As 2024 came to a close, those within the entertainment industry leaned on the phrase ‘persevere until 2025’, a sardonic recognition of the industry troubles and a hope for improvement in 2025. Today, four months into the year, a trickle of optimism remains, including the impressive success of A Minecraft Movie at the box office and legacy companies beginning to profit from streaming services. However, the industry still faces many hurdles – production remains low, general industry morale has deteriorated, and the introduction of the Trump tariffs in April has only increased concerns in Hollywood.
A small relief was felt when recent import taxes were eased hours after their introduction, but the prevailing tariffs still present a significant financial problem for the entertainment industry, which is trying to regain its footing after years of challenges. These tariffs impose indirect economic burdens on Hollywood, as projects filmed overseas and roles offered to British and Australian actors in American shows aren’t directly taxed; the knock-on effect of the tariffs is the actual concern.
In response to these fiscal challenges, companies have started initiating new strategies. Reports on Wednesday suggested that companies are advising their employees to stop all nonessential travel, cut back on overtime and freeze superfluous costs, following confirmation by two sources from within the industry.
If the only consequence of the Trump tariffs was a decrease in extravagant business lunches, Hollywood would be less apprehensive. The industry is racing to grasp the potential implications of the tariffs, and how they might lead to industry-wide complications. The White House’s rollback of some tariffs does little to quell fears of a potential economic downturn this year or in 2026. Such a recession could significantly impact media companies dependent on advertising.
An industry veteran has shed light on the imminent threat to marketing and advertisement in times of financial instability. The cascading effect of decreased ad sales requires the entire company to pull in their resources further. According to financial analysis firm MoffettNathanson, a recession could lead to an estimated loss of $45 billion in U.S. ad spend against current forecasts. Online advertising would bear the brunt of this loss, followed by television ads.
All areas of production will feel the pinch of the tariffs, as the increased cost of materials and resources will drive up overall expenses. For example, one television industry veteran believes the increased cost of company vehicles in the pharmaceutical industry might be paralleled by greater expenses in set building or personnel transportation in film production. While the specific cost increases are yet to be seen, professionals across the industry are bracing for impact and beginning internal dialogues about potential complications.
As Hollywood doesn’t directly export goods targeted by Trump’s tariffs, the economic issues will stem from increased costs in virtually all areas of production. For instance, the rise in lumber costs will impact expenses for set building, and similar cost increases could occur for wardrobes, special lighting, and tools manufactured abroad. Additionally, there are ongoing concerns about the depreciating U.S. dollar, particularly for companies filming overseas to take advantage of tax breaks.
Deviations in global currency exchange rates due to the weakening dollar could challenge financial planning for overseas productions. An industry insider also hinted at the possibility that countries affected by America’s trade war might indirectly retaliate against Hollywood. For example, some governments already mandate that American platforms spend certain portions of their budgets on shows made domestically. The current hostility may increase these local content spend obligations for streaming platforms, although this could potentially have positive impacts on content diversity.
While the revenues generated from products subject to Trump’s tariffs represent a small portion of entertainment companies’ finances, they still make a difference. For instance, devices used for movie and TV show streaming may become more costly depending on their country of origin. The manufacturers often sell these devices at near-cost, profiting from advertising revenue and data collection, rather than hardware sales. Nonetheless, the tariffs will almost certainly push the retail prices up.
Licensing deals with product manufacturers can also generate significant revenue for entertainment companies, such as from apparel, games, and a myriad of other products based on popular media franchises. With the increase in production costs due to the tariffs, these revenues could also potentially decrease. For instance, a collectible toy or a jacket from a popular show, likely sourced from China, would become more expensive to produce.
Hollywood is not without some optimism, despite the frustrations and uncertainties the tariffs have brought. Historical evidence suggests that despite an economic downturn, streaming platforms might not suffer a drop in subscribers. Rather, consumers who are tightening their budgets are more likely to cut entertainment expenses that require leaving the house, choosing instead to stay in and stream shows or movies.
During financial difficulties, people look for areas where they can save money and they often prioritize home entertainment over other types of spending. This trend has been noticed since the 2008 financial crisis, wherein streaming platform subscriptions saw a significant increase despite the overall reduction in household expenditures.
Despite predicting a gloomy outcome due to a potential recession, MoffettNathanson’s reports were relatively upbeat about streaming services like Netflix. Their analysis suggests that Netflix, due to its subscription-based model and the optimistic visibility of its growth, might fare better than its counterparts.
It’s necessary to remember that these outcomes are based on worst-case scenarios. The economy might evade the predicted recession, rendering these potential problems moot. While the media industry stock rallied up on Wednesday by up to 20%, the certainly from Washington remains as volatile as ever. Drawing on recent political trends, a streaming executive commented on the haphazard changes made to tariffs without any concrete game plan, implying the unpredictability in handling these issues.
The post Optimism Amid Recession: Hollywood’s Fight with Trump Tariffs appeared first on Real News Now.
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