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Hollywood faces uncertain economic outlook: study

Posted on: Tuesday, 29 November 2005, 17:02 CST

LOS ANGELES (Reuters) - Hollywood faces uncertain prospects for jobs and growth in 2006 due to slowing DVD sales, the loss of local film and television production and looming labor talks, according to a report issued on Tuesday.

The report from the Los Angeles County Economic Development Corp. projected that growth in local entertainment industry jobs would begin to moderate in 2006 after solid growth this year. There are currently about 249,000 people employed in the entertainment industry in Los Angeles County, the report said.

"People see this as an industry that's very glamorous and exciting, but it's an industry that's going through some major inflections," said Jack Kyser, chief economist of the LAEDC.

One studio, Warner Bros., has already cut 450 jobs, or almost 6 percent of its worldwide work force.

In recent years, the studios have relied on the booming DVD market to increase revenues. But DVD sales, which reached $15.2 billion in 2004, are only $10.2 billion so far in 2005, according to a Standard & Poor's study used by the LAEDC.

Adding to industry woes, movie ticket sales and box office admissions in 2005 have also slipped, a downturn blamed on poor films, the high cost of going to movies and competition from video games.

California also faces competitive pressure for film and TV production from other U.S. states, Canada and other countries that have offered tax incentives to lure producers.

The piracy of copyrighted material and the disruption caused by emerging technologies, such as downloading and streaming content to computers and handheld video players, also present challenges to the industry, the report said.

The movie industry also faces a new round of union contract talks in late 2006 and subsequent years.

But Kyser noted that original content still drives sales of all the entertainment products and Hollywood is still where most of that content is created.

The study also points out that hit TV shows such as ABC's "Desperate Housewives" have caused a resurgence in programs using many writers, directors and actors as opposed to the reality TV series that often have fewer staff and are waning in popularity.

"Content will still be king, although it may come in many new guises. And the Los Angeles area is well positioned to create this evolving content," Kyser said.

The LAEDC is a non-profit group created to help attract, retain and boost business and jobs in Los Angeles County.

Hollywood's major studios are owned or operated by media conglomerates, including Time Warner Inc., The Walt Disney Co., Viacom Inc., News Corp., General Electric Co. and Sony Corp..

Reuters/VNU

Source: REUTERS

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