Hollywood starts '09 with little to celebrate

The fallout from declining local TV ad revenue, weakening DVD sales and diminishing sources of film financing will continue to pound Los Angeles' signature industry, which employs more than 200,000 people and pumps an estimated $20 billion to $30 billion into the local economy.

Many expect that will trigger further layoffs at the studios, networks, independent production outfits and other media companies on top of the thousands of job losses that have already occurred in recent months. Industry executives contend that the steep downturn will force Hollywood to fundamentally change the way it does business.

"You can eliminate all the limos and velvet rope events you want," said former studio executive Marty Kaplan, director of the Norman Lear Center and research professor at the USC Annenberg School for Communication. "But if you're still spending $100 million on pictures that have little chance of being hits, you're in a business that is inherently nuts."

Compounding the angst is the threat of another industry strike, this time by the powerful Screen Actors Guild, which would halt most movie and prime-time TV production and throw tens of thousands of actors, technicians and others out of work. Estimates of how much last year's strike by screenwriters cost the local economy vary widely, from $380 million to $2.5 billion. One study concluded the strike led to the state losing 37,700 jobs tied to the entertainment industry.

"It's not business as usual," said Marc Shmuger, the chairman of Universal Pictures. "We are all facing economic uncertainty, and [2009] is going to be tough. We are deep into a recession. None of us have been here before."

The signs of distress are already evident. In December, Universal laid off 70 executives as part of parent company NBC Universal's move to cut 500 jobs across its business units. The same day, Viacom Inc. shed 850 jobs at its various media companies, including MTV Networks and Paramount Pictures.

Most recently, video game giant Electronic Arts Inc., based in Redwood City, Calif., said it was cutting 1,000 jobs amid declining sales, and New York-based Cablevision Systems Corp. announced it would close its Voom high-definition channels and cut jobs in the unit. Time Warner Inc.'s Warner Bros. and Walt Disney Co.'s ABC are considering similar moves in the first quarter.