The View From Your Recession, Ctd.

A reader writes:

I saw the post from the brother of the movie producer.  I run a workforce development and education/training NGO that focuses on entertainment and have some knowledge of the business of “the biz.”  Here are some additional things to consider about the health of Hollywood right now:

“Movies are recession-proof” is an incomplete (rose colored) view of the industry.  It stems from the fact that theatrical motion pictures did well in the Great Depression, so everyone figures they will do well in any recession.  They did well in the Depression for a variety of factors unique to that era---they were inexpensive to see and people had few alternatives.  It was also shortly after the birth of the talkies and the founding of the big studios, so it was an era of industry expansion, much like the high tech and internet booms of the 1980’s and 90’s (in short, not a mature industry).

Nowadays, movies compete with a whole range of cheaper forms of entertainment, such as TV, DVD’s, games and the internet.  At the same time, motion picture producers rely on a more diverse revenue stream to make money, such as those very same TV shows, DVD’s, games and the internet.  So, it’s a two-edged sword because all of those product lines are seeing decreasing sales revenues today.  In addition, certain studios have financial pressures unique to their specific business models---two big examples:  NBC-Universal, as a subsidiary of GE, has been forced to improve its bottom line and make cuts in expenses because the entire parent company is having problems with other divisions, such as GE Financial; Disney gets a big chunk of income from its theme parks, hotels, cruise ships and retail sales, all of which are not doing well right now.

Finally, your reader’s brother may have been impacted by accelerating runaway production here in Los Angeles---the trend to move production to cheaper locations, facilitated by improved remote and portable technology and tax incentives offered by those locales, as well as the increasing cost of production in LA.  That is a megatrend akin to the steel mills leaving Pittsburg, and will not recover much once the economy bounces back.

All that said, the entertainment industry is one of the healthier sectors of the national economy.  There is not a lot of hiring going on, but there are also no mass layoffs like the ones you are seeing in other industries.