The Economic Impact of Digital Distribution
The 2007 Hollywood writers' strike dealt a blow to California's already struggling economy and is expected to result in a loss of 37,700 jobs and $2.1 billion in lost output through the end of 2008.
The report includes estimated losses for fourth quarter 2007, but focuses on the economic impact for 2008 since this is where the biggest repercussions are felt due to the ripple effects. According to the report, the 2008 statewide economic ramifications for all industries include:
Wages and salaries are projected to decline by $2.3 billion
- Retail sales are expected to show a decline of $830 million
- Total personal income (which includes wages, salaries, self-employment, rents, dividend, interest and other income) is expected to drop by $3.0 billion
Building on the analysis of the recently released, The Economic Outlook for the United States and California: Slow Growth or Recession?, Milken Institute economists conclude that the strike was one of several factors that tipped California into a recession in early 2008.
California is particularly vulnerable to strikes in the entertainment industry because of the concentration of jobs and economic output. Some of the other concentrated sectors of California's economy, such as the top-ranked information industry, are also directly related to the entertainment industry. In 2006, 36 percent of the output and 42 percent of the employment generated by California's information industry were in motion picture and broadcasting services.
The analysis in the report notes that by 2009, the effect of the 2007 strike will be less noticeable. However, if another work stoppage occurs in the industry (at the time of the release, SAG was negotiating a contract), the impact will be felt for up to an additional year.
The report also provides background and context for the key issues of the strike, focusing on the growing importance of digital media. Innovations in distribution, on-line advertising, steady growth in cable network advertising (as opposed to declining revenue in broadcast advertising), trends in reality programming and production location choices are all important dynamics in an industry that is so closely linked to California's economic stability.