Study Estimates $6.9 Billion as Cost of Strike
A prolonged strike by writers and actors this year could result in the loss of 81,900 jobs and $6.9 billion in income for Southern California, which “could plunge our city and our county into recession,” Los Angeles Mayor Richard Riordan warned Thursday.
Riordan’s prediction came as he released a report forecasting that strikes lasting from May through October would push the area’s jobless rate more than 2 percentage points higher to 6.9%, exacerbating the local effect of the national economic slowdown, the report said.
“If film and television producers cannot reach agreement with the writers and screen actor representatives, we could take a huge U-turn back to the days of high unemployment and business closures,” Riordan said at a City Hall news conference releasing the $30,000 city-funded report.
The report estimates $2.5 billion in lost income in the second quarter and $4.4 billion in the third if TV and film production is shut down. Countywide, tax revenue would drop by $54.4 million. Noting the effect would extend statewide, the report said that 100,000 jobs and $6.1 billion in income could be lost in California in the third quarter alone.
Compiled by the Milken Institute in Santa Monica and Marina del Rey-based Sebago Associates, the report defines a long strike as a five-month work stoppage by the Writers Guild of America and a three-month interruption by the Screen Actors Guild and the American Federation of Television and Radio Artists. Those periods were picked because they roughly mark the longest historical strikes against studios by each guild.
The report also looked at the impact of two shorter scenarios: a two-month strike by writers only, and a strike in which writers would walk out for three months and actors for one until the end of summer.
The study kicks off what Riordan promises will be an aggressive public relations campaign--ultimately expected to cost as much as $60,000--to pressure labor guilds and their counterparts at major studios into reaching a new contract without a catastrophic walkout. Amid the most tense Hollywood labor relations in more than a decade, Riordan hopes that by raising the civic responsibility issue, he can push both sides toward compromise.
In a joint statement, the Writers Guild and the Alliance of Motion Picture and Television Producers, which resumed stalled talks Tuesday, said they “are committed to negotiating in good faith a new contract that will serve writers, the entertainment industry and the community.”
Screen Actors Guild officials said Riordan should urge studios “to commit to meeting the reasonable need of middle-income actors to earn a living wage.” The guild said such an action “will go a long way toward diminishing irresponsible and unfounded strike hysteria. Follow-through and delivery on such a promise will avoid a strike.”
One union source, who asked not to be identified, took issue with some details of the report, noting that TV production is largely shut down in May and June, so the economic impact would be minimal.
The contract between studios and writers expires at 12:01 a.m. on May 2; the actors’ contract expires two months later. For both guilds, the main issues remain payments members get, especially residuals when their work is rerun on cable TV, in foreign markets and sold on videocassette and DVD.
Thursday’s report used a number of sometimes offbeat analogies to dramatize Riordan’s point, including the nearly 82,000 lost jobs is equal to the attendance at four sold-out Laker games. Another was that the $4.4-billion reduction in income is three times the size of the Bahamian economy.
It also includes anecdotal examples from people such as cameraman Jeff Norvet, who said he sold his home in Agoura, moved into a smaller one and set aside the proceeds as a cushion in case of a strike. Next week, Riordan plans to take his case into the city with visits to small businesses such as restaurants and dry cleaners that will probably be hurt.
At Thursday’s news conference, Riordan also produced two small-business owners who said they would be devastated by a strike.
“Not only will I have to lay off many of my employees, but I may even have to close our business,” said Steve Michelson, whose 43-year-old Michelson Food Services in Sun Valley has catered the films “West Side Story” and “L.A. Confidential” as well as such television shows as “The West Wing.”
John David Ridge, whose Hollywood costume and wardrobe company serviced such films as the upcoming “Spider-Man,” said he would be forced to lay off the majority of the 18 to 25 seamstresses and tailors he regularly employs.
“Tonight, I’m going to New York to talk to some people there about maybe getting some Broadway stage work to keep my people employed,” Ridge said.
The numbers released by Riordan are conservative, because the report assumes only 185,000 entertainment industry workers in Los Angeles, a number at the low end of economists’ estimates about how many people work in an industry increasingly made up of gypsy-like independent contractors.
Los Angeles County Economic Development Corp. chief economist Jack Kyser estimates entertainment employment at about 255,000 workers. As a result, his previously disclosed estimates of the strike impact are higher than Thursday’s, projecting that each week the county economy would suffer a $250-million direct hit and a $257-million indirect blow.
Orszag, a partner in Sebago, said the study used a basic number drawn from public databases. He acknowledged that the number of people could be much higher depending on how one defines an entertainment worker.
The Riordan-commissioned study concludes that in a long strike, an estimated 16,000 jobs would be lost in entertainment-related businesses such as costume rental, advertising and accounting. Also included in that figure are stores, dry cleaners, restaurants and bars that would see their incomes drop substantially. Home sales also would probably slow, the report concludes.
The Milken-Sebago study notes the increasingly larger role entertainment plays in the Los Angeles economy, with employment more than doubling in the last 20 years at a growth rate higher than any other business sector in the city. It also says that Los Angeles overall accounts for more than 25% of the nation’s movie and TV production, proportionally higher than Detroit’s share of auto production, New York’s of financial services and Las Vegas’ share of gambling.
“Movie and TV production is to Los Angeles what semiconductors and computers are to Silicon Valley,” said Ross C. DeVol, director of regional and demographic studies at the Milken Institute.
He added that the movie and TV industry “is twice as important to Los Angeles as it was two decades ago, directly accounting for almost 7% of our economy.” DeVol said that in 1988 the aerospace industry employed 15,000 more people than entertainment. Today, he said, entertainment employs 120,000 more workers than aerospace.
