The Weekly Cost Of The Hollywood Strike Could Top $150 Million

Hollywood has shut down for the first time in more than six decades, with actors and writers joining forces on the picket lines. As we enter the first week, here’s a breakdown of why analysts say the weekly loss hovers around $150 million.

With SAG-AFTRA and the WGA simultaneously on strike, many already feel the financial impact. As I previously reported, the Hollywood strike could exceed $3 billion in economic fallout. Some predict it could top $4 billion.

Andrew Boyd, a financial advisor at Finty, estimates the immediate loss to be $150 million per week. “The financial ramifications are far-reaching and can be quite substantial. The cumulative impact, should the strike extend into 2024 or beyond, could be significantly more. This cost includes production delays, increased expenditure once the strike is resolved, and a possible decline in the quality of output.”

When asked what this means for the consumer, Boyd said the disruption in the release of new content might drive consumers towards alternative entertainment options. “In the long-term, the quality of content could be impacted due to rushed production schedules post-strike, and the cost might also be transferred to consumers in the form of higher prices for movie tickets or streaming subscriptions.” Boyd also contends that historically, long strikes have increased the popularity of independent productions as viewers seek new content.

The economic fallout will be massive, with nearly 160,000 actors and approximately 11,500 screenwriters striking simultaneously. To put this into perspective, the 100-day strike 16 years ago, which solely involved the writers, surpassed $2.1 billion.

With both sides very apart on two major sticking points, AI and residual pay for streaming, this Hollywood shutdown is expected to be twice as damaging financially. The Milken Institute released a report following the 2007 strike that estimated the loss of 37,700 jobs. The number now is much higher.

In my previous article, I explained that in addition to actors and directors, each film and television series employs roughly 300 crew members who will be out of work, including carpenters, caterers, hair/makeup/wardrobe, accountants, prop houses, set designers, transport workers, and production and personal assistants.

The trickle-down effect could touch every facet of the Southern California economy, including the housing market. If people stop buying houses, rents increase; this is especially concerning as consumers are already dealing with high inflation and rising interest rates.

Peter C. Earle, an economist with the American Institute for Economic Research, explains it’s difficult to estimate the financial losses, but he gauges his estimates on prior strikes. “One estimate puts Hollywood’s losses owing to the 2007 writers’ strike at $500 million over three months. That would be an average of $165 million monthly, about $42 million weekly. But those are internal/direct costs. Another estimate of the 2007 writers’ strike puts the total losses – losses including related businesses dependent upon movie studios and film production like hotels, caterers, personal services, and so on — at about $2 billion over three months or roughly $110 million per week.”

Earle warns that it’s essential to put these estimates into perspective. “Even if the actual dollar losses are closer to the low end of those estimates ($42 million/week) than the higher end ($110 million/week), they are coming at a time when the entertainment industry is still recovering from the pandemic and amid a major restructuring. Film revenue hit an all-time high in 2007, which undoubtedly took some of the sting off of that year’s strike impact. But movie attendance and cable subscriptions have been falling for several years, and 2022 film revenues were over 30% lower than 2019 levels.”

Earle sees these trends as a significant factor in the inability of the opposing sides to reach a deal. “For studios, revenues are falling, and margins are compressing. Meanwhile, an estimated half of writers are working at or near minimum wage, up from a third just ten years ago. Streaming and the growing backlash against woke scripts and plots are leaving less and less for Old Hollywood to fight over.”

Martin Mulyadi, a Ph.D. and accounting professor at Shenandoah University, says the direct costs could be much higher. He refers to the last writers’ strike as causing “a substantial blow to California’s economy,” equating to $21 million per day. “Adjusting for inflation and factoring in the industry’s growth, we could now see daily losses north of $25 million. Therefore, using this number, direct costs alone could accumulate to a minimum of $175 million per week.”

As for indirect costs, which include those not working or spending money, Mulyadi says these are often trickier to quantify. “Considering the economic multiplier effect, the indirect losses could match or exceed the direct ones. If we presume the indirect cost to be on par with our direct cost estimate, we are potentially looking at an additional $175 million per week, impacting California’s economy. We’re talking about a total of $350 million here.”

Mulyadi adds that it’s critical to remember these are approximations but says one thing can be said with certainty. “This strike’s consequences will undoubtedly have a profound impact on the California/Hollywood economy. This disruption can be extensive, leaving an imprint that will be felt long after the strike is over.”