Hollywood is crashing.
To readers here, this is no surprise. It is well known by many who follow the industry closely. There are many channels on YouTube, for example, that chronicle the difficulties.
We are also seeing this make the mainstream media. The Los Angeles Times is one that covered the topic on a number of occasions, especially regarding the economic impact.
Because of this, it is a good time to look at the economic impact of the crash of this industry.
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The Demise of the Hollywood Economy
Entertainment is not disappearing. In fact, it is likely to grow in volume over the next few years.
What is changing is the fragmentation. This is something we covered quite frequently so no need to delve into it. Let us just say that large centralized entities producing entertainment content is not the future.
Instead, we are seeing the tentacles expanding in different directions. This is causing major problems for the Los Angeles area. The industry adds an estimated $115 billion to the local economy. When we consider the size, that is not surprising.
The effects of the decline are being felt everywhere.
The actor and aerial cinematographer turned his hobby of flying drones into a profitable business in 2012 just as the streaming wars were taking off. For a decade, he was flying high above film sets, creating sleek aerial shots for movies and TV shows on Netflix, Amazon and Disney.
Now he’s on the verge of becoming homeless - again. He was evicted from the Huntington Beach home he shared with his wife and two young children and nOowis being booted from the Las Vegas apartment they moved to because they could no longer afford to live in Southern California.
This is what often gets overlooked. The major stars are going to be fine. If you know an actor or actress by name, unless a total financial fool, they should have few problems with money.
We cannot say the same thing about those who got bit parts or were not in front of the camera. Set people, script writers, and others jobs are being affected. As was the case with Michael Fortin, the one in the quote above, he had to locate outside the area.
Another thing that gets overlooked is the tentacles of the industry. There are many businesses that benefit from the money generated by the industry. restaurants, bars, and tourism are a few of the areas that are enhanced. As things consolidate, the revenue of the companies starts to go away.
No Turning Back
We are talking about billions that are at stake. If the number for the local economy goes from $115 billion to, say $70 billion, that is a huge hit. My estimation is things could go a lot lower.
There is no turning back from this. As I follow this topic, there are many reasons people give for the downturn. If this was the case, then it would be a situation that could be solved.
And along with the streaming bubble bursting, some productions are also being lured away from California by attractive tax incentives in other states and countries. Los Angeles leaders are so concerned about the slowdown that Mayor Karen Bass created a task force last month to consider new incentives for film production in Hollywood.
This is typical.
While there are incentives out there to lure production away, it is not the basis of this problem. Therefore, incentives will do no good.
The reality is that, companies that relocate, are going to be in as much trouble wherever they locate to. While they might enjoy lower costs, it is only delaying the inevitable.
Hollywood has no more of an answer for this than newspapers. That industry was wrecked a couple of decades ago. Today, we see it as a microcosm of itself.
Here is the model from which things will evolve. Notice how there is no shortage of news. In fact, it is everywhere. That is why newspapers were done. People can turn to a number of places to get what they need in this regard. Instead of a local paper bringing the news, there are millions of websites (along with social media) that people can turn to.
We are seeing the same thing arrive with video. No longer are the broadcast networks and Hollywood studios the only one to distribute video content. YouTube is the one garnering all the attention but that is only the beginning. We are going to see this spreading out even further as video appears in more locations.
All of this is before we even start the discussion around generative AI.
Hollywood is being disrupted by technology. What we are witnessing is how industries collapse when this takes place.
It is something that we saw many times before.
The one difference is little is more public than Hollywood. Even the retail apocalypse was not as well known as this one.
For Los Angeles, the economic impact is into the billions. The only question is how many they will loss from their local economy.
It is not a situation that is going to get any better.