(LOS ANGELES) The 2007 Hollywood writers′ strike dealt a blow to California's already struggling economy and is expected to result in a loss of 37,700 jobs and $2.1 billion in lost output through the end of 2008. The impact of the strike tipped the state into a recession in early 2008, according to a new report by the Milken Institute.
The report, The Writers' Strike of 2007—2008: The Economic Impact of Digital Distribution, comes as another major entertainment industry union, the Screen Actor's Guild, is at the negotiating table. Without a resolution before the deadline of June 30, more entertainment industry losses could further damage the state′s economy.
The entertainment industry is a key economic driver for California. It is one of the top five industries in the state. These writers, actors and production staff support other sectors by pumping their wages into retail, professional services, health care and education.
"Although the writers' strike ended in February, the effects are going to continue to be felt throughout the year," said Kevin Klowden, managing economist at the Milken Institute and one of the authors of the report. "The ripples created from this industry reach far into California's economic engines and the current statewide recession will further dampen the industry′s recovery efforts."
Even though the Writers Guild of America and the Alliance of Motion Picture and Television Producers reached an agreement in mid-February, the effect of the three-month strike, which began on Nov. 5, 2007, will be felt through the rest of the year, Klowden said. Many retail shops and services are still struggling to regain their customer base and get their businesses back on track. Other economic factors, including inflation and high fuel prices, make it even more difficult to regain business and profit levels.
The report includes estimated losses for fourth quarter 2007, but focuses on the economic impact for 2008 since this is where the biggest repercussions are felt due to the ripple effects. According to the report, the 2008 statewide economic ramifications for all industries include:
- Wages and salaries are projected to decline by $2.3 billion
- Retail sales are expected to show a decline of $830 million
- Total personal income (which includes wages, salaries, self-employment, rents, dividend, interest and other income) is expected to drop by $3.0 billion
The Milken Institute has broken down this overall economic impact to show the direct result in other industries. The figures below capture the losses in Nominal Gross State Product (comparable to Gross Domestic Product, but at the state level), which measures the total market value of all final goods and services produced within the state in a given period of time.
Projected 2008 economic losses by sector as a result of the 2007 writers′ strike:
- Information, leisure and hospitality: $282.3 million
- Professional and business services: $366.7 million
- Trade, transportation and utilities: $311.4 million
- Financial activities: $327.8 million
- Education and health services: $98.6 million
The report projects that by 2009, the effect of the 2007 strike should be less noticeable. However, if the industry is hit by another work stoppage, the impact will intensify and the recovery will be delayed by another year.
In the meantime, studios are still trying to catch up with the delays from the writers' strike. They have cut back on the number of shows and episodes under production, which may further impact their ability to regain advertisers and even viewers who left during the strike.
The report also provides background and context for the key issues of the strike, focusing on the growing importance of digital media. Innovations in distribution, on-line advertising, steady growth in cable network advertising (as opposed to declining revenue in broadcast advertising), trends in reality programming and production location choices are all important dynamics in an industry that is so closely linked to California's economic stability.
The Writers' Strike of 2007—2008: The Economic Impact of Digital Distribution was produced by the Milken Institute's California Center, which is dedicated to measuring, evaluating and analyzing the economic, demographic and social conditions and trends in the state.