The “Baywatch” reboot returned to Los Angeles beaches in March — with Gov. Gavin Newsom bragging the show was back “where it belongs” and $21 million in state incentives to prove it. But before long, the production nearly became the wrong kind of symbol: County officials and the California Coastal Commission told producers they couldn’t park trucks overnight, light fires or drive on the sand. For a lifeguard show, that was an existential problem.

The standoff was resolved only after elected leaders were summoned to the Fox lot to smooth things over, co-creator Greg Bonann recalled to Variety. The episode illustrated in miniature a crisis that has been building for decades and accelerating sharply since 2022 — when the streaming bubble burst and America began hemorrhaging production work at a pace that has now cost the country 73,000 jobs, roughly two-thirds of them in Los Angeles.

Everything costs more in L.A., starting with labor. Other states and countries have built their own crew bases, offer more favorable regulations and provide more generous financial incentives. The United Kingdom alone spent $2.2 billion on film and television subsidies in 2024, and its incentive program covers not just upfront salaries but back-end profit payments as well — a structure that producers say is nearly impossible to match. The new “Avengers” films are being made in London. “Spaceballs 2” is shooting in Australia. The “Scrubs” reboot films in British Columbia. The “Little House on the Prairie” revival heading to Netflix in July was shot in Winnipeg, where Canada’s 16% labor credit stacks on top of Manitoba’s 30% incentive.

Sen. Adam Schiff, California Democrat, has been working on federal legislation to create a 15% labor cost credit — roughly equivalent to Canada’s program — and the Motion Picture Association has pushed for 20%, with additional bonuses for filming in disaster zones or enterprise areas. Because of the January wildfires, all of Los Angeles County would qualify. No bill has been introduced, and as of June 4 Mr. Schiff said his Republican colleagues are waiting for “smoke signals from the White House.”

The ripple effects are reaching well beyond production crews. Corri Levelle, chief executive of Sandy Rose Floral in North Hollywood, which supplies flowers to film sets, told Variety she is down 50% and cannot survive if the drought continues. Chef Michael Cimarusti closed his West Hollywood restaurant Connie & Ted’s this spring, citing the loss of crew regulars who could no longer afford to dine out following the 2023 writers and actors strikes.

Industry advocates have drawn comparisons to the decline of Detroit’s auto sector, though some analysts push back on the analogy.

“It’s oversold that the auto industry left Michigan,” James Hohman, director of fiscal policy at the Mackinac Center for Fiscal Policy, told Variety, noting Michigan remains the country’s top auto-producing state. He credited billions in state subsidies over 25 years, along with federal support — a model Hollywood advocates say the entertainment industry now needs.

Xavier Becerra, the Democratic gubernatorial candidate, put the competitive situation more bluntly: California, he said, “went into this knife fight without a weapon, and now folks are bringing guns.”