Economic impact of writers' strike is negligible

12/07/2007 7:37 AM

12/07/2007 7:41 AM

With Hollywood's writers on strike, politicians from Gov. Schwarzen-

egger on down are looking for ways to help end the work stoppage, often justifying their intervention by citing the potential economic impact of the unionized writers putting down their pens and keyboards.

One estimate published recently in the Los Angeles Times pegged the potential cost at $1 billion.

But a study released Wednesday by the UCLA Anderson Forecast suggests that the strike is likely to have far less of an economic impact than conventional wisdom suggests. Structural changes in the entertainment industry, the stockpiling of scripts and the public's substitution of one type of entertainment for another all will help offset the effects.

Stockpiling is probably the most important factor, according to the university's forecast, written by economist Jerry Nickelsburg.

Studies of past strikes in Hollywood and other industries show that producers, seeing a work stoppage coming, often increase production in advance of the strike to carry them through at least part of the impending shutdown.

In 1988, when the writers engaged in a record 153-day strike, producers built up an inventory of scripts sufficient to keep them and their employees busy during the stoppage. Filmmakers and many television shows could continue their work, employing thousands of people, until the scripts ran out. Only the writers were out of work.

In 2001, this phenomenon was even more evident when a threatened strike was averted at the last minute -- but work for writers slowed down in its wake because producers had a surplus of material on the shelves that they had expected to use during the labor action.

This results in what is known as a "time-shifting" of income.

Employees and independent contractors in the industry earn more money in the weeks before the strike as producers gear up. Because this kind of work is seasonal even during the best of times, most writers are already in the practice of averaging their income over a period of months, salting some away for periods between jobs. Knowing that a strike was looming this fall, most would have saved some money, which they are spending now. This will soften the anticipated blow to the economy.

Sure enough, numbers compiled by a firm that tracks activity in Hollywood show an increase in film and television shootings at the end of 2006 and the first six months of 2007. UCLA's forecasters also noted a spike in September of almost 8,000 new employees added in the industry.

While the economists think some of that might have been a statistical glitch, much of it, they believe, reflects a surge in hiring to finish production on stockpiled programs on the eve of the strike.

The effect of the strike will also be muted by the dramatic changes in the industry's composition in recent years. The biggest of those is the increasing reliance on reality shows and other unscripted programming. These shows don't use union writers and can continue in production during the strike. One estimate pegs them at 46 percent of all television production in Los Angeles today.

That means an estimate that extrapolates from wages lost during the 1988 strike -- when almost all programming came from the striking writers -- would vastly overestimate the economic impact of a similar strike today.

Then there is the substitution effect. If viewers who would otherwise have watched new television shows spend their time, and ultimately some money, elsewhere, this will help buffer the impact of the strike on the Los Angeles economy.

Nickelsburg says studies of strikes against Major League Baseball and the National Football League found that the economic impact on communities with professional sports teams was nil. People spent their money on other forms of entertainment. During the 1985 Philadelphia newspaper strike, television and other print media hired more journalists and expanded their output, Nickelsburg says, to serve increased consumer demand.

The 1988 writers' strike led to an estimated 10 percent permanent shift away from scripted shows to other entertainment, and a similar shift might be expected today. But if those new forms of entertainment, which today include "webisodes" produced for the Internet, are also created in Los Angeles, then the net effect on the economy will be less than assumed by those looking only at the traditional entertainment industry in isolation.

"This loss to the industry is not a loss to the economy any more than a choice to shop at one supermarket over another represents a loss," Nickelsburg writes.

Bottom line: UCLA expects the strike to have an economic impact of about $380 million if it lasts until March. The entertainment industry accounts for about $20 billion a year in income, and the entire Los Angeles economy is about $380 billion. So that works out to a hit of one-tenth of 1 percent of the region's economy.

While the damage to any single writer's bank account might be huge, the people of greater Los Angeles and the rest of California will miss their favorite shows a lot more than they will feel the broader economic impact of the strike.

Weintraub can be reached at dweintraub@sacbee.com.

THE SACRAMENTO BEE

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