Labor issue could cost up to $2.5 billion
The WGA strike will wind up costing the local economy anywhere from $380 million to $2.5 billion, depending on how long it goes on and who’s doing the forecasting.
The dent put on Los Angeles County’s economy by the now 7-week-old strike was the subject of a 75-minute hearing held Wednesday ayem at City Hall by the L.A. City Council’s Housing Community and Economic Development committee.
The sesh, held in a marble-columned meeting room, drew an overflow crowd of Writers Guild of America supporters, some of whom gave brief testimonials to the fact that most WGA members are middle-class earners who “drive Hondas and Toyotas,” in the words of scribe Betsy Thomas, who addressed the council with her infant son Owen perched on her chest in a baby sling.
The Alliance of Motion Picture and Television Producers did not send a rep to the meeting; the Motion Picture Assn. of America, which reps the studios before all governmental bodies, issued a statement on the studios’ behalf.
Factoring in the lost wages of idled writers and the multiplier effect on a wide range of support businesses, the strike has cost L.A. County more than $342.7 million and counting, Jack Kyser, chief economist with the Los Angeles County Economic Development Corp., told the committee, based on calculations he made as of Tuesday.
(According to the AMPTP, the lost wages of WGA and IATSE members as of Wednesday totaled more than $342.8 million. Applying the LAEDC’s multiplier formula for highly paid showbiz workers of 2.8 times earnings, the local economic impact from the lost WGA and IATSE wages alone is $959.8 million, and climbing. And that figure doesn’t include other losses, such as wages of idled producers or other studio expenditures on movies and TV shows that would otherwise be in production.)
The last WGA strike, which ran five months in 1988, resulted in a $500 million loss at a time when the biz employed about 80,000 locals.
“The pain is growing each day the strike goes on. That concerns us,” Kyser told the committee. He noted that showbiz is the region’s third-largest employer, with a workforce of 160,000 that generates $46.8 billion in economic activity annually for L.A. County. Kyser stressed the “multiplier effect” of all that production spending on local businesses ranging from restaurants to hotels to florists, and he emphasized that showbiz is a key driver of tourism in Southern California.
The Academy Awards ceremony alone generates $130 million annually in local economic activity, Kyser said, which could be dented significantly if the WGA and Screen Actors Guild encourage members to boycott the ceremony.
“This strike will not kill the L.A. County economy, but it will certainly act as a brake on the L.A. economy,” Kyser said, adding that it will also dent sales tax revenues for local and state government because of the strong ripple effect that production has on other businesses. “It takes a lot to get this product out the door,” Kyser observed.
UCLA economist Jerry Nickelsburg offered a less dire prediction of the strike’s impact, saying it would amount to about $380 million in lost economic activity if it goes five months, in part because the entertainment industry is much more diverse than it was during the last WGA strike (Daily Variety, Nov. 29). Nickelsburg noted that cutbacks in traditional production areas may well lead to expansion in newer sectors like vidgames and original production for the Internet. He pointed to recent media reports that venture capitalists are now courting writers for a range of ventures.
Nickelsburg said his forecast was based in part on an analysis of TV ratings before and after the 1988 strike. The average rating loss for shows that were affected by the strike was about 10%, which he said he used as the basis of a conservative estimate of the number of people who would seek out new forms of entertainment during this strike.
“Consumers are not going to sit idly by,” Nickelsburg said. “And today, there are many more alternatives than there were in 1988.”
Rexford Olliff, finance specialist for L.A.’s City Administrative Office, seconded Kyser’s concerns about a slowdown in local tax revenues. Olliff said the city of Los Angeles had already seen a significant drop in sales tax revenue going into the strike. The showbiz shutdown, coupled with mortgage meltdown issues, will surely “push us over” into fiscal troubles next year, Olliff told the committee.
“We’re taking a key element out of the (city) economy when we cannot afford it,” Olliff said. He noted that the biggest single contributor to city sales-tax revenues are local restaurants, at 13%, and anecdotal evidence is strong that the strike has put a damper on dining out at many high-end eateries. Olliff said direct showbiz spending generates tens of millions of dollars annually in taxes for the city of L.A. (When pressed by committee members, Olliff said he could not be more specific.)
John Bowman, veteran showrunner and head of the WGA’s negotiating committee, got a big round of applause as he began his brief remarks to the committee. (Committee chair Herb Wesson told the packed room that he’d allow them one burst of applause “because he’s your fearless leader” but warned the WGA red shirts not to do it again.)
“We remain at the negotiating table that they abandoned,” Bowman said after giving the committee a brief rundown on the WGA’s talks with the AMPTP, stressing that the majors have walked away from the table twice since early November. “We are ready to settle this contract before irreparable damage is done, but we can’t settle this strike if we are the only party at the negotiating table.”
Bowman said the guild’s internal estimates tote up losses of $2.5 billion in production activity, including wages for writers and other workers, if the strike continues and the major networks and studios scrap scripted series production for the remainder of the 2007-08 season. Bowman said the guild’s informal survey of members found that at the time the WGA went out on Nov. 5, most half-hour scripted shows had six remaining episodes to be written and produced, while most hourlong skeins had seven outstanding segs.
Bowman said the guild believes most of the lost production could be made up in the first quarter of 2008 if the strike is settled in the near future.
In the statement issued by the MPAA, org said the studios are “cognizant of the harm caused to employees within our industry and the overall Los Angeles economy.” MPAA statement pegged lost wages since the strike began at “upwards of $350 million,” including $120 million for WGA members, $205 million for IATSE members in the Los Angeles area and $50 million to the Teamsters and other craft unions.
The strike’s swift shutdown of TV skeins has been particularly troublesome for the local economy because as feature film production has been lured to other states and Canada, “Television for the last four to five years has been the primary driver of the entertainment economy in L.A.,” said Steve MacDonald, prexy of film permitting org Film LA. The shutdown of all but two of the 52 drama series and 19 comedies is costing the town $135 million a week.
Other speakers during the hearing included Pam Elyea, co-owner of North Hollywood-based prop house History for Hire, and Pam Fair, deputy national exec director of SAG. Later in the day, City Council prexy Eric Garcetti, who appeared with Bowman at a brief news conference after the hearing, introduced a motion to the full City Council calling on the sides to resume negotiations.
“It’s time to resolve this with a fair contract and get everybody back to work,” Garcetti said.