Nancy Sidhu sees a brighter picture for entertainment industry

Nancy D. Sidhu is chief economist for the Los Angeles County Economic Development Corp., a private research and business development group that prepares economic forecasts of national, regional and local business trends.

A former economics professor and corporate planner with Inland Steel Industries in Chicago, Sidhu moved to California in 1987 from the Midwest, first to work at Toyota Motor Sales before joining Bank of America as a senior economist.

Sidhu joined the LAEDC in 2000 and eight years later succeeded longtime forecaster Jack Kyser, now the group's founding economist. The organization's Kyser Center for Economic Research recently released its 2010-11 Economic Forecast and Industry Outlook, a report card on the region's economy.

The Times talked to Sidhu this week about her outlook for the entertainment industry, which generates an estimated 250,000 jobs in the county.

Other than a soaring box office, 2009 was a miserable year for L.A.'s entertainment sector, with falling DVD sales, studio cutbacks and the exodus of jobs to other states. Just how bad was it?

We estimate 9,000 jobs were lost in the entertainment sector. That includes the motion picture and TV sector, the sound recording industry and radio and broadcasting. What we've seen is that those parts of the industry that were tied to advertising revenues -- especially broadcast television and print media -- went way down. One of the things that was striking was how fast companies reacted. Once they concluded they were in for it, they started doubling back and hunkering down, cutting back spending and costs.

So why did you award the entertainment industry a B grade in your report? Isn't it more like a D?

The entertainment industry looks a lot better than a lot of other businesses. Commercial banks are still in trouble. They got a C-minus.

If you think of it as a giant "U" curve, the economy has come down the left side and passed the bottom and is beginning to turn up. That's also true for entertainment, which is beginning to turn now. It's a mix. Box office appears to be fine, but runaway production is a problem.

We're seeing more activity. Industry statistics show that commercial production activity is up. CBS is saying they're seeing more activity in the scatter market [the daily sales of ad time]. That's very significant. That's the money for the broadcasting industry that pays for these shows. That could be a reason for the apparent increase in TV pilot purchases.

Capital markets are a little easier and interest rates for corporate borrowers have come down. Because the rates are lower, investors are having trouble finding any investment that will yield anything, so they are willing to look at riskier investments with potentially higher returns. That helps to develop the funding for some independent films. A year ago investors didn't want to talk about risk. Now they're taking a look.

What does your crystal ball reveal for this year?

We're looking for some modest gains of about 3,000 to 4,000 jobs in entertainment. I would call it a measured recovery.

How does that square with Sony Pictures Entertainment's recent announcement that it's laying off 450 employees?

Sony was one of the last companies to cut costs, so I don't think the Sony layoffs are a harbinger of more widespread layoffs this year.

Can anything be done about the flight of production out of state?

There are two long-term challenges: One is how to meet the technology advances that are disrupting traditional models in the entertainment industry. Challenge No. 2 is how to meet the growing competition L.A. faces from around the world. There's a lot of collateral damage when production doesn't take place in L.A.

Your roots are more Steeltown than Tinseltown. How does glitz compare to grease?

I'm very comfortable talking about dirty, greasy businesses. Heavy industry in Chicago is the big deal. When the steel industry goes down like it did in 1982, everyone suffers. The same is true here. Entertainment is big enough here and has enough suppliers that the same impacts happen. When times are good, it's good for a lot of companies, but when times are bad, the impact is widely felt.


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