Entertainment industry pours $47 billion into L.A., economist says

Robert Kleinhenz, chief economist with the Los Angeles County Economic Development Corp., recently spoke with The Times about a new report on the entertainment industry’s effect on the L.A. County economy.

What was the purpose of the study?

We know that the entertainment industry looms large on the world stage and that L.A. is the entertainment capital of the world. We said, ‘Okay, how big is this industry?’ This study was an effort to evaluate the size of the entertainment industry and to measure its impact on the L.A. economy in terms of jobs, income and taxes.

So what did you conclude?

What we found is that despite the loss of business to places around the world, the entertainment industry in L.A. County remains a focal point for the industry around the world, and is also a significant contributor to the local economy. It’s an industry that accounts for not just 162,000 wage and salary jobs, but another 85,000 jobs for freelancers and independent contractors. Taking into account the ripple effect the industry has on other jobs (caterers, florists and so on), the industry supported 586,000 jobs and had an annual output of $47 billion in 2011. That’s equivalent to 8.4% of the county’s annual economic output.

Where does entertainment rank in size compared to other big sectors such as healthcare and trade?

The entertainment industry is the fifth largest sector based on employment (behind health services, business administration services, hospitality and real estate). However, its impact on the local economy is much greater because the films, television programming, and music that are produced here in L.A. are viewed by people throughout the country and the entire world. They generate entertainment-related revenue streams from around the world that supports spending and jobs that otherwise would not exist locally.

What comprises the entertainment sector?

By far the largest category is motion picture and video-related industries. That is followed by the sound industry, radio, television and cable sectors, live entertainment, as well as agents, managers and independent artists.

So how has the entertainment sector fared over the last decade?

If you look at the industry compared to 2001, the number of jobs has increased. Total employment was 16.9% higher in 2011 than in 2001 as the media sector has expanded its offerings and produced more content for existing and new distribution channels, such as mobile and the Internet.

But, as you note in the study, the film and television sector lost more than 16,100 jobs since its peak in 2004. What accounts for that?

Among the reasons are new technology, the recession, which led to a decline in jobs in virtually every sector of the economy, piracy and runaway production.

How much of a challenge is the migration of work to other states and countries?

The local industry has seen a declining share of the business over the last several years at the same time we’ve seen gains elsewhere in the country. For example, in 2005, 82% of all new prime-time TV pilots were shot in L.A. County. By 2011, that had fallen to 51%. We still have quite a bit of downstream support and infrastructure here in L.A. that continues to make it an ideal place to shoot, but we’ve also seen prop houses, sound stages and other support services lured away to other states, so we have to be concerned about that development.

Has California’s film tax credit made much difference?

A separate study that the LAEDC did found that for every dollar in tax credit, the state and local government gets at least $1.06 back (in intial economic impact), so there does seem to be a net positive benefit to the state and local government.

The Legislative Analyst’s Office said your analysis exaggerated the benefits. What’s your response to that?

We used fairly conservative assumptions and the results of our study were very similar to those of another study by the Milken Institute, which also showed there was a net positive benefit. It keeps employment here in California.

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