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Hollywood: It's Boffo! : What It Isn't Is a Ticket Out of the Recession


While some key California industries seem to resemble the denizens of "Jurassic Park," the booming movie business might just as well call itself "The Joy Luck Club."

That's because Hollywood is on a roll, boasting growing employment and record revenues that have caught the attention of state labor economists and the Federal Reserve Board. The Fed even noted the industry's vigorous growth in its "beige book" report this week.

But is Hollywood's ascendance enough to pull the rest of the state out of its economic tar pit? Most likely not, say analysts.

"It's a very small positive voice in a chorus of bad news," said Larry Kimbell, director of the UCLA Business Forecasting Project.

In August, movie industry employment in California grew to 139,800, up 9.2%, or 11,800 jobs, compared to a year ago. By contrast, total non-farm employment in the state was down 173,000 jobs from a year ago, to 11.9 million.

The bulk of the industry's job growth is occurring in Los Angeles County, and it is here that the contrast between Hollywood and the rest of the economy is most stark.

In July, county employment in the movie industry was up 11,300 jobs over a year ago, to 102,600. But total non-farm employment was down 76,400 jobs to 3.72 million.

The county's movie industry now has more jobs than the local transportation equipment sector, which saw jobs fall 18.8% to 98,500, or the aircraft industry, which saw employment fall 19.6% to 76,900.

Moreover, because Hollywood draws in money from out of state, it has a pronounced multiplier effect in the local economy, said Ted Gibson, principal economist with the state Department of Finance.

For every two new direct jobs created in the industry, roughly three others are created outside it, he estimated. Many of those ancillary jobs--in fields such as legal and financial services, or as personal trainers or construction workers--pay well.

"No other industry even comes close," Gibson said.

The reasons for the growth vary. One is that the industry has seen boffo box office this year. The year-to-date domestic box office gross is at a record $3.7 billion, up 13% from a year earlier, according to figures published by Hollywood Reporter box office analyst A.D. Murphy. The high figure is due in part to a summer's worth of films that won huge audiences worldwide: "Jurassic Park," "The Fugitive," "The Firm" and "Sleepless in Seattle."

Long-term trends are also at work. The video and foreign market for Hollywood's films has exploded, and cable and pay TV demand for Hollywood's output continues to grow.

The industry is also on an aggressive construction binge to modernize facilities, some of which predate World War II, as Hollywood continues moving into the digital age.

The trade paper Variety recently estimated that studios are spending more than $1 billion on new projects in what it called the biggest construction boom since sound came to films.

Prospects remain bright for increased movie production. "Some of the major studios have already announced significant increases in their annual feature output," Murphy said. "In some cases, this is amounting to a 50% to 100% increase in the number of films they are planning."

But none of this is enough to compensate for job losses elsewhere in the region or the state. Movie industry employment is only a fraction of the total employment in California. And the industry's job growth is far overshadowed by job losses in aerospace, defense, general manufacturing and construction.

"Is the motion picture industry going to be the locomotive that drags us out of the ditch?" asked Jack Kyser, chief economist of the Economic Development Corp. of Los Angeles County. "Probably not. . . . It's a powerful locomotive, but it has a caboose filled with lead in the form of the aerospace industry."

Observers note that Hollywood has gone through previous booms, only to see subsequent busts. Job growth in the industry has already slowed since the beginning of the year.

At the same time, major studios and producers are under continuing pressure to keep a lid on overhead following the free spending of the 1980s. And California faces stiff competition for production work from areas such as Florida and Canada.

Some studios, notably Metro-Goldwyn-Mayer and Orion, have shrunk significantly in recent years because of financial and other problems. Some of that contraction is being offset by the expansion of foreign entertainment concerns such as the Dutch-controlled Polygram and Germany's Bertelsmann.

But expansion at some studios may be constrained because business is soft for parent companies. The worldwide electronics slump and Japan's soft economy, for example, are hurting Sony Corp., the Japanese parent of Columbia Pictures and Tristar Pictures, and Matsushita Electric Industrial, the Japan-based parent of Universal Pictures.

Still, said UCLA's Kimbell, "If we only had a dozen more sectors like Hollywood, the recession . . . might be over."

A Record Year

Domestic box office gross so far this year stands at 2.7 billion, up 13% from a year earlier. A summer of films that won huge audiences worldwide played a key role.

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