At the midpoint of 2024, it's clear that Hollywood is not in a good place right now even though the rest of the economy is comparatively solid. And there's a few reasons for that, particular to the entertainment industry.
Yes, we're still feeling the aftereffects of the strikes that paralyzed Hollywood late last year. No one ever thought the industry was simply going to shrug off the walkouts. But that we'd be sitting here after two quarters with production volume still quite sluggish probably would run counter to even the most bearish estimates.
It's certainly being felt in Los Angeles, where the economy that has built up around film and TV production has clearly been impacted. It's even fair to question whether things will ever be the same again.
The U.S. Bureau of Labor Statistics is seeing record employment lows, which is going to impact consumer spending, and those still in jobs are going to see decreased wages. That's not even taking into account freelance and contract work or production hubs outside of Los Angeles.
And even though we've gotten past those major strikes, there is still the threat of some smaller but still quite destabilizing strikes hanging over Hollywood. The good news is we've gotten past the biggest of those small threats now that the IATSE strike has been ratified.
With another strike looking like it's been averted as of July 28 with the Teamsters, only now that Hollywood is on the other side of any significant labor hindrances can we see if the climate for production is fully conducive for revitalization.
In fairness, that decline began before the strikes even began, but they clearly accelerated it. And the question of whether it comes back has less to do with whether the market conditions are more or less conducive to production than the appetite of the source of production boom in the first place: the streaming services that overloaded their programming larder before the strikes and probably never intended to continue spending at the peak rate of yesteryear.
What's more, we're seeing recent indication that streamers are distributing their programming spend more and more internationally to feed their overseas audience increased localized content. So the notion that we will suddenly see some dramatic bounceback in domestic original content seems highly unlikely near or long term, though that spend shouldn't expect to continue to decline either.
But this is not just about the strikes. Entertainment is also feeling the compound effect of the disruptive forces of the pandemic, which threw off all sorts of industry practices and consumer behaviors. Before the pandemic, there was the continuing competitive pressure being applied by the tech giants — whether that's the streaming services or social media, which are stealing away time spent on movies and TV, as well as advertising and subscription dollars.
And if that wasn't bad enough, the worst may be yet to come in the form of generative AI, which is just beginning to unleash an entirely new wave of disruption that is clearly causing justified anxiety.
So when you look at all of these things, you understand why so many depressed stock prices are in place right now at the leading media and entertainment companies, which during the tightly regulated Biden era haven't been able to engage in the kind of M&A necessary to get bigger.
The really big question is whether this moment in time for the business represents just a cyclical contraction or a secular decline. You may have heard the phrase "Survive til '25," which is a hopeful declaration that things could get better. But there also has to be a reckoning that "show business" — which was never that big a business to begin with — could be getting even smaller for good.
This commentary and video was derived from a presentation delivered on July 18 to The Actors Home.
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