Hollywood is preparing for a recession, what does that mean for movies and TV?

To borrow a phrase from the poet Carl Sandburg, it seems that the ongoing economic slowdown is creeping into the United States at the feet of kittens.

Everyone from Jeff Bezos to Gwyneth Paltrow is talking about the potential for a deepening Recession, where the Amazon founder advised Twitter followers on October 19 to tighten the screws, and Goop’s CEO admitted to worrying late-night about the economic outlook a few days earlier. Technically speaking, the US economy entered recession in the middle of the year, after the second consecutive quarter of decline in GDP. But the economy has rebounded in the past in the wake of such dips, leading some to say we’re not in a recession yet. The cup half-full crowd points to low unemployment even amid rising inflation as an indication that we’re not in such dire straits.

A major signal will arrive on October 27 when the Commerce Department releases its preliminary report on third-quarter GDP activity.

The financial slowdown comes at a perilous time for Hollywood, which is already grappling with rising prices for content production for broadcast services and a theater market that has yet to recover from the pandemic. The question on many observers’ minds: How bad will a recession be for the entertainment industry?

As consumers have less money to spend on discretionary items, Hollywood will certainly have to adapt, especially in light of the recent direct-to-consumer construction boom. There are indications that wire-cutting could accelerate and that consumers will be giving up some streaming service subscriptions because they feel tight in their wallets.

Says CJ Bangah, Director of Technology, Media & Communications Customer Transformation Consulting at PwC US

In many cases, this work has already begun. Discover Warner Bros. Promising to create $3 billion in savings as it operates under a mountain of debt, this week The Telegraph will include between $3.2 billion and $4.3 billion in pre-tax restructuring fees related to the giant’s merger, while Netflix cut programming spending and instituted layoffs after it Its shares fell after a weak earnings report last April.

“We were already experiencing severe deflation even before the inflation and recession hit,” says Tom Noonan, the Academy Award-winning producer of “Crash” and a lecturer at UCLA’s School of Theatre, Film and Television. “Big bloated companies might use this as an excuse to do more cutting, but the process was already happening.”

Advertising, as always, is a major economic factor. But the yo-yo market of the past few years has upset the usual forecasting models. The Standard Media Index, a tracker of advertising spending, has recorded a year-over-year decline in US ad spend since June. Filip Krakowski, CEO of the Interpublic Group, told Wall Street analysts last week that advertisers were concerned about the next quarter and urged ad buyers to proceed cautiously with their campaigns.

“The majority of our clients now require us to engage in this kind of contingency planning, prioritizing activity, and focusing on actions that will drive performance,” Krakowski said. However, recent forecasts call for growth. GroupM, the media buying giant owned by WPP, forecast in June that ad spending in the United States would grow 9.3% in 2022, and has not rolled back that forecast, according to Kate Scott Dawkins, the company’s global director of business intelligence. .

“Our base case in the United States is still unclear as to whether or how deep we are in a recession,” says Scott Dawkins.

GroupM has already seen a slowdown, including among major auto marketers. Scott Dawkins says the sector has “not fully returned to normal” after the pandemic.

During the initial sales market earlier this year, many media companies tried to collect as much ad spend as possible, choosing to offer concessions in advertising prices in the hope of attracting buyers. There is some question as to how much ad currency Madison Avenue has left after introductions to support a wide range of ad-supported streaming projects.

“Broadcasting is a relatively inexpensive entertainment option,” says Kevin Westcott, head of technology, media, and telecommunications at Deloitte in the US. Consumers may spend less on getting out of the house—going to dinner, going to the movies. The number of minutes shown on broadcasts will likely go up, and that increases the value of ads on those services.”

The theatrical film industry has long proven to be extraordinarily resilient when it comes to economic downturns. In fact, over the past eight stagnations, the box office has increased sixfold and the number of admissions has increased fivefold.

“Even during tough times, people just don’t stop doing things,” says Patrick Corcoran, vice president and chief communications officer for the National Association of Theater Owners. “They are just looking for cheaper options. And that often goes to the cinema instead of concerts or other things.”

But theaters face other issues. The pandemic has slashed ticket sales and prevented studios from producing the same number of films before COVID, leaving exhibitors without enough compelling films to show. Ticket sales are down nearly 35% from 2019 — the last year before the pandemic — and much of the entertainment industry’s attention has shifted from making global blockbusters to creating content for the streaming services these companies believe represent their future.

Eric Johnson, faculty director in the Center for Media, Entertainment and Sports at UCLA Anderson School of Management, believes that violent stream wars will only get fiercer.

“If you’re not one of three or more big clients, the cost of acquiring new clients or trying to manage disruption can become exceptional,” he says.

Todd Spangler and Diane Jarrett contributed to this report.

Leave a Comment