The Potential Impact of the WGA and SAG-AFTRA Strikes
Written by Shannon Sedgwick, Director of the Institute for Applied Economics
The iconic film and television production industry has deep roots here in Los Angeles County that go back more than a century. A key industry here in the County, it is mainly comprised of five component industries: Motion Picture and Video industries (NAICS 5121), Sound Recording industries (NAICS 5122), Radio and Television Broadcasting Stations (NAICS 5161), Media Streaming Distribution Services, Social Networks, and Other Media Networks and Content Providers (NAICS 5162), and the Independent Artists, Writers, and Performers industries (NAICS 7115). Combined, these five industries directly employed over 193,800 payroll workers last year (2022), representing 4.3% of the 4.5 million nonfarm payroll workers in Los Angeles County.1
The writing of this memo marks the beginning of the fourth month of the Writers Guild of America (WGA) strike, which started on May 2. The last major writers’ strike lasted three months, from early November 2007 to early February 2008, and it only involved the writers’ guild. Today, the WGA strike persists with little indication of when an agreement will be reached; negotiations continue to be stalled after WGA and the Alliance of Motion Picture and Television Producers (AMPTP) failed to reach an agreement to resume negotiations on Friday (August 4th).2
Monthly employment data for Los Angeles County through June of 2023 allows us to make a back-of-the-envelope calculation of the direct earnings which may have been lost with the WGA strike (the direct employment impact from SAG-AFTRA (Screen Actors Guild – American Federation of Television and Radio Artists) will not be visible until later data releases). From April to June of 2023, payroll employment in Motion Picture and Sound Recording Industries (NAICS 512) shed 6,700 jobs, a decline of 4.7 percent. Independent Artists, Writers, and Performers (NAICS 7115) lost 300 payroll workers since April 2023, a 1.9 percent decline. Radio and Television Broadcasting Stations (NAICS 5161) and Media Streaming Distribution Services, Social Networks, and Other Media Networks and Content Providers (NAICS 5162) showed little change from pre-strike levels. Consequently, a total of approximately 7,000 jobs have been lost in these two industries since April. Applying the average monthly wage of each of these industries in 2022 to the monthly changes in employment in between April and June gives a rough estimate of $77 million in potential direct earnings lost over the last three months related to the WGA strike.
SAG-AFTRA, Hollywood’s largest union for performers and other media professionals, began their strike on July 14, 2023. The last actors’ strike occurred in 1980. With SAG now on strike, it represents the first dual shutdown in 63 years; not since 1960 have both actors and writers been on strike at the same time. And it is only the second time ever in Hollywood history.
While these are two separate unions, they share some of the same goals, namely increased residuals, minimum pay raises, and protections around using artificial intelligence (AI).
At the time of the last WGA strike, streaming services were still relatively new. Now, they have disrupted the industry, and we have big streamers like Amazon, Apple, and Netflix at both negotiating tables. These streamers have less history of dealing with labor unions compared to their traditional studio counterparts.
For writers, the big issue with negotiations involves residual payments for release and reuse markets and policies that protect against the use of AI. Streamers, and their changed model of using short pilots and mini seasons comprised of 6 to 8 episodes, have eaten into the earnings of writers who now find themselves working a series of these less lucrative, short, “mini room” writing gigs. As such, a current ask is that there is a reduction of these “mini rooms.”3
Actors are striking for an increase in base compensation, for regulated use of artificial intelligence, better benefits, and compensation for self-taped auditions, which has become more prevalent in recent years. For residual payments, actors want to be compensated for content on streaming platforms based on viewership, but currently streaming services such as Netflix, Hulu and Max do not share those metrics.4
Not only will delayed and stopped productions due to the WGA and SAG strikes negatively impact the earnings of writers and actors, but strike rules also forbid actors from promoting their projects, so premieres, talk show appearances, and other promotional media are also on hold. Furthermore, conventions and awards shows will also be affected by the strikes. Moreover, below-the-line workers, where middle-skill roles are more heavily concentrated, are also impacted by the walkout, as disruptions in production negatively impact their hourly earnings.
If these strikes continue over a long enough period, they will negatively impact the industry itself. In the short-term, both release what content they already have, albeit, perhaps, more slowly.
With respect to longer-term financial risk, traditional studios may be more exposed than streamers. Talk shows were immediately impacted. Delays in filming related to the strikes can impact the most popular network shows which typically are written in the summer and are filmed in the fall, and production of the summer movie releases scheduled for next summer. All of this can impact their bottom line. Streamers may be more resilient, as they often have a larger pipeline of scripted content and have the option to look towards international shows to fill the gaps. The risk for streamers is stale content; it may start to impact their bottom line if subscribers drop off without something new to watch.
The film and television production industry is complex and wide-ranging in Los Angeles County, with well-established supply linkages. Consequently, the industry can typically find all production facilities and requirements within the region. That also means, however, that the economic cost of both the WGA and SAG strikes are more than just lost wages for writers, actors, and other production workers; the more production is impacted, the more businesses in the industry’s local supply chain are affected. These businesses include craft services, studio equipment rental houses, prop and costume houses, marketing firms specializing in the entertainment industry, and even clothing retailers where studio shoppers go to fill their production wardrobes. This ripple effect will be compounded by the reduced spending by workers in both the industry and its supply chain. That reduction of supply chain spending and household spending will represent additional revenue losses in our region that can be felt across all other industries.
While most filming has been put on hiatus, not all activity has stopped; independent film and TV projects with no ties to the AMPTP are exempted from the strike, being granted special interim agreements. Currently, there are 39 productions that have been granted these waivers, with many more undertaking the application process.5 The terms dictate that these independent productions must adhere to the same union-proposed terms that studios and streamers rejected; an 11 percent higher minimum wage rate, residual guarantees, and protections against AI. The points of contention surrounding the productions that are continuing under these waivers are that they include A-list celebrities (like Anne Hathaway, Matthew McConaughey, Mark Wahlberg, Paul Rudd and Jenna Ortega) and, upon completion, will be sold to streaming services that are AMPTP members. As such, despite potentially being a proof of concept for what the union has requested, they are viewed by many as an industry loophole. Regardless, these productions represent only a fraction of “normal” activity.6
According to FilmLA, local on-location film production, measured by Shoot Days (SD), declined by 28.8 percent in the second quarter of this year (6,566 SD), compared to Q2 2022. Television posted the largest quarterly decline among all major production categories (-36.4 percent). These Q2 2023 declines are showing the first signs of the writers’ strike, but part of the decline is also attributable to the post-COVID production surge ending and corporate restructuring that has been occurring in the industry. Not since the pandemic have shoot days in Los Angeles County been so low.7
The ways that we consume content has changed, and the economics have changed with it, making the estimation of potential impacts of the current WGA and SAG-AFTRA strikes more complex. The industry is a significant driver of growth here in Los Angeles County. The film and television industry as defined in this memo directly accounted for approximately 10.9 percent ($90.6 billion) of Los Angeles County’s
$828.4 billion economy in 2021 (most recent gross county product (GCP) available), and that excludes the additional contribution to GCP related to the industry’s local supply chain purchases (indirect spending) and household spending supported by wages earned by direct industry employees and those working in its supply chain (induced spending).8
In terms of employment, job growth across other industries in Los Angeles County has absorbed the loss related to the WGA strike, total nonfarm employment has hovered around 4.64 million since April, but we will likely see the impact of the SAG-AFTRA strike in future data releases, along with the secondary effects of both walkouts as they continue. Ultimately, as with any work stoppage, the duration of these strikes will be key in determining the economic impact they have on the Los Angeles economy; the longer the WGA and SAG-AFTRA strikes go on, the more it will cost our local economy.
1 CA EDD, Labor Market Information Division, Current Employment Series, Accessed 8/4/2023, https://labormarketinfo.edd.ca.gov/data/employment-by-industry.html
2 WGA Negotiating Committee. (2023, August 4). Negotiations update. https://www.wgacontract2023.org/announcements/negotiations-update-8-4
3 WGA Negotiating Committee. WGA negotiations—Status as of May 1, 2023 – WGA Contract 2023. https://www.wgacontract2023.org/uploadedfiles/members/member_info/contract-2023/wga_proposals.pdf
4 SAG-AFTRA. (n.d.). Why we strike: SAG-AFTRA Strike. SAG-AFTRA Strike, Accessed 8/4/2023. https://www.sagaftrastrike.org/why-we- strike
5 SAG-AFTRA. (n.d.). Productions Approved and Signed to Interim Agreements – Members May Work on These. SAG-AFTRA Strike, Accessed 8/6/2023. https://www.sagaftra.org/files/sa_documents/Productions%20Approved%20and%20Signed%20to%20Interim%20Agreements%20-
%20Members%20May%20Work%20on%20These.pdf
6 SAG-AFTRA. (n.d.). Interim agreement: SAG-AFTRA STRIKE. SAG-AFTRA Strike, Accessed 8/6/2023. https://www.sagaftrastrike.org/interim-agreement
7 FilmLA. (2023, July 19). Pencils Down, Production Plummets in Year’s Second Quarter. FilmLA. https://filmla.com/pencils-down-production- plummets-in-years-second-quarter/
8 IMPLAN, 2021. Accessed 8/6/2023.