Movies such as Dune: Part Two, Challengers, and White Bird are seeing their releases delayed due to the ongoing strikes in Hollywood. Milken Institute Chief Global Strategist Kevin Klowden estimates that the economy will take a $5 billion plus hit from the ongoing strikes. Klowden joins Yahoo Finance Live to discuss his findings.
Klowden says, "the main thing we’re really factoring into it, is the lost wages. But when we talk about lost wages, we’re really not just talking about the salaries and impacts that people are feeling in Hollywood itself, but were feeling anywhere that filming is talking place across the country and in all the industries and all the small business and all the little side elements that combine to actually make what we consider Hollywood possible."
Major companies like Disney (DIS), Warner Bros. Discovery (WBD), Netflix (NFLX), and Amazon (AMZN), are "all getting affected, but we don’t see it as much on their bottom line as we do on the workers and we see it on the general expenditures," Klowden says. Klowden explains that these companies are able to "put off costs right now, but "the catch is" with these delayed movie releases, "their ability to get the revenue back to be able to get their expenditures back becomes harder and harder, and they forego revenues and they forego any ability to easily snap back out of this strike the longer it goes on."
BRAD SMITH: Key issues between Hollywood writers and studios still linger as the strike heads into its fifth month, with "Dune-- Part Two" being the latest to push back its release date. Our next guest is warning of a $5 billion-plus hit to the economy as more delays pile up. Kevin Klowden, who is the Milken Institute Chief global strategist joins us now alongside Yahoo Finance's Alexandra Canal. Kevin, great to have you here with us on this. First, perhaps, we start at the top here. When we think about the economic impact here, what is all being factored into that?
KEVIN KLOWDEN: Well, the main thing we're really factoring into it is the lost wages. But when we talk about lost wages, we're really not just talking about the salaries and impacts that people are feeling in Hollywood itself, but we're feeling anywhere that filming is taking place across the country and all the industries, and all the small businesses, and all the little side elements that combine to actually make what we consider Hollywood possible. That means trailer rentals, that means dry cleaners, that means restaurants, that means catering companies, that means construction, that means trucking, that means all sorts of different factors, and all of them are being affected right now. And even if the concentration is in LA, it's in New York, it's in Atlanta, it's in Albuquerque, it's in Pittsburgh, it's in Chicago, and in a number of different places where filming actually takes place.
ALEXANDRA CANAL: So, Kevin, I want to focus on that $5 billion projection. Within that, what industry or company, what will be the biggest laggard in dragging down that projection?
KEVIN KLOWDEN: Well, the biggest thing right now is it's no one company. Obviously, the majors factor in more than anything else. So Hollywood's been very heavily concentrated in terms of production activity. So anybody who does film and TV, who does a large number of different productions-- so say Disney is a classic example of that, Warner Brothers, Universal, and even at this point, given the role they're playing, Netflix and Amazon increasingly become significant, even Apple-- they're all getting affected, but we don't see it as much on their bottom line as we do on the workers and we see it on the general expenditures. And the reason is that they can put off costs right now. The catch is that, as you were mentioning with "Dune Part-- Two," is that as they delay movies, that means their ability to get the revenue back to be able to get their expenditures back becomes harder and harder, and they forego revenues and they forego any ability to easily snap back out of this strike the longer it goes on.
RACHELLE AKUFFO: We're at a time right now, Kevin-- this is Rachelle, by the way-- where obviously 65 years ago when we had a strike like this, you didn't have streaming services, you didn't have as much reality TV. So how does that really change the landscape of what we might see happen next with these negotiations and how far apart they are?
KEVIN KLOWDEN: Well, the big thing that you're dealing with right now that's different than 65 years ago is that the cost of living issue in Hollywood was not a problem 65 years ago, it certainly is now, it is in New York, it is everywhere. And that's a major driving factor, just simply being able to maintain the middle class as opposed to the studio system, which paid people a set amount on a regular basis each month. And people knew what was coming next, and they don't know, and that's the pressure everybody is facing. But the big distinction between now and say when the major strike last happened in 1960 is that it's all about where's the revenue coming from next. In 1960, the existential threat had become television, now it's about streaming. What happens next in terms of where is the streaming money coming from? Because streaming doesn't pay as well, not only for the companies but for the people working in it, as what we saw with DVD sales, what we saw with broadcast television, and so on.