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BTL: “Economic Development Corp. on Impact of De Facto Strike”


BTL reported on the early stockpiling rumors and the Economic Development Corporation’ s study of its effects in our March 5, 2007 issue:

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Economic Development Corp. on Impact of De Facto Strike
by Jack Egan

Stockpiling of scripts and an acceleration in production is already occurring as studios try to shield themselves from a writers’ strike later this year, according to Jack Kyser, the chief economist for the Los Angeles County Development Corporation (LAEDC).

Some 7,300 jobs could be added to employment rolls in the entertainment industry—or just over four percent—during the speed-up phase, according to a new report on the Southern California economy issued last month by LAEDC under his supervision. But in 2008 there will be a downturn in jobs, with the nonprofit group estimating a loss of 2,400 jobs as studios work off their accumulated scripts and product. Besides the writers, both the Directors Guild of America and the Screen Actors Guild have contracts expiring in June 2008, further clouding the outlook.

“What you are seeing is that the industry, the people producing television shows are accelerating production, buying of scripts, looking at doing a longer run if they’re producing a weekly series—ordering more shows,” Kyser told Below the Line. “At the studio level for feature films we haven’t seen a pickup yet, but as we move forward I would expect something to occur if there isn’t a breakthrough soon.”
Television would be disrupted the most, he believes. “The TV networks are about to go into their production cycle for the fall season,” he observes, “just as production is getting underway, and that that puts them in an awkward spot. One option is to put on more reality shows, but those don’t have the same quality or number of jobs.”

Negotiations between the Writers Guild of America and the Association of Motion Picture and Television Producers on a new contract were supposed to be underway by now, but were postponed until late this summer, just weeks before the pact expires in October. The most positive recent sign was an indication from the WGA that the talks might begin in June instead of September.

However in Kyser’s view, “the risk of a strike, real or de facto, is high.” The scenario, he adds, is very similar to 2001 and 2002 “when there was a big decline due to stockpiling—even though there was no strike.”

According to separate figures from the IA, the number of contribution hours received by the Motion Industry Picture Penson Health Plans for production workers were down by 27 percent when comparing the two quarters prior to negotiations with the two following quarters.

That’s not the only long-term negative for the seemingly healthy Los Angeles show biz sector, following a 5.2 percent gain in domestic box office in 2006 over the previous year. These range from continuing challenges from runaway production to uncertainty caused by shifts in the way content is delivered, the report notes. The latter raises “large questions about what revenue streams might emerge,” such as cell phones and the internet. With DVD sales leveling off, a lot rides on consumer acceptance of new—but competing—formats like HD DVD and Blu-ray. Despite the uncertainties, a key point in the upcoming WGA negotiations with AMPTP is getting a piece of the action from such new technologies.

The report notes that another year passed in 2006 with no incentive for low-budget films coming out of the California legislature, even as other states upped the ante by raising subsidies. Another stab at such legislation will be made this year. However, since the LAEDC report came out in early February, an Internal Revenue Service ruling pulled the rug out from under the federal government’s tax break on films with budgets of $15 million or less (see story elsewhere in this issue).

A “small bright spot” mitigating runaway production is the dollar’s decline against the Canadian “loonie,” the report points out.

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