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Last Updated: Wednesday, 2 January 2008, 12:53 GMT
Writers' strike hits studio coffers
By Peter Bowes
BBC News, Los Angeles

The increasingly bitter writers' strike is entering a new phase, with no new negotiations on the cards and some of America's most high-profile entertainers returning to work.

Jay Leno and David Letterman
Both Leno and Letterman return to the airwaves this week
From this week, the main late night chat shows hosted by Jay Leno and David Letterman will be back on the air.

Their programmes became the first casualties of the strike when their writers walked out in November.

But the hosts have decided to return out of sympathy for their non-writing staff who found themselves laid off through a lack of work.

Letterman's production company, Worldwide Pants, has done an interim deal with the Writers' Guild to allow his show to return with a full writing staff.

Leno, however, will re-launch his show without a writing team.

With negotiations deadlocked, the return of the chat shows - along with Letterman's local union deal - will serve only to muddy the waters in a dispute that is far from being resolved.

But the TV networks will be relieved that their late night schedules are returning to some degree of normality.

Financial impact

They have survived the strike so far by showing repeats. But the old shows and old jokes were beginning to wear thin.

"These things do not repeat well," says Jack Kyser, chief economist at the Los Angeles County Economic Development Corporation.

Striking writers in Baltimore in December
Two months on the writers strike shows no signs of ending
"They've seen their ratings plummet for the repeats, so they need fresh material."

At this stage, the financial impact on the TV networks has not been devastating.

For one thing, they have saved significant sums of money in the production costs associated with putting on new shows.

But the economic implications for the wider entertainment community, especially in Hollywood, are severe.

Most TV production has come to a standstill because there are no new scripts, and there has been a knock-on effect on film and TV-related businesses in Los Angeles.

"The trickle-down has been significant," says Mr Kyser.

'Unsettled situation'

It has been calculated that $325m (163.8m) in wages have been lost for both writers and other studio workers.

The cost of the wider "economic impact", meanwhile, has been put at $500m (252m).

Quentin Tarantino announcing this year's Golden Globe nominees
Awards shows like the Golden Globes may be affected
Companies that hire out studio equipment have been hit hard, as have Hollywood restaurants, costume makers and hairdressers.

Even day spas have reported a drop in business.

"People aren't spending money because it's a very unsettled situation," says Mr Kyser.

"It's having a devastating impact on the areas in which the industry is located."

Up to 250,000 people are employed in the motion picture business in Los Angeles County.

"Our contingency plan is to lay off probably up to 40% of our staff, which would mean 35 to 40 people," says Alan Songer of Omega Cinema Props, a major supplier of props for TV shows and films.

"It's unnerving, looking at that as a possibility. These are people who've given their all to us through thick and thin.

"We're left with no alternative to remain viable."

Promotional tool

Most people in Hollywood fear there is worse to come. With the traditional awards season in full swing, major events such as the Golden Globes and the Oscars are under threat.

"The Academy Awards means roughly $150m (75.6m) to the local economy," says Mr Kyser.

Strikers in Burbank, California last month
The dispute centres on writers' royalties for internet usage
"If you don't have writers writing the scripts, what do they do?"

The awards shows are hugely important as a promotional tool for the studios to get the word out about their movies.

For now, both sides appear to be battening down the hatches for the long haul.

The producers are sticking to their argument that there is no viable business model on which to base future sales in the digital world.

But the writers believe it is possible to craft a deal that would give them a share of the profits from DVD sales and internet downloads.

"It's going to get more and more painful," says Mr Kyser.

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