The Post-Recession Model: Fewer Jobs in Digital Hollywood

The old way of doing business is over, and as more content moves into the stream and the cloud, the industry is getting leaner

Conclusion to TheWrap's series on how the economic crisis is affecting the Industry.

Think the recession was bad? Just wait until Hollywood finishes going digital.

The industry’s rapid transition away from physical products such as film prints and DVDs and toward digital distribution is allowing studios to get by with leaner workforces — a shift that has been both exacerbated and exposed by the recession.

Experts say that the thousands of jobs that have disappeared as the result of the digital revolution and the economic crisis are unlikely to completely return.

"Five years from now, there will not be as much pressure on studios to have as many titles as possible. That will mean fewer people employed in Hollywood, more of whom work in CGI or who are employed on the technical side," Edward Jay Epstein, author of "The Hollywood Economist," told TheWrap.

Also read: Hollywood & the Job Crisis: Just How Bad Is It?

As more and more filmmakers make the transition to digital and away from film, it’s also eliminating the need for the post-production industry of old.

An old way of doing business is vanishing just as rapidly as Hollywood is moving its films and television shows into the digital cloud and streaming.

"Everybody is revising their business model right now … film, TV, advertising," Chris McGurk, CEO and chairman of the digital cinema company Cinedigm told TheWrap.

Even if the economy had continued humming along, some of the carnage was unavoidable.

Also read: The Jobs Crisis: Poor Folk Are Making a TV Comeback

“It’s funny, because the producers and studio executives I talk to don’t bring up the recession,” Patrick Goldstein, a columnist for the Los Angeles Times, told TheWrap. “I think technology is the thing that’s having the huge and disruptive effect. It’s the number one thing impacting all forms of entertainment.”

Indeed, despite sturdy box office performance — especially internationally — and robust television ads sales, the economic downturn of the past three years has caused real economic pain throughout the industry. From the executive suite to the makeup tent, thousands of people lost their jobs. Some have found new positions (frequently for less pay); others have left the business entirely.

Also read: The Jobs Crisis: TV Is Booming — Unless You Work in L.A.

Throughout the past week, TheWrap has documented the stories of the screenwriters, post-production workers, actors and unit production managers displaced by the economic tumult. Some cited the recession as the reason for their current troubles, others mentioned the rise of new ways of doing business as the cause.

All are grappling with a radically altered industry — fewer films are being produced, movies and miniseries on the broadcast networks are something of an endangered species, and studios are slashing their production budgets. Generous back-end deals and multi-year production pacts are rapidly disappearing.

Major studios have also dialed back their once expansive development arms and brought on more producing partners for films, pushing the bulk of the financial risks onto smaller production companies. That has helped studio margins, but over the long run it might discourage investment in the entertainment sector.

“The studios have reduced their risk down to nothing and put all of the risk onto producers, who have to shoulder the costs of developing and producing films,” Kirk D’Amico, president and CEO of Myriad Pictures, told TheWrap. “It’s lopsided, and I don’t see it going back to pre-recession levels.

“There will be fewer producer deals, unless it's with brands like Hasbro, and the ability to make movies will depend on bringing in co-financing,” he added.

As for the once thriving home entertainment sector, the rapidly declining DVD market means that the layoffs in that sector aren’t likely to stop anytime soon.

Studios such as Paramount have already begun to merge their home entertainment, digital operations and licensing divisions, and executives tell TheWrap that they expect many of the other major studios to follow suit.

The jobs that remain will require a skill set that is uniquely different from the one offered by many industry veterans. Older forms of exhibition such as movie theaters aren’t ready to shuffle off this mortal coil, but to survive and thrive today, studio executives must have a firm understanding of everything from tablets to UltraViolet, qualities more likely to be found in Silicon Valley than in Hollywood.

"Distribution may become someone, somewhere, simply pushing a button," said Epstein.

To that end, film schools such as USC are trying to reposition their students for the new economy. Their encouraging rising filmmakers to broaden their horizons beyond making the next “Mean Streets” or “Pulp Fiction,” and to consider working in video games or web video.

“It used to be that to get a foot in the door, you went to work at Warner Bros. or William Morris; now there are lots of new opportunities to pursue,” Michael Taylor, chair of USC’s Division of Film & Television Production, told TheWrap.

“We have people making webisodes and the whole world of music videos and video games that didn’t exist in the same way that long ago.”

But these days breaking into the business might require a longer stint behind the counter at Starbucks or Trader Joe’s before achieving viral video fame.  

Catch up on the rest of the series here.