Hollywood is currently in the midst of a tumultuous period marked by prolonged strikes that are causing significant disruptions to both California’s economy and the global entertainment industry. The Writers Guild of America (WGA) and the Alliance of Motion Picture and Television Producers (AMPTP) are locked in a contentious battle, resulting in a series of strikes that have far-reaching consequences beyond the confines of studio lots and writers’ rooms. While the strikes have garnered significant attention, it’s important to recognize the broader economic implications, including their potential impact on mortgages and the housing market in California, as explained to us Financer.com
The Economic Fallout
As the strikes extend beyond their 100th day, experts are projecting a troubling economic downturn for California. Drawing parallels from the 2007 WGA strike and adjusting for inflation, analysts predict that California’s economy could suffer losses exceeding astaggering $3 billion. During the 2007 strike, the Milken Institute reported 37,700 job losses and a $2.1 billion economic hit, providing a historical context for the potential magnitude of the current crisis.
Moreover, the Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) has also joined the ranks of those striking, compounding the potential economic consequences. What began as a dispute between writers and producers has now escalated to the point where the entire industry’s operations are grinding to a halt.
Impacts Beyond the Entertainment Industry
The reverberations of these strikes extend far beyond Hollywood’s glitz and glamour, affecting a wide array of ancillary businesses. Local enterprises, including caterers, restaurants, set builders, dry cleaners, florists, and professional drivers, are grappling with the adverse effects of the industry shutdown. Approximately 20% of Los Angeles’ income is intertwined with the entertainment sector, making the strikes particularly detrimental for those whose livelihoods are directly or indirectly tied to the industry.
Mortgages and Financial Strain
According to Financer.com, the Federal Reserve interest rate exceeds 5%, even the most competitive mortgages deals can pose challenges for Californians grappling with income loss. As disposable income and luxury spending dwindle due to the strikes, many are finding it increasingly difficult to meet basic living expenses in one of the nation’s most expensive cities. Notably, a reduction in spending by high-income earners can disproportionately impact the local economy, further exacerbating the financial strain caused by the strikes.
Historical Context and Future Outlook
The duration and intensity of the ongoing strikes are of historical significance. Comparisons can be drawn to past strikes, such as the 1988 strike lasting 22 weeks and the 1960 writers and actors strike spanning 21 weeks. Presently, the strikes are entering their 15th week, prompting speculation about whether they might surpass previous records.
Should the stand-off persist until October, experts estimate that the overall economic losses could range from $4 billion to $5 billion. Beyond the financial implications, the conflict also raises questions about union solidarity versus the divergent interests of powerful studios. The evolving landscape, driven by disruptors like Amazon, Netflix, and Apple, adds complexity to the negotiations, potentially prolonging the resolution process.
The Intersection of AI and Entertainment
Amidst these challenges, the entertainment industry is also grappling with the integration of AI, which offers both promise and pitfalls. AI’s capabilities, ranging from analyzing intricate scripts to predicting optimal casts and even contributing to directorial decisions, hold the potential for increased efficiency and cost savings in production. However, concerns linger about the potential stifling of artistic creativity and the erosion of the unique emotional impact that defines cinema.
For actors and writers, concerns center on the potential loss of control over their work and image in an era of growing AI influence. The negotiation of AI-related terms in contracts poses additional complexities, impacting credits, payment structures, and artistic ownership.
A Glimmer of Hope: The Political Arena
Amidst the ongoing struggle, the political realm emerges as a potential mediator. While industry leaders and unions continue to clash, political figures like LA Mayor Karen Bass and California Governor Gavin Newsom are being called upon to facilitate resolution. Their positions, however, are intricate, as they navigate ties to both union supporters and studio-backed donors, underscoring the delicate balance between economic interests and creative endeavors.
But, given that Amazon and Apple have many interests outside of Hollywood, they may be less pressed to resolve the issues.