$2 Billion Economic Impact May Be Just the Beginning – The Hollywood Reporter

A day after the Writers Guild of America’s May 1 call for a strike, a dozen or so members of the Set Decorators Society gathered to share intel. Discussion of layoffs kicked off the Zoom meeting and Pam Elyea, owner of L.A.-based prop house History for Hire, said she had to fire her receptionist and drum technician in March in anticipation of a work stoppage. Others nodded, echoing sentiments that they could not afford to keep all their staff in the face of what they expected to be a lengthy strike. “We’d been saving up, but every time we get something together, something happens,” Elyea says. 

When writers manned the picket lines 15 years ago, the fallout of the 100-day stoppage was around $2 billion (or $2.8 billion in 2023 dollars). This time the financial toll may be even greater — and felt faster, predicts Kevin Klowden, chief global strategist of the Milken Institute, pointing to the think tank’s estimate that the last work stoppage cost the California economy roughly that amount. “Could we see more? Absolutely,” Klowden says.

Hollywood pumps millions of dollars per day into hotels, restaurants and construction companies, among others, not to mention the pay from workers that supports those sectors. A single major film production shooting on location contributes $250,000 a day to the local economy, per the Motion Picture Association, the group that lobbies for studios. The last writers strike dealt a blow to California’s struggling finances to the tune of $772 million in lost wages for writers and production staff, $981 million in lost revenue for various businesses that service the industry, and $1.3 billion from the ripple effects to the businesses that would have profited from lost wages, the Los Angeles County Economic Development Corporation estimated (those figures aren’t adjusted for inflation).

People picket outside of Paramount Pictures studios during the Hollywood writers strike on May 4, 2023, in Los Angeles.

David McNew/Getty Images

The economic consequences of this work stoppage will, of course, depend on how long it lasts. This early on, industry insiders declined to speculate on the depth of the economic impact but note that the strike is positioned to last at least as long as the last one. “If a protracted strike occurs, and lasts six months or longer, it could hurt many media companies,” noted a Moody’s Investors Service forecast on May 4, adding: “At companies most exposed to a long strike, pipelines will dry up and consumers will react negatively to library reruns.”

Both the Writers Guild and the Alliance of Motion Picture and Television Producers, which bargains on behalf of studios, are refusing to cede ground for now on their positions regarding levels and types of compensation as distribution models have morphed in a rapidly evolving streaming ecosystem. Additionally, the studios are seeking flexibility to incorporate tech advancements, like AI, in the scriptwriting process, while the union seeks protections against such integration. Also on the table: more transparency about streaming data and minimum staffing levels for writers rooms. 

As many as 20,000 workers across 600 productions could be out of work, according to the AMPTP. If the strike keeps up, it threatens roughly $81 billion in direct wages from 800,000 jobs in the film and TV industry. Late night shows have already shut down, along with Saturday Night Live, The Talk and Hacks, among others.

“Even if the strike is settled, it will have ripple effects through the entire country,” says Jonathan Kuntz, a film historian at the UCLA School of Theater, Film and Television. “It will have a huge impact on Southern California — in the billions.”

Workers in Los Angeles whose jobs directly depend on filming have been feeling the impact of the strike for months. The production landscape in the period preceding the strike indicated that shooting days plummeted as studios braced themselves for a work stoppage — the opposite of historic trends showing studios accelerating production before a possible strike deadline to stockpile content. The first quarter that ended in March saw a 24 percent decline from the same period last year, when Los Angeles was enjoying historic levels of production, according to permitting group FilmLA.

This may signal that the 2022 surge in production attributed to the huge backlog of content stalled by the pandemic may have had some overlap with studios preparing for the strike, though belt-tightening in recent months due to Wall Street turning its back on the steaming model may also have contributed to the drop-off in production to start this year. There were just six permits issued by FilmLA last week for scripted TV content (whether they proceeded to shoot is unknown.) The fallout is not limited to Los Angeles either, reaching major production hubs in Georgia and New York. “All TV is shutting down,” says Chase Helzer of Atlanta-based props company Bridge Furniture & Props.

The Writers Guild of America and its supporters picket outside of Warner Bros. Studios on May 3, 2023, in Los Angeles.

Rodin Eckenroth/Getty Images

And Hollywood workday is poised to change dramatically should the writers strike carry on — for now, creative executives insist they’ve got plenty to read. “Agents are like, ‘Are you going to Cabo?!’ and we’re like, ‘Um, nope,’” relays one executive, who adds: “We no joke got 2,348,283,479 scripts dumped on us” on May 1. A poll of other industry execs yields a series of similar responses, the result of writers feverishly finishing scripts for new and ongoing projects to submit before the strike formally began May 1 at midnight.

Both the writers and studios are signaling that they intend to play the long game. The WGA asked for a $429 million raise, claiming that AMPTP offered $86 million, nearly half of which would be from the minimums increase. Splitting that among the eight major studios and streamers (Disney, Netflix, Warner Bros. Discovery, Paramount, Sony, NBCUniversal, Amazon and Apple), each would be responsible for roughly $50 million. The AMPTP offers a different narrative, claiming the value of their proposals on wage floors alone was around $97 million a year, not $41 million per year.

But the negotiations go beyond pay, with key philosophical differences separating the two sides. The WGA has claimed that the AMPTP has completely stonewalled the guild on proposals to institute a minimum size for writers rooms, as well as a minimum duration of employment. Breaking its silence for the first time after talks broke down on May 1, the studios argued Thursday that the proposal would result in the superfluous hiring of writers and that it amounts to a “hiring quota that is incompatible with the creative nature of the industry.” On the issue of AI, the AMPTP did not address the guild seeking to block literary material from being written or rewritten by the technology and to prevent it from creating source material. Stressing that “writers want to be able to use this technology as part of their creative process,” it instead raised legal questions over copyright protections around such material.

For studios and streamers at the negotiating table, the strike may turn out to be good for their bottom lines. After reaching peak valuations and spending just a few years ago, they get to now say they’re in cost-cutting mode in the pursuit of curbing losses. The work stoppage may give them the opportunity to further tighten their belts. In the short term, they will not have to pay writers and producers on late night shows and are likely to ask employees to work shorter weeks and halt, or at least reduce, payments to producers.

If the strike drags on, studios may be tempted to hold out until they can trigger so-called force majeure clauses, which attorneys familiar with the contracts say typically happens at eight weeks, to offload expensive overall deals. Amid the last strike, ABC Studios terminated the development deals of nearly two dozen writers and nonwriting producers who weren’t working on major series. “If they have to stop work for a few months, the studios are finally going to get to clean up their balance sheets in the way Wall Street was demanding,” says Tom Nunan, founder of production label Bull’s Eye Entertainment, and a producer of Crash. “In a perverse way, it’s playing into their needs instead of acting against their interests.”

Members of the Writers Guild of America and its supporters picket outside of Universal Studios on May 3, 2023, in Universal City.

Rodin Eckenroth/Getty Images

Companies could also turn to mergers under the perception that they result in cost savings. A top VFX supervisor projects that “we could see more consolidation [of VFX facilities], or several of them going out of business.” 

Another theory (of many) goes that writers could gain leverage as the strike goes on and threatens fall TV for broadcast networks. Writing for key shows ramps up during the spring, with production taking place through the summer. TV could be forced to bear the brunt of a long strike as streamers have more flexibility with their release schedules. One thing is for sure this time. “It’s not comparable to 2007,” says a top-tier showrunner, nodding to the last strike kickoff. “2007 is going to look quaint.”

To a certain extent, the impact of the strike on production could also be mitigated by streamers’ global footprint. The pandemic proved that Netflix can acquire content from South Korea, for example, to the fanfare of global subscribers. After the breakout success of viral series like Squid Game, The Glory and Physical: 100, Netflix announced in April it will spend $2.5 billion in the country over the next four years to produce local TV series, movies and unscripted shows. International crews, outside of members of the Writers Guild of Canada, are also outside the jurisdiction of the WGA (The WGC has told members to follow WGA strike rules).

Gov. Gavin Newsom said on May 2 at the Milken Institute Global Conference he will step in to mediate the negotiations “to the extent both sides are willing and interested in that.” He added, “[The strike] has profound consequences, direct and indirect. Every single one of us will be impacted by this. We’re very concerned by what’s going on because both sides are dug in and the stakes are high.”

As industry insiders, crew and owners of businesses that depend on Hollywood take stock of the strike’s expected fallout, nothing is certain except that the work stoppage will have a costly toll. The only question now is how much.

“Most of us barely got through COVID, and now we’re staring at this,” said Dan Schultz, vice president of Prop Heaven, at the SDSA meeting. “It won’t surprise me to see all of us not survive this.”

Lesley Goldberg, Carolyn Giardina and Lacey Rose contributed to this report.

A version of this story appears in the May 10 issue of The Hollywood Reporter magazine. Click here to subscribe.

2023-05-05 21:32:10