Writer fallout strikes: $2 billion economic impact may be just the beginning

A day after the Writers Guild of America called for a strike on May 1, a dozen members of the Set Decorators Society gathered to share information. The Zoom meeting began discussing layoffs, and Pam Elyea, owner of LA-based prop house History for Hire, said she had to fire her receptionist and drum tech in March pending a work stoppage. Others nodded, echoing the feeling that they couldn’t afford to keep all of their staff despite what they expected to be a protracted strike. “We were saving, but every time we get something together, something happens,” says Elyea.

When writers manned the picket lines 15 years ago, the fallout from the 100-day hiatus was about $2 billion (or $2.8 billion in 2023 dollars). This time around, the financial toll will be even greater — and feel quicker, predicts Kevin Klowden, chief strategist at the Milken Institute, pointing to the think tank’s estimate that the latest work stoppage has cost the California economy about that amount. “Can we see more? Absolutely,” says Klowden.

Hollywood pumps millions of dollars a day into hotels, restaurants and construction companies, not to mention the pay of workers who support these industries. A single major film production shot on location contributes $250,000 a day to the local economy, according to the Motion Picture Association, the group that lobbies for studios. The latest 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 companies serving the industry, and $1.3 billion in fallout for the companies that would have benefited from lost wages, the Los Angeles County Economic Development Corporation estimated (those numbers are not adjusted for inflation).

The economic consequences of this work stoppage obviously depend on its duration. At first, industry insiders declined to speculate on the magnitude of the economic impact, but note that the strike is expected to last at least as long as the previous one. “If there is a prolonged strike, lasting six months or more, it could hurt many media companies,” a Moody’s Investors Service forecast said on May 4. will react negatively to iterations of the library.”

Both the Writers Guild and the Alliance of Motion Picture and Television Producers, which negotiates on behalf of studios, refuse to budge on their positions regarding levels and types of compensation for now as distribution models have changed in a rapidly evolving streaming ecosystem. In addition, the studios are seeking flexibility to incorporate technical advances such as AI into the scriptwriting process, while the union is seeking protection against such integration. Also on the table: more transparency about streaming data and minimal occupancy for writers’ rooms.

According to the AMPTP, as many as 20,000 workers in 600 productions could be out of work. If the strike continues, it threatens about $81 billion in direct wages for 800,000 jobs in the film and TV industry. Late night shows have already stopped along with Saturday Night Live, The conversation And Hacksamong other things.

“Even if the strike is settled, it will affect the entire country,” said 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.”

Los Angeles workers whose jobs depend directly on filming have been feeling the impact of the strike for months. The production landscape in the pre-strike period indicated shooting days plummeted as studios braced for a work stoppage – the opposite of historical trends showing studios speeding up production ahead of a possible strike deadline to save content. In the first quarter, which ended in March, there was a 24 percent decline from the same period last year, when Los Angeles saw historic production levels, according to licensing group FilmLA.

This may indicate that the 2022 production ramp-up, attributed to the huge content backlog brought to a halt by the pandemic, may have had some overlap with studios preparing for the strike, though belts have been tightened in recent months as Wall Street turned its back on the steamy model. may also have contributed to the drop in production starting this year. There were only six licenses issued last week by FilmLA for scripted TV content (whether they continued shooting is unknown.) The fallout isn’t limited to Los Angeles, either, reaching major production hubs in Georgia and New York. “All TV will be turned off,” says Chase Helzer of Atlanta-based prop company Bridge Furniture & Props.

And the workday in Hollywood is about to change dramatically as the writers’ strike continues — for now, creative executives insist they have plenty to read. “Agents say, ‘Are you going to Cabo?!’ and we’re like, ‘Um, no,'” says one executive, adding, “We’re not kidding, we’ve got 2,348,283,479 scripts dumped on us” on May 1. of writers feverishly finishing of scripts for new and ongoing projects to be submitted before the strike formally began at midnight on May 1.

Both the writers and studios indicate 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 come from the minimum raise. If you split that between the eight major studios and streamers (Disney, Netflix, Warner Bros. Discovery, Paramount, Sony, NBCUniversal, Amazon, and Apple), each would be responsible for about $50 million. The AMPTP offers a different story, claiming that the value of their proposals on wage floors alone was about $97 million a year, not $41 million a year.

But the negotiations go beyond pay, with significant philosophical differences between the two sides. The WGA has alleged that the AMPTP has completely blocked the guild with proposals to set a minimum size for writers’ rooms, as well as a minimum length of employment. The studios first broke silence after talks broke down on May 1, arguing Thursday that the proposal would result in the unnecessary hiring of writers and amount to a “hiring quota that is incompatible with the creative nature of the industry.” On the issue of AI, the AMPTP did not talk about the guild trying to prevent literary material from being written or rewritten by the technology and preventing it from creating source material. Emphasizing that “writers want to be able to use this technology as part of their creative process,” it instead raised legal questions about copyright protection around such material.

For studios and streamers at the negotiating table, the strike could prove to be good for their bottom line. After hitting peak valuations and spending just a few years ago, they can now say they are in cost-cutting mode to limit losses. The work stoppage may give them the chance to tighten their belts even more. In the short term, they won’t have to pay writers and producers for night shows and will likely ask employees to work shorter weeks and cut or at least cut producer payments.

If the strike continues, studios may be tempted to hold out until they get so-called force majeur clauses, which lawyers familiar with the contracts say usually take place after eight weeks, to relieve expensive overall deals. During the latest strike, ABC Studios terminated the development contracts of nearly two dozen writers and non-writing producers who were not working on major series. “If they have to stop working for a few months, the studios will finally be able to clean up their balance sheets as Wall Street demanded,” said Tom Nunan, founder of production label Bull’s Eye Entertainment, and a producer of Crash. “In a perverse way, it caters to their needs rather than against their best interests.”

Companies could also merge on the assumption that this will lead to cost savings. A top VFX supervisor projects that “we could see more consolidation[of VFX facilities]or some of them going out of business.”

Another theory (of many) is that writers could gain influence as the strike continues and television threatens to fall for broadcast networks. Writing for major shows ramps up during the spring, and production takes place throughout 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 certain this time. “It’s not comparable to 2007,” says a top-level showrunner, nodding to the kickoff of the latest strike. “2007 is going to look strange.”

To some extent, the strike’s impact on production may also be mitigated by streamers’ global footprint. The pandemic proved that Netflix can acquire content from the likes of South Korea to the fanfare of global subscribers. After the breakthrough success of viral series like Squid game, The glory And Physical: 100, Netflix announced in April that it will spend $2.5 billion in the country over the next four years to produce unscripted local TV series, movies and programs. International crews, other than members of the Writers Guild of Canada, are also outside the jurisdiction of the WGA (the WGC has instructed members to follow WGA strike rules).

Governor Gavin Newsom said on May 2 at the Milken Institute Global Conference that he will step in to mediate the negotiations “as far as both parties are willing and interested.” He added: “(The strike) has profound consequences, direct and indirect. Each of us will be affected by this. We are very concerned about what is going on because both sides are dug in and the stakes are high.”

As industry insiders, crew and owners of Hollywood-dependent businesses take stock of the expected fallout from the strike, nothing is certain except that the work stoppage will take a costly toll. The question now is just how much.

“Most of us barely made it through COVID, and now we’re staring at this,” Dan Schultz, Vice President of Prop Heaven, said at the SDSA meeting. “I wouldn’t be surprised if we all don’t 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.