Los Angeles  - The auction may be a memorabilia collector's dream: Rows of aliens used in the sci-fi series, The X-Files; a cryogenic tube from Austin Powers; a huge drill used by Bruce Willis and Ben Affleck in the 1998 film, Armageddon; even a spaceship built in 1959 for a Twilight Zone episode.

But for the movie industry, the sale this week of thousands of items by a specialty props company that's fallen victim to Hollywood's hard times, sounds ominously like a nail in the film sector's coffin.

20th Century Props, which is selling almost 100,000 items valued at nearly 8 million dollars, is far from alone. All across town, companies large and small that have thrived for years in the movie business are struggling to deal with a steep drop in the number of films made in Los Angeles, as well as a sharp cutback in budgets.

A July report by FilmLA Inc, which helps production companies organize shoots in the world movie capital, found that on-location filming in the city dropped 24.5 per cent in the first half of 2009, compared to the previous year.

Feature films, which account for the largest budgets, dropped a record 52.5 per cent. "We are deeply concerned about our long-term loss of commercial and feature film production," said FilmLA president Paul Adley.

For companies like 20th Century Props, the demise of scripted TV shows in favour of reality TV has made things even worse.

Owner Harvey Schwartz said revenues plunged 30 per cent last year, and was 50 per cent down this year when he decided to close down. "I ran out of money three months ago, and I don't know what else to do," he said. "It's terrifying. I've devoted my entire life to something that is over."

It's not just the recession that is to blame for the city's film woes. In fact, cinema ticket sales have climbed 12 per cent so far this year as viewers look to the movies for some escapist fare from the grim economic reality.

But the problem for Hollywood is that other areas in the US are competing more aggressively for production dollars, offering attractive tax incentives and cash rebates to producers willing to film outside California.

California's share of US feature film production dropped to 31 per cent in 2008 from 66 per cent in 2003, according to the California Film Commission. That largely reflects a falloff in the Los Angeles area, where feature filming activity in 2008 was nearly half what it was at its peak in 1996.

From Louisiana to New Mexico and from Georgia to Illinois, more than 30 US states now offer tax credits and rebates aimed at luring productions away from California.

The cash-strapped Golden State did take action last week, offering a package of 67.5 million dollars in tax incentives. But many feel it's too little, too late for one of California's most important industries.

"LA is at risk of losing a good part of one of its signature industries, just like it did with the aerospace industry in the early 1990s," said Jack Kyser, chief economist for Los Angeles County Economic Development Corp.

"It's a really bleak situation," said make-up artist Leslie Kenny, 29, who like many others in the movies has been forced to take a job as a waitress to make ends meet. "I have friends who are actors, editors, set designers - you name it. They're so desperate, they're asking me for work." (dpa)