WSJ: How Hollywood is collapsing

Pic. publics

Hollywood studios are making fewer movies and shows than they did just a few years ago. The ones they do make are increasingly being shot outside the U.S., ‘The Wall Street Journal’ notes.

Witnesses testified about the devastation caused by a nationwide downturn in television and film production that has hit California particularly hard. Noah Wyle, star and executive producer of “The Pitt,” called it “a near cratering of our once thriving industry.”

Hollywood studios are making significantly fewer movies and television shows than they did just a few years ago. The ones they do make are increasingly being shot in other countries and states that offer more generous tax subsidies.

The result: a 30% drop in employment from a late-2022 peak for actors, carpenters, costumers and the hundreds of other professions that make movies and TV shows, according to Labor Department data. In production hubs like Los Angeles, the economic pain that has followed is apparent to everyone.

Much of the discussion at the Burbank hearing focused on a possible federal production tax incentive to help bring jobs back to the U.S. The U.K., Canada and Australia all have programs that, combined with local incentives, can refund nearly half the money a studio spends locally on a production.

Most big-budget movies and a growing number of TV series now shoot overseas to take advantage of those tax credits. Some are shooting in non-English-speaking countries like Hungary, where labor and construction costs are particularly cheap.

California last year more than doubled the size of its state tax incentive, though experts say it still isn’t as attractive as those in New Jersey, New York or Georgia. Studios, labor unions and soundstage owners have all been lobbying the Trump administration and Congress to support a federal incentive of around 15%. When combined with state incentives that typically range from 20% to 40%, backers believe it would be enough to bring most Hollywood productions back to the U.S.

Repatriating production would be only a partial solution. The other reason entertainment workers are struggling is economic incentives have driven their employers to produce less.

The early 2020s marked the apex of a production boom known as “peak TV,” during which streaming services like Netflix, Amazon Prime Video, Disney+ and HBO Max tried to add subscribers as fast as possible.

By the time strikes by actors and writers ended in 2023, Wall Street was demanding that streaming services give priority to profits over growth. The easiest way to get into the black was to cut production spending.

The biggest question now is whether the current downturn is temporary. Production has come back from past dips, whether caused by recessions, strikes or disruptive new technologies.

But the nature of entertainment is changing significantly. Until recently, most of what was available to watch on a screen came from Hollywood. Now people are spending a growing share of their leisure time watching video on YouTube, TikTok and Instagram produced by amateurs or small production companies using nonunion labor.

Artificial intelligence, meanwhile, could eliminate more production jobs or spark a new production boom if the technology enables content to be made less expensively.

The nightmare scenario is playing out in Los Angeles, where a century-old entertainment economy is evaporating with no signs of a turnaround on the horizon. Many worry Hollywood will soon resemble Detroit after the decline of the auto industry, with corporate headquarters still located here, but little of the actual work.

…The funniest thing about this story is that at the beginning of the 20th century, American filmmakers chose Hollywood, far from the East Coast, because taxes there were much lower than New York, where they initially wanted to make their headquarters. For economic reasons, they chose Los Angeles.

Now, for the same economic reasons, filmmakers are fleeing Hollywood in search of cheaper places to work. The internet and AI are creating fierce competition.

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