“Hollywood is in trouble.” It is a phrase that has been echoed through the decades—from the scandals of the 1920s to the advent of television in the 1950s, the rise of cable and videocassette recorders in the 1970s and ‘80s, and now, in the wake of the shift to streaming, the pandemic, the 2023 strike, and even the wildfires that ravaged Los Angeles earlier this year. But today, the phrase has become a reality.

More crucially, this phrase doesn’t simply refer to the challenges in funding streams and financing facing the entertainment industry, but more specifically to a very real existential threat to the workers, facilities, and hundreds of businesses throughout California that depend on the continued role of filmed entertainment within the state. Unlike the impacts we have seen from prior disruptions, the ramifications for California—and ultimately the entire entertainment industry—are proving to be significantly deeper, with a high likelihood of irreparable harm if state and industry leaders do not act now.

In the just-released publication A Hollywood Reset: Restoring Stability in the California Entertainment Industry, my colleague Madeleine Waddoups and I examine the economic forces that have brought Los Angeles, CA, and the entertainment industry to this point. We further explain how a crisis was reached so soon after the rush of programming in the wake of the pandemic allowed everyone to believe that the industry, its people, and businesses in the Golden State were on their road to recovery.

In many ways, the brief rush of production that occurred as lockdowns ended was an aberration, driven by the tremendous growth and success of streaming during the pandemic, when all other competition was significantly hindered. Although there is no question that the combined writers’ and actors’ strike of 2023 had a significant impact on Hollywood workers and local businesses, its largest single contribution was to bring a spotlight on the larger economic forces that had been hurting filmed production in California since the late 2000s.

For numerous years following the Writers’ Strike of 2007–8, my colleagues and I at the Milken Institute documented the significant forces driving productions out of California. These forces included increasing film incentives from states ranging from Louisiana to New York, along with the combination of those benefits and a strong dollar luring productions to locations such as Canada, Australia, New Zealand, and the UK. Our studies showed that California had been steadily losing larger motion pictures since 1997, and that this process only accelerated over the course of the 2000s. In 2014, we published the report A Hollywood Exit, which made a strong case for increasing California’s film production incentives and helped contribute to the more than tripling of California’s incentive program that year. However, many of the trends that we had observed, especially those around increased competition on incentives and studios seeking out reduced-cost filming locations, could only be somewhat alleviated by the program passed in California at the time.

So what has changed? Most important has been the shift to streaming, which has not only changed the nature of the content being produced but also the way it is financed. As shorter seasons of six to eight episodes have replaced 22-episode network shows, and numerous movies are now produced solely for streaming platforms and no longer resold to other buyers, the incentives of 2014 have not kept pace.

At the same time, the pandemic, combined with an ongoing housing shortage in California, has significantly increased real estate costs, including the cost of living and doing business locally. Meanwhile, the abundance of episodes and movies actually began declining even before the pandemic, in 2019. The 2023 strike only served to give studios a chance to reevaluate their strategies and cut back on productions.

Unfortunately, that also meant that studios largely moved productions to lower-cost locations, resulting in the largest drop-off in local productions and employment in decades. California went from appearing to be highly in demand in 2022 to suddenly having thousands of workers with no steady employment in entertainment for a year and a half.

The consequences have not been limited to workers. Businesses ranging from prop houses to local soundstages to restaurants have all been adversely affected, and workers are now leaving the industry in California—not because they want to, but because they cannot afford to stay. Combined with the income losses of the pandemic and the 2023 strike, the effect has been devastating.

So what happens now? The report offers several recommendations, ranging from a significant overhaul of the incentive program to improving permitting efficiencies at the state and local levels. The City of Los Angeles is already working to improve filming access within its borders, but the larger changes must happen at the state level.

Governor Gavin Newsom, Senator Ben Allen, and Assemblymember Rick Zbur have all introduced proposals to expand the filmed tax credit program and make some significant changes that align with many of our recommendations. Unfortunately, California’s budget has been hit hard by the impact of tariffs and reduced capital gains revenues. Under normal circumstances, the state would be unlikely to consider such a program, but the current economic circumstances do not allow these changes to be postponed another year.

The impact on workers and businesses, not just in Los Angeles County but across the state, cannot reverse itself without intervention. If the decline continues, the potential impacts on tourism are likely to be significant. Ultimately, California must act now, or else all that will be left are corporate offices, underutilized studios, and countless skilled workers from all walks of life who will be forced to move on.