Los Angeles, CA – May 1, 2025 – A new analysis from the Milken Institute paints a concerning picture for California’s dominance in the entertainment sector, revealing that the state is losing ground relative to the broader U.S. market. The report, published today, highlights a notable slowdown in the overall American entertainment industry, but underscores that the decline is accelerating at a faster pace within the traditional hub of Hollywood and across California.
The findings indicate a palpable decrease in California’s historic share of both U.S. entertainment output and employment. This trend is exerting pressure on various facets of the industry, ranging from major studio profits to the stability of employment for workers and the viability of small businesses that rely on the ecosystem.
Understanding the Shift
The report details how California, long synonymous with filmmaking and television production, is facing intensified competition and fundamental shifts in how content is created, distributed, and consumed. While the U.S. entertainment sector as a whole has experienced headwinds, California’s position appears particularly vulnerable.
The erosion of the state’s market share has direct consequences. Major studios are re-evaluating production locations based on economic factors, leading to a potential decrease in investment within California. For the workforce, the decline translates into fewer job opportunities and reduced hours. The network of small businesses, from equipment rentals and catering to visual effects houses and sound stages, also faces diminished demand.
Drivers of the Downturn
The Milken Institute identifies several key factors contributing to this worrying trend.
Chief among these is the transformative rise of streaming services. While streaming has reshaped content delivery, the report notes that its revenue models have not consistently matched the stable, predictable revenues historically generated by traditional media formats like theatrical releases, broadcast television, and physical media sales. This financial uncertainty can impact production volumes and budgeting.
Adding to the pressure is the burgeoning competition from a new generation of online platforms. Giants like YouTube, TikTok, and Twitch have created alternative avenues for content creation and distribution, often operating with lower overheads and different economic structures than traditional studios. These platforms compete not only for audience attention but also for talent and advertising revenue.
Furthermore, the persistently high real estate costs and overall cost of doing business in California remain significant disincentives for production companies. These expenses, exacerbated by the lingering economic effects and operational disruptions caused by the COVID-19 pandemic, make other states and countries with more favorable economic climates more attractive for filming and production activities.
The Data Illuminates Challenges
The report substantiates its analysis with compelling statistical data illustrating the impact on California’s entertainment workforce.
Average weekly hours for California entertainment workers have seen a significant contraction, decreasing by 5.6% since 2018. More alarmingly, the period between 2022 and 2023 witnessed an even sharper decline of 11.9% in average weekly hours, reflecting a rapid deterioration in work availability.
Similarly, employment figures highlight a contraction in the state’s entertainment job market. Between 2019 and 2023, entertainment jobs in California fell by 11.7%. The most recent data shows an even steeper decline, with jobs decreasing by a dramatic 24.8% between 2022 and 2023, indicating a recent acceleration in job losses within the sector.
A Proposed Path Forward
In response to these challenges, the Milken Institute report puts forward a specific policy recommendation aimed at bolstering California’s competitiveness. The report suggests increasing the California tax credit budget dedicated to the entertainment industry.
Specifically, the recommendation calls for boosting the annual tax credit allocation to $750 million. The rationale behind this proposal is that a more robust tax incentive program would make California a more financially attractive location for film, television, and other entertainment productions, encouraging companies to film and produce within the state rather than elsewhere.
Projecting Economic Recovery
The report projects that implementing this recommendation could yield substantial economic benefits for California. According to the analysis, increasing the tax credit budget to $750 million annually is expected to generate $4.99 billion in additional total output for the state economy.
This projected output gain stems from the direct spending by productions attracted by the tax credits, as well as the indirect and induced economic activity generated throughout the state’s supply chains and by worker spending. The goal is to reverse the trend of declining output and employment by making California a more cost-effective place to produce world-class entertainment.
In conclusion, the Milken Institute’s report serves as a stark warning about the challenges facing California’s foundational entertainment industry. It highlights how shifting media landscapes, new competitors, and high local costs are eroding the state’s long-held dominance. The proposed increase in the tax credit budget represents a potential intervention, aiming to inject billions back into the state’s economy and help restore stability and growth to an industry critical to California’s identity and prosperity.
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