Traditionally considered to be in an industry that has the ability to stay away from economic downturns, Hollywood movie studios began to feel pains in 2008 when a credit crunch resulting from the U.S. housing crisis turned into the worst economic recession since the Great Depression.
With almost every sector of the economy being hit hard by the financial crisis as consumers reduced their spendings and companies laid off employees, few industries could remain immune from the deteriorating economic situation, entertainment executives and industry observers said.
Hollywood's major studios have been retrenching their operations in recent months by cutting back production projects and slashing marketing jobs, mainly due to the reluctance of their parent companies to risk more movie investments amid declining advertising revenues and worsening financial conditions.
The entertainment industry in fact has been bracing for massive job cuts since Warner Bros. Pictures, owned by media conglomerate Time Warner, announced laying off as many as 1,000 employees in January in the wake of the 100-day strike by Hollywood writers.
The strike, launched by the Writers Guild of America after the union failed to renew its three-year labor contract with studios through negotiations, had halted the production of many new television drama episodes and delayed some film projects. Some economists estimated the lingering work stoppage cost the industry about 2 billion U.S. dollars in losses.
Although Hollywood has recovered somewhat from the devastating strike almost a year ago, the global credit crunch and economic recession are forcing entertainment companies and movie studios to tighten their belts in preparation for a major slump.
Universal Pictures' parent company NBC-Universal announced earlier this month the layoff of 500 jobs, or 3 percent of its staff, while Viacom, which owns Paramount Pictures, cut 850, or 7 percent of its workforce.
Even before those layoffs, statistics showed that about 23,000 jobs had been cut by U.S. media and entertainment companies as of October this year, nearly two times the jobs lost by the industry last year. The figure represents the worst record since the last burst of the stock market bubble and the Sept. 11 attacks in 2001.
Industry insiders predicted more layoffs by other major studios including Disney and Sony Pictures after they adjust production schedules and finalize budgets for the new year.
Disney announced last week its decision not to co-produce and co- finance the third movie of fantasy franchise "Chronicles of Narnia" with its production partner for budgetary reasons, in a rare move indicating that Hollywood studios are more concerned with cost and effectiveness and trying to avoid high-risk investments.
"The stock market crash and economic recession have affected almost every funding sources for the movie industry, making investors and studios more conservative on new film projects," said a senior executive of a Los Angeles film production company.
However, a good news for Hollywood is that its box office revenues this year will be on par with the record set in 2007, thanks to a number of blockbusters that helped lure consumers into theaters to temporarily escape from the frustrating economic reality.
Warner Bros.' Batman sequel "The Dark Knight," which was released in the summer, became the year's top box office performer with 530 million dollars in North America, the biggest achievement for a Hollywood film in more than one decade after the 1997's "Titanic."
And the ongoing year-end holiday season may prove a happy ending for Hollywood's 2008 despite the gloomy economic landscape,as studios threw a record of five new movies into theaters on the Christmas Day.
The latest box office figures showed that Americans, who reportedly cut their Christmas shopping expenses dramatically, flocked to see escapist fare like "Marley & Me," "Bedtime Stories" and "The Curious Case of Benjamin Button," which have become the three highest grossing films on the Christmas Day in Hollywood's history.