Strike raises Hollywood recession fears

Hollywood faces an uphill struggle if the strike goes ahead

By BBC News Online's Emma Clark

Industrialists do not invest in movies to make money, quip industry insiders - mostly they just hope to meet girls.

In relative terms, the US film industry is not hugely profitable. Films require a large level of expenditure and the industry as a whole has a high crash-and-burn rate.

But for the Californian city of Los Angeles the movie business is all-important.

Do industrialists make movies to meet pretty girls?

So unsurprisingly, the prospect of an all-out strike by screenwriters and actors is ringing alarm bells and prompting fears of a local recession.

Over the last decade, the amount of people employed by the motion pictures and television industry has increased by about 80%, according to the Los Angeles Economic Development Council.

It has replaced the aerospace industry as the single largest employer in the area.

"(The film industry) is a huge piece of the puzzle," says Steven Gaydos, executive editor of industry publication Variety in London, who has also worked as a screenwriter during his career.

Deadlock

The Writers Guild of America is currently locked in contract talks with studio producers in Los Angeles. Among other issues, the guild is asking for more commission to be paid to writers for film re-runs, and DVD, video and internet sales.

We could turn back to the days of high unemployment and economic recession

Los Angeles Mayor Richard Riordan

If the two parties fail to find a compromise, the screenwriters may go on strike in the summer, heightening the possibility that the actors' unions - which have similar gripes - will follow them to the picket line.

Los Angeles Mayor Richard Riordan warned recently: "We could turn back to the days of high unemployment and economic recession."

A study commissioned by the mayor estimates that an all-out strike could cost the area nearly $7bn in lost revenue and about 130,000 jobs.

This would push the city's unemployment rate from about nearly 5% to 7%.

The impact on the state of California, where agriculture and other industries are also important, is less devastating.

Maximum impact

However, fears for the film industry have been compounded by other troubles in the region - the local power crisis and the bite of a US economic slowdown.

"If it was a normal time, it would not have the same impact," says Variety's Mr Gaydos.

Film revenues

2000: $44bn

2004 forecast: $54bn

Source: Veronis Suhler

He adds the uncertainty has a domino effect on smaller businesses, such as luxury car companies and estate agents, that depend on discretionary spending by the wealthy.

"It is also a big deal for the state and the country, beyond its economic impact," he says, pointing to the industry's enormous success as an export product.

About 85% of international screens are filled with American films, says Mr Gaydos, adding that anything impeding that market position is a serious concern.

According to Veronis Suhler's Communications Industry Forecast, the US film industry generated about $44bn in revenues in 2000, representing a 2% increase on 1999.

This figure is expected to increase to almost $54bn by 2004, with the industry forecast to grow at nearly 6% over five years.

The US film industry also dwarfs its counterparts around the world in terms of revenue.

A bigger slice

Domestically, the US box office continues "to hold its own as a popular way to spend a night out", reports the US merchant bank Veronis Suhler.

However, the growing popularity of DVD, coupled with quick turnaround from blockbuster film to blockbuster video is also helping to drive sales, the bank adds.

Variety's Mr Gaydos estimates that film revenues are usually split pretty evenly between the theatrical business - the showing of films at home and abroad - and additional sales - DVD, video and other products.

The author of The West Wing is rumoured to earn more than most writers in the industry

The fact that US writers and actors want a bigger slice of the new formats is not surprising. In 2000, video and DVD sales generated $20bn, almost half of the industry's total output.

At the outset of contract negotiations, the Writers Guild of America was demanding a $100m increase for its workers over three years. The screenwriter guild has said that Hollywood writers earned a total of about $1.2bn in 2000.

The guild also estimates that the median salary for a writer working west of the Mississippi was about $84,000 last year.

Mr Gaydos points out that this means top writers probably made about $7m each over the year, while the vast majority of guild members earned very little.

For example, John Wells, president of the guild and writer-producer of the TV series ER and political drama The West Wing, is rumoured to earn about $35-50m a year.

To put it all into perspective, A-list actors, such as Julia Roberts, Tom Hanks and Tom Cruise can demand about $20m for 12-16 weeks on a film shoot.

Shutting the town down

Actors also hold more sway over the local economy. A walk-out by the actors' union is feared the most, says Mr Gaydos. A strike by the writers would not "shut down the town as completely".

In a panic to finish Jodie's new film

In a desperate attempt to forestall any fall-out from a strike, film studios have been racing to complete new films, such as Jodie Foster's The Panic Room.

"They have been shooting films and TV shows on every available piece of land, free set and free lot, just to stockpile films," says one media analyst.

The frenzy reflects just how panicked the industry is at the prospect of a strike.

And even if California's economy is not set to suffer greatly, the community of Los Angeles will be biting its glossy nails down to the quick as it awaits the outcome of the contract negotiations.