is at the root of inequality, with Wrms continuallysqueezing less skilled, less innovative workers in order tosupport the Wrm’s innovative capacity (Galbraith, 2000).

This is a compelling argument and in accord with theo-ries about the bargaining power of creative workers inregional Xexibly specialized industries. In concert withother theories about the knowledge economy, the creativeeconomy and Wrm technical and innovative capacity, how-ever, it assumes that Wrms have one spatial strategy: theyidentify regions with a good “business climate” and locatethere. So, according to this view, Wrms in search of an inno-

vative, skilled workforce identify regions that meet theirneeds (Florida, 2002; Reich, 1990; Friedman, 2005). Theycan seek out locations that appear to oVer them cost advan-tages or the kind of labor force they need but if those inputadvantages do not materialize, or are aVected by increasedlabor bargaining power, for example, the Wrm’s only optionis to de-camp.

A closer look at TNC location strategies reveals, how-ever, that they relate to existing and potential productionspaces in complex ways, devising methods to combine com-parative advantage based on wage diVerentials with thatrooted in territorially based agglomeration economies(Amiti, 2005; GereY et al., 2005; Storper, 1997). They notonly respond to existing market and production conditions,they attempt to shape them – to increase proWts and Xexi-bility, and to reduce risks.

In this regard, Harrison’s insights about the continuedpower of large corporations in shaping and re-shapinglabor markets and regional production centers to meet theirneeds are prescient. His analysis emphasizes the compatibil-ity of (industrial) concentration and decentralization and,most importantly, points to the sources of decentralizedproduction centers:

“Rather than dwindling away, concentrated eco-nomic power is changing its shape, as the big Wrmscreate all manner of networks, alliances, short- andlong-term Wnancial and technology deals – with oneanother, with government at all levels, and withlegions of generally (although not invariably) smallerWrms who act as their suppliers and subcontractors.True, production is increasingly being decentralized,as managers try to enhance their Xexibility (that is,hedge their bets) ƒBut decentralization of produc-tion does not imply the end of unequal economicpower among Wrms – let alone among the diVerentclasses of workers who are employed in the diVerentsegments of these networks.” (Harrison, 1997, p. 9)

As Harrison anticipated and as the contemporary storyof runaway production and out-sourcing in the mediaindustries demonstrates, dominant transnational mediaconglomerates (as opposed to their network of suppliers)do not passively accept the limitations or high costs associ-ated with regional production complexes. Nor are theypassive with respect to the need to solve the key problemsand costs associated with a creative labor force – laborforce reproduction, wage control, and Xexibility in produc-tion conditions. Instead, there is substantial evidence todemonstrate that transnational media conglomerates usetheir considerable political power to reconstruct theproduction environment, regionally, nationally, and inter-nationally so as to increase both their proWtability andtheir Xexibility vis-à-vis product and labor markets. So,while all Wrms operate in a political–institutional context,the degree to which they can shape that context diVersdramatically (Martinelli and Schoenberger, 1991). Theshaping inXuence of the transnational Wrm is extensive,

742 S. Christopherson / Geoforum 37 (2006) 739–751

encompassing both the national and sub-national, that is,regional, state.

If TNCs are understood as market makers not just mar-ket takers, an explanation of their spatial strategies requiresa political-economic rather than a purely economic analy-sis. For example, US-based transnational Wrms, includingthe media conglomerates, have considerable capacity toconstruct and reconstruct the conditions under which theyproduce innovative goods and services such as media prod-ucts. This Wrm capacity arises from the size and scale oftheir operations but also from the governance regime thatdescribes their legal obligations and prerogatives, and theextent and nature of their accountability (Hall and Soskice,2001; Christopherson, 2002). Under US corporate gover-nance “rules”, Wrm accountability is narrowly deWned,extending only to shareholders (and notably excludingemployees or the public interest). And, large US-basedtransnational Wrms have unusual access to regulators andlegislators at all levels of government because of the wayelections are conducted and Wnanced in the US (Gierzynski,2000). Thus, large Wrms have considerable ability to inXu-ence the labor regulations under which they operate, thecorporate governance rules to which they must adhere aswell as their enforcement, and to shape public investmentsthat may beneWt their private purposes.5 All of these capac-ities have implications for their exercise of power and coor-dinating capacity at the regional scale, both in the UnitedStates and in other investment sites.

To provide the basis for a broader discussion of howtransnational media Wrms use political power and territo-rial strategies to reproduce and access regionalized suppliesof skilled, innovative labor, I examine diVerences in therhetoric and reality of “runaway production” in the 1980sand early 2000s. Once again, I focus on the key diVerencesbetween the two periods: (1) the location of an expandedrange of production activities in regional locations outsidethe “headquarters” location of Los Angeles, particularly inCanada; (2) the ability of transnational Wrms to access mul-tiple, self-organized, and networked pools of skilled labor,and (3) the enhanced role of the sub-national, regional,state in reducing the overall production costs of transna-tional Wrms, including those attendant to their use of poolsof skilled labor.

3. Runaway production: the evolution of spatial competition

As Allen Scott (2005) has demonstrated, the Los Angelesregion has retained its position as the dominant pre-production, production, and post-production center for themedia entertainment industries throughout the 20th and

5 In some national economies there are measures to enforce accountabil-ity for claims on the public purse or to weigh and temper the costs oftransnational Wrm agendas. In the US, however, Wrm inXuence on thepolitical–economy is not tempered and so we see potential for Wrm inXu-ence in a clearer light. This being said, Wrms do attempt to rationalize theirclaims on the public purse and inXuence on regulation.

into the 21st centuries. That said, production activity out-side Los Angeles has been an important factor in both thecreative and economic calculus of producers – particularlysince the 1970s. Both the geography of production and thefactors driving it have changed, however, with the gradualemergence of a horizontally and vertically integrated mediaentertainment industry and new spatial investment strate-gies by the oligopoly of transnational Wrms that dominatethe media entertainment industry.

4. In the 1980s...

As has already been suggested, run-away production isan old complaint in the media industries. Film crews havealways left Los Angeles, the historically dominant produc-tion center, to shoot in exotic or less expensive locales. Inthe 1970s and especially in the 1980s, Wlm shoots outsidethe Los Angeles region increased in conjunction with a risein demand for media entertainment products. Demand wasstimulated by the expansion of commercial television intoglobal markets and the emergence of new domestic marketssuch as home video (Prince, 2000). During this periodof market expansion, US national government-enforcedmarket regulation fostered competition in distribution andproduction markets via anti-trust decisions and Wnancialsyndication rules (Epstein, 2005; Holt, 2001). A USSupreme Court decision in 1947 (known as The ParamountDecision)6 forced the major motion picture studios todivest themselves of their distribution venue – in US movietheaters. Regulated competition curtailed the ability of the“Majors” (as the companies composing the oligopoly wereknown at the time), to distribute packages of Wlms througha practice known as “block booking”.7

In another key regulatory eVort to encourage competi-tion in the entertainment media industries, Wnancial syndi-cation rules, adopted in 1970, forced the, then three,commercial television networks to purchase prime timeprogramming rather than produce it in-house. This led tothe emergence of powerful independent mid-size produc-tion houses, primarily located in Los Angeles. In this regu-latory environment, which shaped the media markets ofthe 1980s, overall diVerences in production strategies andproduct mix among the major Wlm and television productproducers decreased; at the same time, the creative diVer-ences among individual products accelerated. Maltby(1998, p. 31) describes this period as one in which “thepost-Paramount attitude of regarding each production asa one-oV event had reached a point where none of themajors any longer possessed a recognizable identity eitherin its personnel or its product.” Uncertainty and higher

6 US versus Paramount, 1947.7 Because the anti-trust provision did not extend outside the US, how-

ever, the major studios retained the ability to book Wlms in Canadian the-aters in package deals rather than individually. This eVectively limited thedevelopment of an indigenous commercial Wlm industry in that country(Winseck, 2002).

S. Christopherson / Geoforum 37 (2006) 739–751 743

risks in distribution markets and decentralized productionacross a wide spectrum of product suppliers fostered prod-uct diVerentiation. For a period, lasting no more than20 years, the bargaining power of “independents”, andtheir associated production networks, increased vis-à-visthe major studios.

Ultimately, the “majors” (Columbia Pictures, WarnerBrothers, MGM, Twentieth Century Fox, Universal Stu-dios, and Paramount Pictures) would use their politicalinXuence on regulation, and their ability to keep re-tryingthe Paramount decision in US courts to re-establish verticaland horizontal integration and their dominance over mediaproduction and distribution (Epstein, 2005; Holt, 2001).But, during this period – with a competitive market formedia entertainment products and increasing demand, newmarkets, and a variety of product distributors, independentproducers thrived (Christopherson and Storper, 1986).

Product diVerentiation also spurred technologicalchange. Because of the application of television productionmethods and technology, Wlmmaking became more mobileand enhanced the independence of Wlm crews from the stu-dio and sound stage environment. Film crews were able touse these new technologies creatively to diVerentiate theirproducts and to lower costs of shooting “on-location” toproduce products that looked diVerent because they wereshot in Portland Maine or El Paso Texas rather than LosAngeles.

Producers took advantage of an expanding range ofincentives provided by US cities and states to lure Wlmcrews to shoot their Wlms outside California. The typicalincentive package included inexpensive accommodationsfor Wlm crews, tax breaks for using local businesses such ascatering and construction, and easy permitting to use pub-lic spaces. States including Texas, Arizona, North Carolina,Florida, and Illinois vied for two or three Wlms a year,knowing that there would be pay-oVs beyond the short-term jobs created in restaurants, catering, and dry cleaningto serve the Wlm crew. Because location was part of whatdistinguished products, such as “Deliverance” and “TheLast Picture Show”, place-based Wlms were valuable asstate promotional devices. Visibility in a Wlm drew touristsand businesses to places far from Hollywood. These rela-tively modest incentives were part of community and stateimage marketing programs, intended to increase the mediaexposure of the state or city so as to attract tourists andlong-term business investment.

The resulting increase in Wlm shoots outside Los Angelesbecame an issue in the 1980s and was dubbed “runawayproduction” because the Majors were concerned about itsimpact on the utilization of their sound stages. The Majorswere the most important promoters of runaway productionas a policy issue at that time. Because of their large facili-ties, high overhead, and unionized workforce, they pushedfor incentive packages by the state of California so as tokeep as much production as possible in Los Angeles to Wllup their sound stages and to use their equipment and ser-vices (Storper and Christopherson, 1985).

The media labor unions, overwhelmingly headquarteredin Los Angeles, supported Major Studio appeals for incen-tives to stem runaway production (for example, providingfree police or highway patrol protection to Wlm crews,clean-up crews to mollify neighborhoods impacted byshooting, and easy permitting) because of what they saw asa need to support the regional industry, and because theypreferred production close to their homes and families.They did not think, however, that their interests weredirectly threatened by shooting on-location. When workingin LA, they were protected by “the 30 mile limit” (from LaCienaga and Beverly Boulevards in Los Angeles) withinwhich more restrictive work rules were enforced. Produc-tion outside this range triggered additional negotiatedbeneWts. For the workforce, shooting on location meantinconvenient travel rather than job loss.

Because the locations where shooting occurred rarelycould provide the skilled labor needed to make the Wlm, thecinematographer, script supervisor, or grip went to Ver-mont or Texas to shoot scenes for a few days and thencame home to the San Fernando Valley or Santa Monica tospend his or her paycheck. Production outside LA did notentail job loss except for the less-skilled and non-unionizedworkers who provide transportation, catering, carpentry,and dry cleaning services to Wlm crews on location (Chris-topherson and Storper, 1986; Storper and Christopherson,1985).

With the exception of New York City, the skilled laborneeded to shoot a Wlm was not available in other locations.Key members of the production crew were hired in LA orNew York because of their particular skills and connec-tions within a production network. Although studio facili-ties existed in some other locations, such as Las Colinas inTexas, these were fragile operations because there was notsuYcient work to sustain a skilled workforce in the region.In the rare case that a skilled production worker managedto capture enough experience through on-location shoot-ing, he or she typically de-camped to Los Angeles in orderto build a sustainable career (Christopherson and Storper,1989).

In addition, pre-production, (the development of theproduct concept and origination of the production crewand Wnancing), soundstage production, and post-produc-tion, the editing of the product and Wnishing for distribu-tion, remained Wrmly rooted in Los Angeles. Theseactivities were carried out by a skilled, specialized, regionallabor force, which was highly unionized (Gray and Seeber,1996). The competitive production environment fostered bythe regulatory regime encouraged creativity and productdiVerentiation and furthered the regionalization of produc-tion in Los Angeles despite high labor and transactioncosts.

As a result, there was no credible inter-regional competi-tion, including over labor cost. The frictions that existedbetween East Coast and West coast branches of mediaguilds or union locals were subdued by national collectiveagreements and by the dearth of regional competitors with

744 S. Christopherson / Geoforum 37 (2006) 739–751

substantial production capacity and a skilled workforce.Policies to stem “runaway” production were, in eVect, indi-rect and rather ineVective strategies to increase demand foruse of the Wxed real estate (and sunk costs) represented bythe major studio facilities in Los Angeles. In the 1980s,then, media producers used locations outside Los Angelesin limited ways primarily associated with product diVerenti-ation. They were dependent, one might even say captured,by their need to use the skilled and collectively organizedLos Angeles, and (to a secondary extent) New York Citymedia workforce. Finally, the state played a limited role.State Wlm oYces focused on making location shootingeasier in order to encourage state tourism. While the stateof California was more engaged in supporting the mediaentertainment industries because of their centrality to theeconomy, even in the case of California, support was lim-ited to on-location production incentives.

5. In the early 2000s...

According to evidence developed by the industry, US-based television and Wlm production increased in thedecade of the 1990s and has continued to expand into the2000s (Monitor, 1999; State of California, Department ofEmployment, 2005). Los Angeles has maintained its domi-nant role in industry production during this period ofexpansion as evidenced by the region’s ability to capturethe majority share of new production. Both the number ofproductions and the dollar volume of total production inLos Angeles rose in California in the 1990s, with a 6.6%increase in total employment (California’s EntertainmentWorkforce: Employment and Earnings (1991–2002), 2005).This continued growth took place, however, in a produc-tion and distribution environment very diVerent from thatwhich existed in the early 1980s: one in which a small num-ber of media conglomerates have re-acquired ownership ofentertainment media distribution channels: cable networks,commercial broadcast networks, DVD rentals, and the-aters, and are now also able to legally produce their ownproducts for those outlets.

Deregulation and lax enforcement of the market rulesthat structured competition in the 1970s and 1980s has ledto a concentrated media entertainment industry in which asmall number of Wrms control access to multiple distribu-tion markets in Wlm, broadcast and cable television, andDVD sales and rental. As one member of the Creative Coa-lition, a group of actors, writers, directors, and producersconcerned with the eVects of vertical integration on creativ-ity, described the new market, “There are many voices butmany fewer ventriloquists.”

Six conglomerates – Viacom, Time Warner, NBC – Uni-versal (owned by GE), Sony, Fox, and Disney overwhelm-ingly dominate the production and distribution ofentertainment products in the US in the early 2000s.Together they control 98% of the programs that carry com-mercial advertising during prime time television (includingcommercial network and cable programming) and 96% of

total US Wlm rentals. They control 75% of commercial tele-vision in non-prime-time slots, 80% of subscribers to PayTV, and 65% of advertising revenues in commercial radio(Epstein, 2005, p. 83). Although one might expect somecompetition within this oligopoly, inter-Wrm competition isdampened by both tacit and open cooperation among theconglomerates. The Wrms cooperate to inXuence regulatorypolicy (such as that compelling manufacturers of DVDplayers to implant a circuit that prevents playing moviesfrom Europe in the United States) through their trade asso-ciation and lobbying group, The Motion Picture Associa-tion of America (Epstein, 2005, p. 83). They have alsoformed alliances within the group of six to reduce theirrisks and to insure that they all have maximum access toglobal markets. One manifestation of this cooperation isco-Wnancing of major products so that movies directed at aglobal audience are not released simultaneously (Epstein,2005, p. 99; Goettler and Leslie, 2004).

According to Epstein (2005), the contemporary enter-tainment media Wrms are more accurately described asplatforms, involved in extracting value from intellectualproperty. This property may be old (Wlm libraries, ancienttelevision series) or new, such as the popular “extreme homemakeover” (a combination of soap opera, home renovationideas, and venue for product placement revenues). The pri-mary goal of the media merchants, then, is not productionand distribution of products but identiWcation of strategiesto extract the maximum revenue from intellectual property.This orientation has implications for their interpretation of“creativity” and for how they think about the types ofproducts they want to see produced and distributed and towhom. The intellectual property focus, in turn, aVects pro-ducer prerogatives and production location decisions.

The early 2000s conglomerates are distinguishablydiVerent from their precursor distributors of television andWlm products in the 1970s and 1980s, in the scope and scaleof their activities in production and distribution. While Wrmoligopolies dominated the distribution of entertainmentproducts in key markets in the 1980s – the Major Studios inWlm, and the television networks in television series – theiroverall dominance of media entertainment markets waslimited. They faced competition from each other as well asfrom smaller production Wrms and independent televisionstations and small Wlm distributors who had increased innumbers and power in response to expanding globaldemand (Fabricant, 1992; Koch, 1990).

In the new era, the control of multiple end markets by thesix media conglomerates has signiWcantly increased theirbargaining power with advertisers, producers, labor, and theregions in which the products they distribute are produced.While they present their operations as only loosely aYliated(describing them as “sister” Wrms), for accounting and regu-latory purposes, they are, in fact, “virtually integrated” withimportant implications for what is produced and how it isproduced (Christopherson, 1996, 2002).

Concentration has altered all aspects of the productionand distribution of entertainment products, including the

S. Christopherson / Geoforum 37 (2006) 739–751 745

cost structure of production and the production process. Atthe heart of this restructuring is the ability of virtually inte-grated transnational media Wrms to use (or in industryjargon, to “repurpose”) products – Wlm, television series, ordocumentary – across their multiple distribution outlets.Repurposing multiplies the revenues that can be obtainedfrom any one product. It also reduces the transaction anddirect costs associated with product acquisition for down-stream distribution venues, such as DVD rental and sale. Inaddition, it allows the bundling of television and Wlm prod-ucts for sale to ancillary markets such as in-Xight entertain-ment. The control of multiple distribution markets by ahandful of Wrms has spawned strategies to squeeze moreproWts out of products, both old and new, by multiplyingthe venues in which they can be distributed and increasingtheir value through cross-market advertising. Films pro-duced by Universal are advertised on NBC, the conglomer-ate’s broadcast television network, and hyped through itsnews and information programming. Theaters owned bythe conglomerate advertise its other media products.Libraries of old television programs are mined to Wnd any-thing that could attract an audience, Wll cable hours, andattract even small advertising dollars.

Perhaps counter-intuitively, as the entertainment indus-try has concentrated, the cost of producing and distributinga feature Wlm has increased dramatically (MPAA, 2005;Jones, 2002). Among the reasons for this increase areaccounting rules for the industry, which were changed in1981 as new distribution venues for entertainment productsemerged (Fabricant, 1992). These rules permit the (now)conglomerate owners of multiple distribution venues to dis-tribute the costs of marketing among theatrical release, net-work television, and cable and to rapidly write-oV the costof a product while at the same time increasing their bottomline (in current proWts) by longer-term estimates of futurerevenues from these multiple outlets. This accounting strat-egy encourages the conglomerates to extract high advertis-ing and marketing costs from their distribution outlets andraises the overall cost of marketing and advertising theproduct. This strategy, not coincidentally, raises barriers toentry from non-conglomerate controlled producers.

Media conglomerates are now able to limit the expen-sive, transaction-intensive process of competing for prod-ucts from independent producers by producing productswithin their wholly owned subsidiaries. In the 1995–1996US television season, the last in which broadcast networkswere restricted from producing their own programming, thenetworks had at least partial ownership in under 20% oftheir new shows. In 2002, the television networks (and themedia conglomerates of which they are a part) hadincreased that percentage to 77.5% (Manly, 2005).

6. The rise of media conglomerate bargaining power with labor and the regions

The restructuring of the media entertainment industryhas demonstrably changed the bargaining relationship

between capital and labor, even in the capital of industryproduction, Los Angeles.

Some of these changes in bargaining power can be tracedto increasing demand for low-cost television programmingto Wll endless cable networks. Programs for cable networksare produced within small budgets and, frequently, by pro-ducers who use small, non-union crews. They rarely employprofessional actors. The character of production for cable issigniWcant because television production has outpaced Wlmproduction in Los Angeles since the mid-1980s and much ofthe recent growth has been concentrated in low-cost produc-tion for cable television networks (Scott, 2004). The patternof increasing production for cable television is even morepronounced in New York City because it hosts the cable net-work headquarters and because of the City’s specializationin key industries contributing to cable programming, Wnan-cial services and education. So, while the number of produc-tions has increased in Los Angeles and New York, much ofthis increase is in low budget, non-unionized productions.The opportunities for employment in higher budget, union-ized productions have been eroded by a decline in featureWlm production and in the proportion of scripted produc-tions (such as dramatic series) for television.

Labor bargaining power has been further eroded by theexpanded use of digital imaging in production and post-production (Epstein, 2005). Although typically associatedwith innovation in production values, digital imaging isalso employed to reduce labor and location costs.

Despite the decrease in labor’s bargaining power, laborsupply has increased faster than labor demand over the1990s in Los Angeles and New York (EEI, 2005; Center foran Urban Future, 2005). This increase has been visible par-ticularly in the “inclusive” guilds, such as the Screen ActorsGuild, which has low barriers to membership. In both cities,analyses of employment document the presence of a work-force composed of a small core that is regularly employedand a large peripheral workforce that cannot derive a regu-lar income from employment in the media industries (Grayet al., 2005).

The expansion of low budget production for cable, thegrowing labor pool, and slow growth in the more lucrative(for labor) production segments, such as feature Wlm andbroadcast network television series, explains why increasedemployment and production numbers in Los Angeles arecombined with high levels of worker dissatisfaction and asense of increased risk.

Hourly wages in the media industries remain high butreports from the unions indicate the work has becomeharder and less predictable than it was in the early 1990s.One common complaint is that producers attempting to cutcosts will reduce shooting days by requiring overtime workfrom the production crew. While long working hours arelegendary in the media entertainment industry, the bound-aries that circumscribed abuse appear to have broken downas unions have lost power over industry practices and withan increase in the proportion of productions made on“shoe string” budgets.

746 S. Christopherson / Geoforum 37 (2006) 739–751

While the number of marginal productions for televisionis increasing, producers of medium to high budget featureWlms have also been under pressure to cut costs. The pres-sure to reduce total expenses (emanating from rising starsalaries and product marketing costs) has focused particu-larly on “below-the-line” or skilled craft labor costsbecause this work is perceived as less important in addingvalue to the product and acquiring necessary Wnancing.

Although below-the line or entertainment industry craftworkers are most aVected by the restructuring of the indus-try and the ability of entertainment conglomerates tosqueeze producers in order to extract higher proWts, thechanges wrought by industry concentration aVect even themost creative segments of the industry. According to oneveteran Wlm-maker: “in cable, residuals (payments for eachshowing of the product) for writers, actors, and directorsare a percent of the producer’s gross. But if that producer isa network who self-deals the rights to their cable com-panyƒthere is no compensation for that. Suddenly you dis-cover that the 11% or 12% gross residual among the threeguilds that has been fought over for so many decades is vir-tually meaningless, as rights are simply self-dealt amongrelated entities” (Hill, 2004, p. 20).

In response to these conditions, the media unions havefocused on retaining the “good jobs”, those still controlledby union contracts and in bigger, more lucrative and (in thecase of television) longer-term projects. Medium budget($20–$50 million) feature Wlms and television series are atthe core of the “good jobs” category. It is the unionized,higher budget segments of media production, those requir-ing sophisticated facilities and a skilled workforce, that arethe object of intense inter-regional competition, both inter-nationally and within the US.

7. Virtual concentration and the rise of inter-regional competition

The enhanced bargaining power of the conglomerates isdirectly reXected in the location of production activities.The decision regarding where to produce a Wlm or a televi-sion program is, in the early 2000s, more likely to be rootedin a drive to secure product Wnancing or reduce direct pro-duction costs, than in the desire for product diVerentiationthat characterized the more competitive production anddistribution environment of the 1970s and 1980s.

Since the late 1980s, production of media entertainmentproducts for US and international markets has taken placeoutside the United States, particularly in Canada but alsoin the United Kingdom, Australia, and much more occa-sionally, in Eastern Europe. Once again, changes in the spa-tial location of production are being portrayed as“runaway production”. The competitor to Los Angeles isno longer New York, as it was in the 1980s, however, butinternational production centers with sound stages, equip-ment companies, and, most importantly, less expensive andmore “Xexible” craft or below-the-line workers. By contrastwith the 1980s, when runaway production referred to

shooting on-location, since the mid-1990s, it has beensoundstage production and post-production editing andspecial eVects production, as well location shooting, thatare taking place in international production “satellites”,most particularly in Vancouver, Canada (Coe, 2000, 2001;Elmer and Gasher, 2005).

There have been other notable shifts in the runaway pro-duction discourse that reXect changes in the power relationsamong the media conglomerates, the producers who pro-vide them with products, and the workforce. In this roundof “runaway production” the major studios, now part ofproduction and distribution conglomerates, are on the otherside of the runaway production debate. They are supportingthe “right” of producers to produce where they choose,including outside the US. And again by contrast with thecontroversy of the 1980s, US media unions are deeplyengaged in the contemporary runaway production policydebates. Since the late 1990s, the Canadian government hasbeen accused of unfair competition by US media unions,some media service Wrms and small non-conglomerate stu-dios such as Raleigh in Los Angeles (FTAC, 2004; ITC).

At the heart of this charge is Canadian national and pro-vincial provision of labor-based subsidies to US entertain-ment media conglomerates to encourage them not only toshoot on-location but also to use sound stages and post-production services in Canada. With a relative shift in theimportance of factors driving production location decisionsfrom product diVerentiation to production cost, producerswere often required by their media conglomerate employersto move production to Canada to reduce costs or obtainWnancing via tax credits. While some “beauty shots” mightbe made in New York or Chicago where the Wlm was actu-ally set, the expensive sound stage work was transferred tolower cost facilities in Toronto and Vancouver. In Vancou-ver, the media entertainment Wrms leased sound stages sothat they could be used by their contracted US-based pro-ducers, and established contractual relationships with“Canadian” production houses, such as Lions Gate Studio(which has its Executive OYces in Santa Monica, Califor-nia) and post-production houses. The long-term ratherthan one-oV project-based use of Vancouver as a satelliteCenter is also indicated by the established presence ofstudio oYces, such as that of Paramount, and industryassociations, most prominently, The Association of MotionPicture and Television Producers (AMTPT), a US-basedorganization representing the Motion Picture Associationof America member studios. All of these representatives ofUS-based conglomerate interests lobby Canadian oYcialsto maintain and increase subsidies for foreign “serviceproduction”.

The media conglomerates, along with some labor allies,such as The Directors’ Guild, support the Canadian govern-ment’s rationale for subsidies to what Canadians refer to as“service production”, based in the “cultural exception”, aprovision of international trade law that allows govern-ments to provide subsidies to encourage the production ofmedia products that sustain cultural identity.

S. Christopherson / Geoforum 37 (2006) 739–751 747

According to Bonnie Richardson, head of governmentrelations at the Motion Picture Association of America, thetrade association, which represents the media conglomer-ates in the US and in Canada:

Trade action against Canada “threatens to furthersour US–Canada relations already strained by tariVson Canadian lumber, as well as hurt eVorts todismantle barriers abroad to US moviesƒIt’s a “dag-ger-to-the-heart challenge to very sensitive culturalsubsidies,” said Richardson, whose group representsHollywood Studios including the Walt Disney Co.,Sony Corp.’s Sony Pictures and AOL Time Warner’sWarner Brothers” (Pethel, 2002).

Despite the emphasis on the Vancouver–Los Angelescompetition, the impact of TNC ability to ratchet-up itsbargaining power with skilled labor and exercise a cost-based location strategy is most apparent in US productioncenters outside Los Angeles. These locations formerly bene-Wted from location shooting for the purposes of productdiVerentiation and have been the big losers in an environ-ment in which cost (and state subsidies) trumps “look” inmaking location decisions.8

By the end of the 1990s, states such as Texas, North Car-olina, Florida and Illinois, which had developed a smallmedia industry base by providing technical assistance toWlm-makers shooting on-location, some studio facilities,and modest incentives, suVered dramatic declines in pro-duction shooting (Lee, 2002; Jones, 2002). The interpreta-tion of this trend did not focus on Wrm strategies or onchanges in what was produced and how it was produced,but rather on the ability of places and regions to supply theneeds of a global industry. The increasing cost-based char-acter of production location decisions was attributed to therise of international competition based on the ability ofregions in the US and abroad to provide both the physicaland human infrastructure that supports the industry(Weinstein and Clower, 2000).

As a consequence, states and cities in the US were pres-sured by regional economic development coalitions, includ-ing local media industry unions, to Wnd ways to “level theplaying Weld”, to move beyond the public service incentivesthey oVered in the 1980s to provide direct subsidies, studiofacilities, a skilled labor force, and production Wnancing tomedia producers in order to keep them in the United States(Entertainment Industry Development Corporation, 2001;U.S. Department of Commerce, 2001; Jones, 2002; Moni-tor, 1999).

In the early 2000s, the most generous subsidies were pro-vided by the ill-fated state of Louisiana, one of the poorestin the US. The Louisiana subsidies oVset up to 17% of aWlm or television production budget and there were no caps

8 Independent Wlm-makers continue to make Wlms with the look and feelof particular places but these Wlms are a very small segment of total Wlmproduction and, if successful, serve the prestige needs of the media con-glomerates rather than their proWt goals.

on the amount of subsidies that the state provided to mediaconglomerates. In her state of the state address in January2005, Louisiana’s governor, Kathleen Babineaux Blancosaid that Louisiana’s $73 million dollar growth in tax reve-nues in 2004 would be unavailable for teacher raisesbecause it would, instead, fund the (currently) $70 millionWlm tax credit program (Webster, 2005). In Louisiana’sprogram, investment tax credits are sold at a reduced rateto individuals and businesses, which use them to reducetheir own tax liability. The cash goes to directly to a con-glomerate-owned production company. Twentieth CenturyFox (owned by the conglomerate Fox News), and Disneyare both users of the program (Miller et al., 2001). The taxcredits are typically bought and used by professional busi-ness services, including the law Wrms representing the mediaconglomerates operating in Louisiana. A cottage industryhas grown up around tax credit sales. One of the majorWrms in this new tax credit sales industry has established anon-proWt organization to “unite the players in the state’sentertainment industry (Miller et al., 2001) to lobby thestate to maintain and increase the subsidies supporting thelocation of productions in Louisiana”. Their goals are toobtain public capital to support the construction of asoundstage (Louisiana currently has one) and to monitorwhat other states are providing so that Louisiana can con-tinue to match and exceed these bids (Miller et al., 2001).The state is also being encouraged to invest heavily in train-ing programs to provide Louisiana with a skilled mediaentertainment workforce, which it currently lacks.

Some of the key actors lobbying for direct subsidies totransient production companies are similar to those whospurred location shooting incentives among states that inthe 1980s. Real estate interests, for example, play a criticalpolitical role in a growth coalition that stands to beneWtfrom an increase in location shooting. At the same time,both the political arguments for supporting location shoot-ing and the character of the support requested havechanged signiWcantly. In the 1980s, states invested modestlyin Wlm commissions and incentives to make it easier toshoot Wlms (through eased permitting and location assis-tance) hoping to attract media attention and boost tourism.Incentives increased in the 1990s to include sales taxexemptions and waivers on hotel occupancy taxes, but sincethese incentives constituted a minuscule portion of theshooting budget, they had little impact on location deci-sions. In the new economic development environmentregional growth coalitions (and their media industry allies)argue that, in a global marketplace in which all regions arecompeting for industries with good jobs, public capitalplays a critical role in creating the conditions within whichoccasional Wlm and television projects will be transformedinto a stable and lucrative regional industry.

The scenario they lay out follows the well-worn path ofstage theory. First, industry projects must be lured to aregion by signiWcant direct Wnancial subsidies, demonstrat-ing its good business climate. Second, the region is chargedwith developing and sustaining the infrastructure, including

748 S. Christopherson / Geoforum 37 (2006) 739–751

capital facilities and a skilled labor force, to sustain indus-try presence. With these investments, the regional industryeventually becomes self-sustaining and globally competitiveand no longer requires subsidies. Canada is used as anexemplar of this process and its success is attributed to theinitial stimulus of subsidies. An examination of how the“model” Canadian media industry has developed overtime, however, suggests that development policies orientedtoward providing subsidies, skilled labor services, and facil-ities to transnational corporations have uncertain and com-plex consequences even for high-skilled industries.

8. The intersection of regionalized labor and Wrm strategy: the Canadian case

According to the US industry story, the movement ofsigniWcant entertainment media production to Canada isattributable to the introduction of Canadian productiontax subsidies in the 1990s (Jones, 2002; Monitor, 1999). Theline of argument is that production costs rose in the 1990sand that media product producers looked for ways toreduce production crew and craft worker costs. They identi-Wed Canada as an alternative because Canadian labor-based production subsidies reduced crew costs. In 2003, forexample, Canadian national subsidies to foreign producers,in the form of tax credits, were increased from 11% to 16%of labor costs (CFTPA, 2003). Canadian national subsidiesare enhanced by additional tax credits provided by Cana-dian provinces competing against each other to attractforeign production. The total tax credits available to USproducers on payroll costs are as high as 44% (Blackwell,2003). As a consequence, so the argument goes, productionof television pilots, some series, and made-for-televisionmovies began to take place in Canada (Jones, 2002; Moni-tor, 1999). Subsidies are given credit for attracting produc-tion away from US regions, including Los Angeles, andbuilding a Canadian production industry that can competewith the US industry.

This case is then used to suggest that, to compete withCanada, the US must subsidize entertainment media pro-duction at the state and federal level to bring US laborcosts in line with Canadian labor costs. Regional growthcoalitions, including media labor unions and facilities own-ers or property developers, present states and cities with atrajectory of Canadian success. It begins with inter-regionalcompetition via subsidies to attract transnational Wrm pro-duction with the lure of lower labor costs and ends with asuccessful free-standing capacity to compete in the globalentertainment media industry (Monitor, 1999). A promi-nent New York economic development oYcial tied thedevelopment of a successful and prototypical Canadianindustry to the labor-based subsidies the Canadian govern-ment provided in the early 1990s. “Before those subsidies,producers were not interested in Canada”. According tothis supply-side explanation, the subsidies worked and “in afew years Canada had a developed competitive mediaindustry” (Personal Interview, 2005).

This trajectory of Canadian success is contestable on anumber of fronts. First it ignores the impact of theexchange rate diVerential. The value of the Canadian dollarlagged the US dollar throughout the 1990s and made thecost of producing in Canada relatively less expensive in theUnited States. The cost savings did not occur across all cat-egories of production expenditures, however. Studio andequipment rental services have remained roughly equiva-lent across North America (British Columbia Ministry ofEconomic Development, 2005) (in Canada, rising and fall-ing depending on the value of the US dollar). Above-the-line labor costs, including the cost of directors and principalactors, are also not sensitive to exchange rate Xuctuations.Only the cost of the “below-the-line”, production crew isidentiWed as susceptible to cost savings because of theexchange rate.

The savings from wage cost diVerentials produced by theexchange rate has obviously been important in the out-sourcing of production to Canada. Trends in out-sourcinghave generally tracked the exchange rate over the 1990s andinto the 2000s (CFTPA, 2005). That it is not a suYcientexplanation, however, is suggested by anomalies, particu-larly a 22% decrease in production from 1995 to 1996 andan increase of 12.5% from 1996 to 1997, all occurring underthe same exchange rate (Droesch, 2004).

Because the cost savings could be achieved in only a por-tion of the total budget, the savings was most relevant inmedium budget productions with high below-the-line crewcosts for a unionized crew. Depending on Wrm strategiesduring a particular year, that cost saving could be more orless attractive. For example, a stronger emphasis on verylow budget productions would tend to keep production inLos Angeles, where a large skilled non-union labor force isavailable at relatively low cost.

In the same way, the eVect of tax subsidies can also bequestioned as explaining out-sourcing. Hollywood produc-tion in Vancouver predates the introduction of subsidies (in1997), stretching back to the late 1980s and the establish-ment of Stephen J. Cannell productions in Vancouver. Out-sourcing does not emerge in conjunction with the subsidies.In addition and substantiating the weak link between out-sourcing and subsidies, a recent econometric analysis of theimpact of subsidies in British Columbia shows only a weakrelationship between tax credits and production spendinglevels (British Columbia Ministry of Economic Develop-ment, 2005).

At base, while the exchange rate and subsidies have beenimportant in expanding production, they would be ineVec-tual were it not for Canada’s skilled media workforce. Thepresence of this workforce is the necessary condition under-lying any US investment in Canada, whether short-term orlong-term. However, the investments that constituted andcontinue to constitute this valuable labor supply are largelyignored in the policy research on out-sourcing.

The Canadian state has played an important role indeveloping and sustaining the regionalized media work-force in Canada, especially outside the national media

S. Christopherson / Geoforum 37 (2006) 739–751 749

center of Toronto. This role emerged because of the need tofoster production of Canadian content programming.

The inability of Canadian independent Wlm producers tomake a dent in US dominated Wlm distribution in Canada(Winseck, 2002) moved them to turn their attention to tele-vision, which was state-supported and regulated to pro-mote an arena of Canadian content. In 1984, the CanadianFilm Development Corporation became TeleWlm Canadaand since 1988 has invested more than $60 million annuallyin television programming. Government expenditures tosupport Wlm and television production in Canada are sig-niWcant, representing 10% of the total yearly budget for cul-tural activities (Montpool, 1998). This support focusesalmost exclusively on television. In 2003, productions madewith Canadian content received a 60% domestic tax subsidyon qualifying labor expenditures (Canadian Film and Tele-vision Production Association (CFTPA), 2003). The Cana-dian Television Fund has been important in encouragingregional production in the Canadian provinces and thusdeveloping an industrial base throughout the country,including in Vancouver.

The Canadian media production workforce is trained toproduce programming for television but these skills can beapplied to feature Wlm production for US-based mediaTNCs. The Canadian government supports training andmentorship programs administered by the CFTPA, whichalso works with Canadian producer–distributors to trainCanadian media workers (CFTPA, 2005; Elmer andGasher, 2005). In addition, both regional and nationalCanadian governments have invested in regional produc-tion facilities, such as Bridge Studio in Vancouver. Studiofacilities not owned by a production company are rarelyproWtable, especially in a location such as British Colum-bia, which is dependent on foreign “service” production.So, public support for such studio facilities constitutesanother potential subsidy to the transnational corporationslocating production in Vancouver.

In fact, it could be argued that it is the weakness of thesubsidized production complex in Vancouver that makes ita useful production site for Hollywood. By contrast withToronto, where production investment is largely domestic,and Montreal, which has developed a distinctive regionalindustry based in Francophone productions, Vancouver’sindustry is highly dependent on government subsidies andthe unpredictable strategies of US producers and the con-glomerates who employ them. The very vulnerability ofVancouver drives requests for ever larger subsidies to USproducers and pressure on the regional workforce tobecome more “Xexible” in responding to the needs of for-eign service production (Tysoe, 2004; Droesch, 2004).

Several conclusions emerge out of the Canadian story:First, while subsidies and exchange rates increased the pro-pensity of US producers to use Canadian regions to reducecosts in particular types of productions, they did not build asustainable industry in the key region in which the subsidystrategy was deployed, Vancouver. Second, the changingorganization of production in the media entertainment

industries allowed TNCs to utilize the investments thatCanadian citizens made in developing regional productionbases over a period of 50 years. Finally, the evidence fromthe Canadian “success story” suggests that inter-regionalcompetition has increased the proWts of transnational Wrmsrather than building competitive regional industries.

The changes that have taken place in the capacities andstrategies of media conglomerates since the deregulation ofthe industry also point to some key processes constructinga new international division of skilled labor.

9. A new international division of skilled labor?

What can the case of media entertainment add to ourunderstanding of the international out-sourcing of skilledwork? At minimum, it raises some questions about theassumptions underlying prescriptions for clustering andagglomeration as a formula for regional economic develop-ment and competitiveness. The literature on regional produc-tion complexes has implicitly suggested that skilled labor hasmore bargaining power within these complexes. The case ofthe Los Angeles media workforce circa 2000 indicates, how-ever, that Wrm dependence on regional production complexeswill not necessarily limit out-sourcing if alternative regionallabor forces are available and if political and economic strat-egies can be devised to use a similarly skilled regional laborforce to reduce costs or provide labor Xexibility.

In addition, evidence concerning the decreasing bargain-ing power of media labor in LA suggests that productioncan remain territorialized while, at the same time, labor con-ditions in the regional agglomeration deteriorate. The LosAngeles situation is certainly complex – not all segments ofthe workforce are aVected by out-sourcing and diVerent seg-ments of the workforce are aVected in diVerent ways, somelosing income, some being exposed to more risk. Overall,however, labor’s bargaining power has weakened.

The case also suggests the importance of examining howof TNCs devise ways to restructure the conditions underwhich they produce and distribute products. This restruc-turing can occur at various scales and take diVerent politi-cal and economic forms. A key diVerence between theperiod of the 1980s when the Los Angeles media workforcefelt reasonably secure despite employment in project-basedwork and the early 2000s when a larger portion of theworkforce feels insecure, can be traced to the revised struc-ture of the industry and the declining number of customerscompeting to distribute industry products and bargainingwith the workforce. The ability of the conglomerates todecrease their risks at the distribution end has enabled themto seek out and invest in alternative regional productionsites and to squeeze producers to look for Wnancing andproduction cost reductions from regional states.

The story of how the location strategies of media pro-duction and distribution Wrms have changed between the1980s and early 2000s also contains some valuable insightsinto the forces and processes shaping a new internationaldivision of skilled labor.

750 S. Christopherson / Geoforum 37 (2006) 739–751

A literature on the new international division of laborstretching back to the 1970s, demonstrated that the abilityof transnational Wrms to exploit comparative advantage inwage rates and labor power requires collaboration amongtransnational Wrms, a growth coalition including regionalproperty developers, and a politically cooperative nationaland local state. Without modern infrastructure, transna-tional Wrms Wnd it diYcult and ineYcient to take advantageof comparative diVerences in wage rates. The Wrst enterpriseindustrial zones, distinctive enclaves in which the telecom-munications and transportation infrastructure was made toorder for transnational Wrms or their suppliers, were criticalto the construction of a new international division of laborin low-skilled manufacturing. International competitionamong these manufacturing zones contributed to the abil-ity of transnational Wrms to drive down wage rates whilemaintaining the logistical infrastructure to enable just-in-time production and distribution.

The out-sourcing of skilled work, especially that requir-ing innovation and creativity requires even more intensiveuse of state resources, not only in infrastructure but also inthe provision of a skilled work force. While it may be neces-sary to transnational investment, low cost labor is not suY-

cient even if that labor is skilled. Comparative advantagederives not just from an aggregation of lower-wage workersbut also from the existence of the conditions that make itpossible to exploit those low wages to extract increasingreturns. This is particularly true in accessing a skilled work-force that needs to be creative in order to produce a prod-uct. If comparative advantage is not rooted solely in thepresence of individual low-wage workers but depends onpublic investments and regulatory environments, we needto focus attention on how those regulatory environmentsand investment opportunities are politically constructed.

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