Hollywood strikes to cost US economy $5 billion-plus amid lost wages, film delays

Wed, Aug 30, 2023, 6:33 AM 4 min read

The negotiation failure set a sour tone throughout Hollywood as the writers' strike prepares to enter its fifth month while the actors' strike heads for month two. Industry watchers say that the "double whammy" work stoppage has already had serious economic implications, similar to the last writers' strike.

According to estimates from the Los Angeles County Economic Development Corp., the 2007-2008 strike cost the Los Angeles County economy a whopping $2.5 billion. That likely will double this time around.

Kevin Klowden, chief global strategist at the Milken Institute, estimated the current strikes will soon cost the national economy $5 billion-plus, upwardly revising his previous estimate of $4 billion. He explained that the work stoppage will impact other businesses besides production, including restaurants, catering companies, trucking agencies, and dry cleaning businesses, among many others.

"The main thing we're really factoring into it is the lost wages," Klowden told Yahoo Finance Live in an interview on Tuesday. He emphasized it's not just the industries in California that will be impacted, but also industries in New York, Atlanta, Albuquerque, Pittsburgh, and other production-friendly locations.

On top of lost wages, Klowden said delayed films, including Warner Bros.' "Dune" sequel, and cancelled programming, such as Amazon's "A League of Their Own," will also heavily contribute to losses.

"Hollywood's been very heavily concentrated in terms of production activity, so anybody who does film and TV — Disney (DIS) is a classic example of that — along with Warner Bros. (WBD), Universal (CMCSA), and even at this point [Netflix (NFLX), Amazon (AMZN), and Apple (AAPL)] they're all getting affected," he said. "But we don't see it as much on their bottom line as we do on the workers."

Still, that doesn't mean these companies won't be hit in the future, Klowden warned.

"They can put off costs right now. The catch is [as] they delay movies, that means their ability to get the revenue back, to be able to get their expenditures back, becomes harder and harder. They forego revenues and they forego any ability to easily snap back out of this strike the longer it goes on."

'Suits' resurgence highlights strategy shift amid strikes

FILE - Members of the The Writers Guild of America picket outside Paramount Pictures on May 3, 2023, in Los Angeles. Hollywood productions and promotional tours around the world have been put on indefinite hold as actors and writers are on strike against big studios and streaming services.(AP Photo/Ashley Landis) — Members of the The Writers Guild of America picket outside Paramount Pictures on May 3, 2023, in Los Angeles. Hollywood productions and promotional tours around the world have been put on indefinite hold as actors and writers are on strike against big studios and streaming services.(Ashley Landis/AP Photo) · ASSOCIATED PRESS

In the wake of the strikes, streaming platforms have scrambled to fill their content pipelines with strike-immune programming like reality TV, international series, and, in some cases, live sports and news.

Recently, USA Networks drama "Suits" saw a resurgence on Netflix after the platform acquired the series in June. According to Nielsen, "Suits" — which debuted 12 years ago — attracted a record-breaking 18 billion minutes of viewing time in July.

"We might break out of what we're seeing in terms of siloing," Klowden said, referencing the massive success of "Suits," which was heavily driven by word of mouth in addition to Netflix strategically promoting the show on its homepage.

Other streamers have also hopped on the trend with Warner Bros. Discovery's Max announcing a 60-day deal with AMC that will bring AMC+ programming like "Fear The Walking Dead" and "Killing Eve" to the platform. WBD already has a licensing deal with Netflix.

USA Networks drama "Suits" saw a resurgence on Netflix after the platform acquired the series in June. (Courtesy: Shane Mahood/USA Network)

Klowden explained the old days of streamers holding on to exclusive content could be over as syndication, or reselling shows to other channels in an effort to revive neglected content, becomes a more lucrative opportunity.

"That was essentially the holy grail that people used to talk about," Klowden continued, adding syndication was a popular strategy that fueled the creation of channels like TNT and even streamers like Netflix, which held the rights to Paramount's "Twilight Zone" before the episodes left the platform in mid-2021.

That strategy could speed up the timeline for media consolidation — but most likely only for mid-level companies.

"There's only so much consolidation that can really happen and still be effective and efficient," he said, adding, "I think you'll see more on the mid-size where companies look at it and say their financials are under pressure ... you might see more acquisitions that way, rather than at the large cap size."

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at [email protected].

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