The Writers Guild of America, WGA, the union for writers in the entertainment industry
is on strike against the Alliance of Motion Picture and Television Producers, AMPTP.

At the core of the negotiations are revenues - a percentage of revenues, specifically
associated with sales of DVD’s and from downloads off the Internet.  These are revenues
that the WGA believes their members are entitled to but not receiving as a share of the
total amount acquired by members of the AMPTP from these sales.

The WGA and Alliance cannot agree on the value of content when placed on the Internet
or on DVD. The writers' jobs are unstable and could be months or even years apart. They
want residuals from reruns, DVD sales and the Internet.  The dilemma is determining
proper compensation. Television viewership is declining and revenue from Internet
content is difficult to forecast because ad rates typically are less online plus there is a
societal expectation that everything online should be free.

Before the strike, some members of untraditional media sarcastically responded to the
news of a pending strike stating it’s all about more money, so who really cares, we
will only miss late night television and daytime soap opera shows. Unfortunately their
comments missed the mark.  What is of significance is the impact the strike could have
on the California economy, specifically if the strike becomes protracted.
 
California’s economy if measured against other world economies is the eighth largest
in the world.  And some experts have identified Los Angeles county’s economy as the
26th largest in the world. And even though Hollywood is identified as the center of the
world's film industry, the cluster of businesses and their corresponding employment
comprising film and television production in Los Angeles county accounts for less than
10 percent of its $447 billion economy. 

While there is conflict with forecasting revenues associated with the negotiations, 
there is also conflict with the numbers on the economic impact from the industry. For
example, in a report compiled by the Los Angeles Economic Development Corporation,
it identified that the Motion Picture Association of America estimated that the U.S. film
and television industry employed more than 350,000 people -- from actors and directors
to hairstylists, electricians, truck drivers and clerks with a corresponding $21.2 billion
payroll. In California, the film industry was estimated to make up $17 billion of the total
national payroll impact with over 245,000 Californians employed in the industry.
 
However, the Census Bureau has numbers that illustrate a smaller impact.  From the
2000 Census, it was identified that nationally there were 153,000 people employed in
the industry with a corresponding payroll nationally of $9 billion.  In California it
was estimated to have 88,500 employed with a corresponding $6.4 billion payroll out of
the national total. Additionally, the Bureau of Labor Statistics has just released a study on
the film and television industry. They too admit to the inability to effectively account for
the size of the industry. 

So no matter what numbers are utilized, they still reflect a percentage of less than 10 
percent of Los Angeles county's economy.

                                  
  
Quiet on the Set!

The WGA is comprised of 12,000 members. For about 500 members of the Guild, the
profession pays extremely well. A-list writers make more than $5 million a year,
$400,000 a week for a rewrite for a film in trouble. However, nearly half of the
West Coast members of the WGA are not working as writers in any given year. Writing
jobs are hard to get and even harder to keep.
 
The last major WGA strike was in 1988, with a 22-week walkout delaying the start of
that year's fall television season that cost the entertainment industry an estimated
$500 million. Economists estimate a strike of the same duration as the 1988 walkout
could result in at least $1 billion in losses
 
Jack Kyser with the Los Angeles Economic Development Corporation identified to the
San Francisco Chronicle that a study by the now-defunct Entertainment Economy Institute
estimated that for every 10 entertainment workers who show up in government statistics,
there are 6 more working independently. Kyser also identified that entertainment jobs tend
to be high paying, so their demise would have a bigger-than-average economic impact.

For example in the first quarter of 2006, the average weekly wage was $1,355 in movie
production and $1,453 in television production, compared with $784 for all industries.
(The highest average weekly wage in the creative arts, according to the study, was
$1,972, in record production. The lowest was $311 in fine arts schools, where many
instructors work part time.)

The Los Angeles Economic Development Corporation identified that a large-budget
film of about $70 million typically creates 928 jobs: 231 tied to the production and 697
indirect jobs. A mid-budget film costs about $17 million to produce, generates $1.2
million in state and local taxes, and employs more than 300.

As identified earlier, the 1988 writers’ strike, which lasted 22 weeks, cost the industry
an estimated $500 million. In today's dollars, that would be close to $1 billion. However,
neither the MPAA nor the Census Bureau or even the Bureau of Labor Statistics incorporated
a multiplier effect to their numbers.  Thus to have a greater understanding of the economic
impacts, it would have been beneficial to have had an input-output model completed on the
industry to see not only the direct but also secondary and teritary impacts from the strike. 

Not to ignore the numbers or the need for further analysis, but the real economic impact
from the industry is that it is capital intensive, it brings in huge sums of capital investment
coupled with influential business and political interests that have help grow the state's
economy along with an amazing if not envious industry hype of its personalities (stars)
and organizations that comprise the industry perpetuating its continued growth while
enhancing the global notoriety of California.

So, keeping it in perspective as dire as it sounds, even a prolonged strike (6 months)
probably would not do as much damage in Southern California as the recent southern
Californian wildfires ($2 billion in damage, mainly in San Diego County) or nowhere near
as much in terms of economic impact from the recent collapse of the sub-prime mortgage
industry in California.


                                 

Direction

However, on the other side of the coin, no matter what payroll and employment numbers
are used, the unfortunate loss of jobs and revenues at this time could be hard felt in
California, specifically lost revenues to the state and local governments.  Revenues that 
would have manifested themselves for example in the way of sales tax, property transfer
tax and income tax will be sorely missed by state and local governments.  Coupled with 
the loss of these tax dollars with the losses created by the current downturn in the housing
market and from the losses caused by the recent wildfires that have impacted specific
southern California communities will only further exacerbate government budget issues.
 
They say timing is everything, and it appears a protracted strike will not bode well
for California's economy.  It will be interesting to see how California's Governor-actor
interfaces with the parties. Finally, although bias to this idea, the parties should
hire some of the great economists from California to examine and identify measurements
to forecast the revenue bringing about a fair and equitable resolve in an expedited
manner.

Note:  Both parties have agreed to meet again on November 26.  

                                               
  
For further information

See www.CaliforniaBusinessMinute.com  go to Economic Overview for further
details on the report and the film industry.

Also see:

The Economic Impact of the Creative Arts Industries:  New York and Los Angeles
by the Bureau of Labor Statistics, Monthly Labor Review, Oct. 2007

www.bls.gov/opub/mlr/2007/10/art3full.pdf
www.amptp.org  Alliance of Motion Picture and Television Producers
www.wga.org  Writers Guild of America
http://unitedhollywood.blogspot.com