A big opening doesn’t necessarily mean a movie has “legs”—the ability to continue earning high revenues—but we'll know in another few weeks.
Writers’ and Actors’ Strike
The strike by the Writers Guild of America (WGA) that commenced in May, now joined, since July, by the Screen Actors Guild (SAG) and the American Federation of Television & Radio Artists (AFTRA, together “SAG/AFTRA”) has effectively shut down most film and television production in the United States. Some independent films and “reality TV” productions and game shows can continue.Major differences between the WGA and SAG/AFTRA have to do with residuals, the money paid to writers and actors when a film or TV show is replayed on TV or in network reruns or syndication, and the looming threat to writers and artists by artificial intelligence (AI). Both the WGA and SAG/AFTRA fear that scripts could be written by AI and that actors’ images and voices could be replicated in films without compensation for their past work.
I’m sympathetic to the WGA and SAG/AFTRA position—names, likenesses, and original scripts should have protections from free use, not unlike the protections granted copyright or trademarks, in my view. Nevertheless, we aren’t positioned to speak about the merits of the underlying strike issues; we don’t do labor relations. We do economics and business.
Affects a Lot More Than Box Office
The government agencies that track motion pictures and television contributions to the economy are discordant at best, particularly after the pandemic. So much goes into filmmaking that it’s hard to track it all.So-called above-the-line costs include all the expenses incurred before principal photography is commenced; thus, it includes things such as casting, rehearsals, office rents and rent on rehearsal space, legal fees, location scouting, cast and crew recruiting, and so forth. “Below-the-line” costs include all the costs after principal photography begins, so cast and crew salaries, caterers, set building and prop rentals, insurance, and so forth. Then, when principal photography is done, thousands of hours of film are edited; titles, sound, and special effects are added; and the film is prepared for release.
But even then, the film isn’t ready for release.
A whole budget—sometimes equal to the cost of the film itself—is devoted to “P&A,” or Prints & Advertising, with prints (copies of the film, either as reels or digital files) and advertising. That means millions of dollars spent on things such as advertising; movie posters; press kits and junkets; theater standees, which are cardboard free-standing posters of the movie; publicity and public relations; and similar items.
All-in, and given a normal production season, all that can add up to hundreds of billions of dollars. Industry-wide, it’s probably about at least half a trillion dollars to the economy (an old figure from 2015) and a large portion of the U.S. export industry. And that’s to say nothing of the hundreds of thousands of people employed, directly or indirectly, full- or part-time in the movie business and its related industries.
If one digs further into the business model, you can see that motion picture gross receipts are divided between the distributor and the exhibitor, with the exhibitor earning an escalating percentage of the receipts the longer the movie plays. The exhibitor’s share of receipts supports his rent payment for the theater, which, in turn, supports retail spaces such as shopping malls, shopping centers, and plazas. And we all know “brick and mortar” retail space is hurting nowadays.
After a Movie Has ‘Played Out’ in Theaters
So we’ve covered what the industry terms “theatrical distribution,” which encompasses movies displayed in theaters, here and abroad, for a paying audience. It doesn’t consider the hundreds of millions more that distributors earn from nontheatrical distribution, such as movies shown on airlines, ships, or at military bases, hospitals, nursing homes, colleges, and prisons.There are also licensed products that come from movies. My guess is that Mattel’s sales will spike this quarter as boomers introduce Barbie to their grandchildren, just as they introduced their children to Winnie the Pooh and other Disney products and Luke Skywalker and the gang from the “Star Wars” franchise. T-Shirts. Play sets. Lunch Boxes. Backpacks. ... “Fuhgedaboudit” as they say in Brooklyn. Tens of millions more. Producing, distributing, and selling all those products—and keeping others from producing them without a license—adds thousands more jobs.
After all of that, films go on to pay-per-view on cable networks or Amazon; then to pay networks such as Netflix and HBO; basic cable networks such as AMC and Starz; and, finally, to broadcast TV. (While atypical and truly special, it took “Saving Private Ryan” more than five years from its theatrical release in 1994 to air on ABC TV, albeit unedited and commercial-free, on Veteran’s Day in 2001.)
Why It Matters
Films have been part of American culture for more than a century. TV has been part of the average American landscape since the 1950s. They’re as integral to American culture as baseball, Mark Twain, and jazz.For now, I rather enjoy the prospect that bored young people, hungry for something “new,” might revert to something “old” and might choose to see some of the classic films I enjoyed as a young person in theatrical rerelease. Fandango has done that with some old classics, such as “The Sound of Music”; perhaps exhibitors will build on that model. And perhaps younger people might observe and emulate the characteristics—heroism, sacrifice, altruism, and friendship—that were all part of the movies I enjoyed when I was coming up.
Good movies, like the good rhetoric of a Lincoln or Churchill, can move whole societies. So I hope that the dearth of current releases might cause today’s young people to enjoy some old movies, such as “Casablanca,” “The Deer Hunter,” “The Cardinal,” “Advise & Consent,” “The Great Escape,” “Citizen Kane,” “The Third Man,” and “The Man Who Shot Liberty Valance” (or anything else by John Ford)—most of which were made well before Gen X was even born—that I enjoyed as a young person. It might help ameliorate the cultural divide in the United States and, perhaps, better refine the tastes of today’s moviegoers.
But movies and TV are also an enormous part of the U.S. economy, so large, all-in, as to escape a proper calculation of their effect. While the WGA and SAG/AFTRA strike will leave some independent filmmakers free to work and allow foreign films not bound by the union contracts to be distributed in the United States, those aren’t likely to be the “must-see” films we need to put people in seats this year or next. (Next summer’s films should be being developed and filmed right now, but aren’t because of the strike.)
It’s troubling that so little is happening (at least in the public eye) to settle the strike and that the Biden administration seems so apathetic to resolve it. A Google search of news of Gina Raimondo, President Joe Biden’s commerce secretary, and WGA and SAG/AFTRA shows nothing. News of Mr. Biden himself on the issue shows only that he “stands with the unions.” He has done nothing to bring about a settlement.
An ongoing strike could have a substantial deleterious effect on gross domestic product (GDP) and the U.S. balance of payments in the second half of the year and even into the next; perhaps as much as 3 percent of total GDP and maybe as much as 0.5 percent or more of GDP growth.
Hollywood needs to come back and soon, for the good of the economy. (Besides, I’m almost done with the stack of books I’m reading.)
