2010 Entertainment & the Media in Los Angeles Jack Kyser Nancy Sidhu Ph.D. Kimberly Ritter LAEDC Kyser Center for Economic Research 1/20/2010 EEEnnnttteeerrrtttaaaiiinnnmmmeeennnttt aaannnddd ttthhheee MMMeeedddiiiaaa IInn Los Angeles January 2010 Prepared by: Jack Kyser Nancy D. Sidhu, Ph.D. Kimberly Ritter Ferdinando Guerra LLooss AAnnggeelleess CCoouunnttyy EEccoonnoommiicc DDeevveellooppmmeenntt CCoorrppoorraattiioonn KKyysseerr CCeenntteerr ffoorr EEccoonnoommiicc RReesseeaarrcchh 444 S. Flower St., 34th Floor Los Angeles, CA 90071 Tel: (213) 622-4300 or (888) 4-LLAEDC-1 Fax: (213)-622-7100 E-mail: [email protected] Web: http://laedc.org The LAEDC, the region's premier business leadership organization, is a private, non-profit 501(c)3 organization established in 1981. As Southern California’s premier business leadership organization, the mission of the LAEDC is to attract, retain, and grow businesses and jobs for the regions of Los Angeles County. 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Global Connections The World Trade Center Association Los Angeles-Long Beach works to support the development of international trade and business opportunities for Southern California companies as the leading international trade association, trade service organization and trade resource in Los Angeles County. It also promotes the Los Angeles region as a destination for foreign investment. The WTCA LA-LB is a subsidiary of the Los Angeles County Economic Development Corporation. For more information, please visit www.wtca-lalb.org © 2010 Los Angeles County Economic Development Corporation www.laedc.org 444 S. Flower Street, 34th Fl., Los Angeles, CA 90071 E: [email protected] T: 213.622.4300 F: 213.622.7100 T H HE EADLINES The Entertainment and Media Industries in Los Angeles Major Trends (cid:1) Content is king! Owning content is becoming more important versus simply distributing it (cid:1) Consolidation in the entertainment and media industries will continue through 2010 (cid:1) Consumers are insisting on increased mobility; they want to take their content with them (cid:1) Information may want to be free, but media companies are stepping up efforts to charge for access to their services (cid:1) The use of digital media will continue to grow across all demographic groups (cid:1) 2009 was the worst year for the advertising industry in decades – 2010 looks a bit brighter By The Numbers (cid:1) Entertainment and Media Employment in Los Angeles County • In 2008, the entertainment industry cluster employed 141,400 workers – employment grew by +31.3% since 2001 and by +0.4% compared with 2007 • Combined, the media industries (broadcast and cable TV, radio broadcasting, and newspaper and magazine publishing) employed 29,900 workers in 2008 – this represented a total decline of -10.9% since 2001 and a decline of -3.5% compared with 2007 • The advertising industry employed 20,100 people in 2008 – industry employment was up by +2.1% since 2001 and by +2.7 compared with 2007 • Entertainment, media and advertising industry employment, combined, dropped by at least 12,000 jobs (-6.0%) in 2009 (cid:1) In 2009, domestic box office receipts totaled $10.7 billion, a new record level (cid:1) DVD spending (sales and rentals) totaled $21.4 billion in 2009, down from the 2004 peak of $24.9 billion (cid:1) Los Angeles County had a 45% share of total U.S. entertainment employment in 2008 (cid:1) Viewership for L.A’s largest TV stations dropped in 2009 after a strong 2008 (cid:1) Local radio stations generated more than $1 billion in ad revenue in 2008, but ad sales were down by -12% compared with the prior year (cid:1) The Los Angeles Times is the fourth largest newspaper by circulation (657,000 daily) in the country behind the Wall Street Journal, USA Today and the New York Times. (cid:1) Newspapers across the nation are bleeding print readers, ad revenues and employees TTaabbllee ooff CCoonntteennttss I. The Entertainment Industry in Los Angeles ............................................................ 1 Introduction ............................................................................................................................. 1 Some Numbers and Some Comments ............................................................................................ 2 Tracking Film and TV Production in Los Angeles ..................................................................... 3 Employment Trends ................................................................................................................. 4 Overall Economic Impact ......................................................................................................... 7 The Challenges ......................................................................................................................... 7 Some Thoughts about the Future of Filmed Entertainment in Los Angeles ......................... 10 II. Media and Advertising in Los Angeles .......................................................................... 13 Introduction ........................................................................................................................... 13 Broadcast and Cable Television ............................................................................................. 14 Radio Broadcasting ................................................................................................................ 21 Print Publishing ..................................................................................................................... 25 Newspaper Publishing ....................................................................................................... 25 Magazine Publishing .......................................................................................................... 34 Advertising ............................................................................................................................. 40 III. Summing Up ............................................................................................................................. 44 Appendix ........................................................................................................................................... 47 Index of Figures ................................................................................................................................. 58 This report was produced by the LAEDC Kyser Center for Economic Research team: Jack Kyser, Founding Economist Dr. Nancy D. Sidhu, Chief Economist Kimberly Ritter, Associate Economist Ferdinando Guerra, Associate Economist TThhee EEnntteerrttaaiinnmmeenntt IInndduussttrryy iinn LLooss AAnnggeelleess A high glamour quotient – a major change in the business environment IInnttrroodduuccttiioonn Entertainment is the best-known industry in of Los Angeles, including Century City and Los Angeles. In fact, many people think of it Culver City. Other pockets of entertainment as the only industry in Los Angeles. It is also activity around the County include Santa very misunderstood. Most see only the Clarita, which has several rental sound stages, glamour, thanks to awards shows on TV and Raleigh Studios in Manhattan Beach, and Los the glossy magazines at supermarket Angeles Center Studios in downtown Los checkout stands. They do not understand Angeles. how the entertainment industry really works nor do they understand the momentous Six major studios produce feature films and challenges it faces. Worse, economic TV series, and they all are part of media information for the industry is incomplete. conglomerates. The latter have rather Many workers in the industry are diverse business portfolios. The majors are independent contractors and are not counted Fox (part of News Corp.), NBC Universal (soon by government statisticians. Also, since there to be co-owned by Comcast as well as GE), are a small number of large entertainment Paramount (part of Viacom), Sony Pictures firms, government agencies are careful not to Entertainment (part of Sony Corporation), disclose any critical information, so Walt Disney, and Warner Bros. (part of Time sales/receipts data are not reported well. Warner). Local assets for the film industry include the There are also some smaller film companies, large crew base, plus all the support activities. such as DreamWorks Animation, Lionsgate, There are also several film schools in MGM, and the Weinstein Company (TWC). In Southern California. In addition, many addition, the “new” DreamWorks has re- “looks” are available right in the industry’s established itself as an independent film back yard; i.e., Long Beach subbing for Miami production company. DreamWorks will Beach (as in CSI Miami), or Downtown Los remain based at Universal, though Disney will Angeles subbing for “anywhere USA” in auto distribute its films. CBS, sister company to commercials. Viacom, is going to start producing feature films. While people may think the industry is centered in the community of Hollywood, one There are always rumors about possible of the largest concentrations of production mergers in the entertainment industry. This activity is in the southeast San Fernando pot was stirred by Disney’s recent acquisition Valley, which includes the Burbank-Universal of Marvel Entertainment. Another dramatic City-Studio City corridor. Then there are the example is the pending acquisition of a communities of Hollywood and the Westside controlling interest in NBC Universal by cable The Entertainment Industry in Los Angeles giant Comcast. Also important is the future of i.e., “going to the movies”). We consider MGM, as the studio is beset by financial these below after a review of the facts. problems. SSoommee NNuummbbeerrss aanndd SSoommee CCoommmmeennttss Many people have the impression that the studios’ revenue comes only from theatrical Box office receipts: Domestic box office distribution (both domestic and receipts moved to a new high level in 2008 of international). However, they have multiple $9.8 billion. Last year (2009) started strong – revenue streams, including DVD and TV double-digit gains over the year – but (cable, pay-per-view, video on demand, etc.). dropped back to a +9.2% advantage over the There is also merchandise tied into movies, previous year. This pushed the total well over with Disney the acknowledged master at this. $10 billion, a new record level. In addition, some studios have video game divisions. Worldwide Box Office Receipts Currently, there is some confusion about the Domestic International $Billions health of the industry. While the Sunday r(piswee phosotipcrrluhteig nhgwgal ievnroegef . thuTdepho eimmi neipn srd2tei0ucs0s st9irbo)yo n’sxi st hlaopabfotf ositcirhte iev p eirrn,oe dbcmuelesiapmtnrtyyss $6.2 $6.8 $7.3 $7.5 $8.1$8.6 $9.3$10.5 $9.2$10.9 $9.2$15.7 $8.8$14.3 $9.1$16.3 $9.6$17.1 $9.8$18.3 $10.7$19.6 receive lots of headlines; the national recession has hammered advertising revenue, and run-away production (from Los Angeles) Source: MPAA is a constant threat. In the last few years, Figure 1 most studio specialty divisions were dismantled and the number of films released International box office receipts (outside the by the major studios declined. All of this has U.S.) also moved to a new high level of $18.3 resulted in some job losses and has generated billion in 2008. Hard numbers are not yet a lot of stories about the “crisis” in the movie available for 2009, but anecdotal information business. The local sub-text is whether Los points to a solid gain, matching the ‘07/’08 Angeles will remain a center for the gain of +7.1%. entertainment industry. International box office has become quite Certainly, the entertainment industry faces important to the film industry, with some formidable challenges, which are upending films doing better abroad than domestically. long-standing business practices. Some of the Foreign release dates are chosen to maximize challenges are due to the rapid changes in results and now may occur before the U.S. technology; others are due to the release date. Also, ad campaigns are tweaked globalization of the film business. Finally, to account for foreign sensibilities (U.S. there are changes in the way people consume comedies often do not travel well). Russia is entertainment (either when they want it or proving to be a lucrative market for U.S. made where they want it, or in a social context – films. China is felt to offer great potential, LAEDC Kyser Center for Economic Research | Entertainment & the Media in Los Angeles 2 The Entertainment Industry in Los Angeles but access to this market is still limited Not all DVDs are films that have been shown despite a recent WTO ruling. in theaters. There is a sizeable “direct-to- video” business. Some of these are sequels International Film & Television to theatrical releases, produced at a lower Tape Rentals * cost than a theatrical film. Others are films specifically crafted for DVD. Producers of $Billions $12.8 $14.4 $13.6 irnedleeapseen, daesn ti t miso vcioens sliidkeer etod haanv ein ad itchaetiaotnri coafl $4.3 $4.7 $5.0 $5.9 $7.1 $8.1 $8.6 $8.8 $9.3 $9.8 $10.4 $10.1 qnuewalsitpya pe(pr)e. ople notice the ad in the DVD Spending - Sales & Rentals Source: U.S. Dept. of Commerce, Bureau of Economic Analysis $Billions Figure 2 $24.9 $24.4 $24.5 $23.7 $20.7 $22.2 $22.4 $21.4 *Note (1): Film and Television rentals cover the $17.9 rights to display, reproduce and distribute U.S. $14.3 motion pictures and television programming abroad. These numbers do not necessarily correspond to foreign box office totals. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Digital Entertainment Group Not all of the reported box office receipts go to the studios. They are shared with theater Figure 3 operators, based on a sliding scale. The longer a film plays in a theater, the better for the studio. TTrraacckkiinngg FFiillmm && TTVV PPrroodduuccttiioonn iinn LLooss AAnnggeelleess DVD sales: DVD revenue is quite important This can be difficult, but is important given to the film industry, as it represents the the size of the industry and the commotion largest share of pure profit. DVD sales have over run-away film production. One indicator softened in recent years since it is a mature is the number of on-location production days platform, but rentals are still fairly strong. (away from the studio lot). These data are Total DVD spending actually peaked back in gathered by FilmL.A., which coordinates 2004 at $24.9 billion. Blu-ray initially did not location filming in the city of Los Angeles; perform as strongly as hoped, but seems to unincorporated areas of Los Angeles County; be gaining traction. Currently, the rental the cities of Diamond Bar, Industry, Lancaster, segment is being powered by Netflix and Palmdale and South Gate; the Angeles Redbox kiosks, though reaction to the latter is National Forest, and the Los Angeles Unified mixed. Some studios think inexpensive and Burbank Unified school districts. While rentals will take away from DVD sales, this data set does not capture all the location especially in a soft economy. In any event, all filming activity in the area, it does provide a studios are reviewing strategies to revitalize measure of overall activity as well as trends or protect the DVD business. by film type (feature, TV, etc.). LAEDC Kyser Center for Economic Research | Entertainment & the Media in Los Angeles 3 The Entertainment Industry in Los Angeles increases in the third and fourth quarter of the year. The Bunker Hill area of Downtown On-Location Film Production Los Angeles remained a popular spot for auto Days by Type commercials (hills and swooping ramps). 60 Production Days, 1000s 50 EEmmppllooyymmeenntt TTrreennddss 40 30 The official employment numbers for this 20 industry cannot hope to capture all of the 10 0 jobs associated with it. The Quarterly Census 1993 1995 1997 1999 2001 2003 2005 2007 2009 of Employment & Wages (QCEW) provides Feature Films Television Commercials Other the most detailed data, but there is a time Source: Film LA lag. Sectors included in our count are: motion Figure 4 picture & video production; motion picture & video distribution; post production & other According to FilmL.A., total on-location related activity; sound recording; production activity peaked in 2006 at 55,399 independent artists, writers & performers; days. The total includes feature films, TV, and their agents & managers. commercials, music videos and other assorted activities. There have been shifts in location Entertainment Industry Employment in activity for the three major categories. Los Angeles County Feature film activity reached a high back in 1996 at 13,980 days. Since then, on-location 160 Employment, 1000s 140 filming has shrunk to just 4,976 days in 2009. 120 According to FilmL.A., this was a low point for 100 on-location feature film production in Los 80 Angeles 60 40 20 Location activity for TV reached a new high of 0 2001 2002 2003 2004 2005 2006 2007 2008 25,277 on-location days in 2008. However, in 2009 it fell by -16.6% to 15,933 production Source: EDD LMID ES202 days. There have been shifts in the type of TV Figure 5 production. Reality TV shows had recorded major gains in 2008, but activity dropped off in 2009. “Reality” is a misnomer, as this type According to this data set, 141,400 people of show has a predetermined story line. worked in Los Angeles County in the industry Unfortunately, these productions do not yield during 2008. The all-time peak employment as much in employment as a scripted series. according to the QCEW was in 1997, when there were 148,600 jobs. However, 2004 On-location production of commercials in Los came to a close with 147,500 jobs. For 2009, Angeles peaked in 2005 at 6,983 days. Since a decline of about 9,000 jobs is forecast. A then, activity has eased, reflecting the woes modest gain in entertainment employment is of the advertising industry. 2009 saw a - expected in 2010, reflecting the absence of 12.0% decline. However, FilmL.A. noted labor issues, the impact of California’s film LAEDC Kyser Center for Economic Research | Entertainment & the Media in Los Angeles 4