Hollywood writers’ strike creates ripple effects across California's economy, other states

Roughly a month into the Hollywood writers’ strike, the standoff between the Writers Guild of America (WGA) and the Alliance of Motion Picture and Television Producers (AMPTP) remains at an impasse.

The financial impacts have already begun to reverberate across nearly every facet of the Southern California economy. From dry cleaners to restaurants and even the real estate sector, the work stoppage from 11,500 writers has jolted businesses that rely on income from the industry to make a living.

And a prolonged strike threatens to spread the impact beyond the region.

"With the increase in different kinds of filmed productions due to all of the new demand from streaming and film incentives being a great deal more robust now than they were in the last strike, the overall impact of the strike will be felt in places like Georgia, New York, and elsewhere in ways that it was more confined to California last time," said Kevin Klowden, chief global strategist at the Milken Institute.

In North Hollywood, where Pam and Jim Elyea own a prop house called History for Hire, history feels like it's repeating itself.

Their business has supplied props to movie productions for nearly 40 years, including the cameras for Steven Spielberg's "The Fabelmans" and military gear for "Platoon." The last time the WGA went on strike in 2007, the Elyeas delayed buying their own warehouse, using the money saved up to keep the business afloat instead.

Pam Elyea said this strike feels "longer, colder."

"There's not a lot of other options for us," she said. "So what we do during this time when we're shut down is we work on our stock, we maintain it, but every week we're losing money. Every month we're losing money on this. And we really estimate the strike will at least go on to the end of September, possibly the end of the year."

If the last writers' strike, which began in 2007 and ended in 2008, is any indication, a prolonged strike is likely to result in significant job losses and weigh on the region's growth. The 100-day strike contributed to 37,700 job cuts and $2.1 billion in losses, according to a Milken Institute study conducted by Klowden. That accelerated the onset of California's recession in 2008 in the midst of the subprime mortgage crisis that triggered the global financial crisis.

Nearly a month into the current strike, a growing list of shows and films have already halted production. But it's too early to say what the full impact will be, Klowden said.

"The secondary effect of the strike can often be delayed," he said. "A number of those businesses were already hit hard by the pandemic, and an extended strike might force them to close down entirely."

The proliferation of streaming services is at the core of the strike. Chris Keyser, co-chair of WGA's Negotiating Committee, said tech companies such as Netflix (NFLX) have fundamentally altered the way in which writers are paid, employing them for "the fewest amount of weeks, for the least amount of money they can pay" while maximizing output.

"A bunch of tech companies came in during the streaming era and imposed a kind of efficiency and productivity onto the creative process that doesn't make any sense," Keyser said. "They pay us by the week and say, give us your great idea and go home. Doesn't work anymore."

Writers are seeking increases in minimum pay, along with better residuals, which are similar to royalty payments, from streaming services. They’re also calling for strict limits on any content produced by artificial intelligence.

Keyser said AMPTP has yet to come to the table on key issues to compensate writers fairly, even as Hollywood studios rack up profits.

"If we don't negotiate for this now, when we come back in three years, it may be too late," Keyser said. "Yes, there are costs to it. There are terrible costs. We are painfully aware of those costs. The companies should come back and talk to us."

In a statement to Yahoo Finance, the AMPTP said: "Member companies remain united in their desire to reach a deal that is mutually beneficial to writers and the health and longevity of the industry, and to avoid hardship to the thousands of employees who depend upon the industry for their livelihoods."

Stalled negotiations with the Screen Actors Guild, which has already authorized a strike, and the Directors Guild of America, which has yet to reach its own deal with the AMPTP, may complicate the timeline for any resolution.

Danny Tolli, a veteran writer and strike captain, said he's hanging on to two additional jobs unrelated to the studios in preparation for the long haul.

"I'm facing some financial hardships, but it's important to be out here," he said from outside the Netflix building on Sunset Boulevard. "Given where I was before the strike, it wasn't a dangerous gamble to go on strike. I was already seeing my career as a writer evaporate. I knew that this was important."

Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita

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