Skydance Calls L.A. Home, But the Threat to Leave Persists

Skydance is now Los Angeles' newest Fortune 500 company. How long it stays is another question.

In a message to employees last week, CEO David Ellison said he is committed to keeping the company in Hollywood. "We aren't going anywhere," Ellison wrote.

But the consent decree between Ellison and 12 state attorneys general does not require him to maintain a headquarters in Los Angeles. And the last two months have shown that the threat to leave can give Ellison powerful leverage whenever he needs something from state government in the future.

"I think our attorney general and all of us were in a no-win situation when you had a company that seemed very willing and able to move out of California," Rep. Laura Friedman told NBC LA. "I personally don't believe that was an idle threat, and if that had happened, that would be devastating for Los Angeles."

Los Angeles has lost a series of corporate headquarters over the last 15 years, including Northrop Grumman, Occidental Petroleum, Toyota Motor North America, AECOM, SpaceX, Public Storage and KB Home. Companies often cite California's high cost of living, taxes and regulatory environment when they decamp for Texas or other states.

"It's a parade of horribles," said Larry Kosmont, whose real estate advisory firm has long studied the cost of doing business in California. "If you had to fill a prescription for corporations leaving, California would get an A on the exam."

California leaders also remain open to the charge that they have allowed companies to flee by failing to reform business regulations.

"Other states have improved in measures of tax and regulatory burden. California hasn't improved," said Sarah Bohn, vice president at the Public Policy Institute of California, whose research has found that corporate flight is indeed increasing. "The trend is not going in the direction you would want it to go."

In that context, losing Paramount would have carried a powerful symbolic weight — even if all that moved was a small corporate office. That threat, even if Ellison has no use for it now, remains available.

Under the agreement with the state attorneys general, Skydance will not sell either the Paramount or Warner Bros. lots for at least five years. The deal also provides for increased production volume. The question of where the company will be headquartered was not written into the agreement, though it appears to have been discussed.

"I believe that the future of this merged company is in Los Angeles for the foreseeable future," Attorney General Rob Bonta said in announcing the consent decree last week.

Ellison's commitment arrives with a caveat: he made a similar pledge before, then walked it back amid Bonta's antitrust suit. In a February letter to Friedman and Sen. Adam Schiff, Ellison vowed that the combined company would "stay true to our roots" in Southern California.

The question of what more must be done to keep film and TV jobs in Los Angeles remains live at both the federal and state level. Congress is weighing a federal production incentive, while California lawmakers are expected to take up next year whether to eliminate the $750 million cap on the state's incentive program and whether to modify it to include above-the-line costs.

"We've got to fight to keep Hollywood in Hollywood," Xavier Becerra, the Democratic nominee for governor, said in a CNN debate this week. "And I've said I'll do everything I can to make sure that happens."

For now, Ellison says the company stays. The paperwork, however, leaves the exit open — and everyone in Sacramento knows it.