The entertainment capital of the world finds itself in an unprecedented existential crisis, as artificial intelligence, labour conflict and international competition converge to challenge the century-long reign of Hollywood over global filmmaking.

For generations, Hollywood's brand provided a quasi-religious experience; the gargantuan studio lots and the iconic boulevard are synonymous with the magic of film. Today, however, this industry is being tested by an extraordinary convergence of technological disruption, labour strife and alarmingly competitive conditions both domestically and abroad, that could fundamentally alter Hollywood's position as the centre of the entertainment world.

Like Detroit believed it had a monopoly on manufacturing cars, Hollywood too thought it would never be beaten as the entertainment capital of the world, but this belief is being challenged by forces much larger than its borders of Los Angeles County; they are forces preparing to disrupt, as evidenced by labor boycotts that have followed a pandemic economic collapse and new technology that threatens to replace jobs of even the most creative and visionary filmmakers.

This article explores the effect of artificial intelligence and how it's threatening the very fabric of Hollywood.

The Numbers Don't Lie: A Production Exodus in Progress

The statistics provide a troubling view of an industry in decline. FilmLA's comprehensive 2024 Production Report noted that the number of Los Angeles film shoot days fell by a shocking 35 per cent year-over-year since 2019, with television production, down almost 50 per cent, faring even worse. Not just a brief downturn, this highlighted some profound changes to how and where television and film content is made.

The 2024 filming year was the second-worst in recorded history for Los Angeles, with only 23,480 shoot days accounted for, a performance only worse than the pandemic-influenced 2020 year. Even more frightening is the early 2025 data, which highlights an accelerated decline, projecting first-quarter production down another 22.4 per cent year-over-year from 2024. Regardless, sound stage occupancy, often a reliable indicator of health in the industry, has fallen from the usual 90 per cent range between 2016 and 2022, down to a shocking low of 63 per cent in 2024.

These figures are more than just statistical abstractions; they represent a fundamental geographical shift of an industry that has defined Los Angeles for over one hundred years. As one industry analyst said, "What we've seen tragically, in the last few months, is some of the lowest levels of production we've seen". The repercussions extend far beyond entertainment, affecting every facet of the regional economy, which has grown to depend on a steady stream of productions around the city.

The Strike That Changed Everything

The dual strikes by the Writers Guild of America and SAG-AFTRA in 2023 were both signs of deeper problems in the industry and contributed to rapid change. According to the detailed Otis College study, entertainment jobs in Greater Los Angeles decreased 17 per cent throughout the strikes—that is, around 25,000 jobs. The strikes spanned 148 days for writers and 118 days for actors, bringing production to a near standstill. They also revealed a long-standing fragility in the industry.

However, the decrease in employment is only part of the picture. The strikes also occurred within a contraction that had already been underway to some extent, beginning in early 2022, when the "Peak TV" era started its inevitable decline. From August 2022 to October 2023, the entertainment industry shed 26 per cent of its workforce, indicating that although the strikes intensified an already existing employment crisis, the employment crisis did not originate from the strikes themselves.

This disruption has a human cost that goes far beyond the writers and actors who garnered attention during the strike. Some industry reports indicate that 75% of Art Directors Guild members are still out of work, approximately 18 months or more after the initial layoffs. The guild has even suspended its training and job placement programs, stating that it would be entirely inappropriate to encourage a new cadre of working professionals. At the same time, so many existing members remain unemployed.

The Forgotten Casualties: Below-the-Line Workers and Small Businesses

Although the striking writers and actors finally secured better contracts and protections from artificial intelligence, the broader entertainment worker ecosystem faced a more untenable future. The ripple effects of halting production were inflicting carnage on a network of small businesses and specialised workers, which represent the backbone of the Hollywood ecosystem.

Marc Meyer, CEO of Faux Library Studio Props, saw his company's revenue collapse from $150,000 a month to just $10,000 during the strikes, resulting in the layoff of all 14 employees. "If the actors' strike is not resolved in a short time frame, we may be forced to sell props," Meyer said. He described the financial hardship as approaching a "snapping point." Countless other businesses across the surrounding Los Angeles area shared similar experiences.

The Western Costume Company has provided costumes to Hollywood films since the silent film era, but the halt of productions meant laying off 45 employees. Nathan Haskell of The Hand Prop Room conveyed the exasperation of several vendors servicing the industry: “Nobody is talking about all the other people that are not working because of this, and we don’t get anything for it.” These businesses, unlike the union workers who ultimately received payouts from the strike settlements, did not receive compensation for their losses and had to decide whether to rebuild their businesses in an increasingly unpredictable market.

The economic damage reached even deeper into the local economy. Restaurants, florists, dry cleaners and other service providers identified before the strike and built their business models around the entertainment industry were also impacted. As props master Joe Connolly explained, even local restaurants and catering had an impact on the decline of the industry, because their client base no longer had any reason to visit. The Hollywood ecosystem, even if it was damaged, had a profound impact on literally every sector of the regional economy.

The AI Revolution: Creative Partner or Existential Threat?

There may be no more pressing threat to Hollywood's future than the advances in artificial intelligence in content creation. The 2023 strikes in the industry made AI-related issues a centrepiece for negotiations. Still, the differing resolutions of those labour issues have done little to stop the technology from moving rapidly into all parts of filmmaking.

According to Deloitte's 2025 report on predictions for the entertainment industry, large TV and film studios are expected to remain cautious in their use of generative AI to create content. They will spend less than 3 per cent of their budget to implement these tools in 2025. At the same time, the report indicates that spending on operations would shift by approximately 7 per cent to AI-enabled tools to support operational functions such as contract management, marketing, and content localisation, all of which are job functions previously held by thousands of industry professionals.

Technological capabilities continue to expand at an astonishing rate. As announced in February 2024, OpenAI's Sora model showed the ability to produce hyper-realistic short videos from merely text prompts. While this was initially used only by visual artists and filmmakers, tools like these represent a key shift toward democratised content creation that could eventually eliminate the need for traditional production infrastructure.

The implications for labour here are profound and, in some ways, frightening. As one scholar noted, digital replicas of actors are increasingly being produced without their consent, creating their image and performance as a free-use data asset that can be altered and used without compensation. The scholar notes that we are making "digital serfs" as part of a system of "datafeudalism", where tech organisations extract value from human performers with very little compensation handed back.

Background actors face particularly acute risks from AI advancement. The Alliance of Motion Picture and Television Producers has proposed using full-body scans and digital clones to replace daily-rate performers, potentially eliminating thousands of entry-level positions that have traditionally served as pathways into the industry. One background actor described being herded into a trailer with dozens of others for 15-minute scanning sessions, during which digital replicas were created that could be used indefinitely without additional compensation.

The Global Competition: Hollywood's Diminishing Market Share

As Hollywood struggles with its own upheaval, overseas competitors are expanding their global presence and threatening American preeminence in the entertainment space. This marks a major realignment of global cultural influence that is about much more than box office revenues.

In just a few years, China's film production has more than doubled, producing 792 films in 2023, and has surpassed Japan and the United States, for the first time, as the leading country in total film production. India still produces the most films of any country in the world, with over 2,500 films annually, which is more than three times the number produced by any other country. These numbers reflect not just an increase in production potential but also robust domestic markets that can support large-scale entertainment industries, which are no longer dependent on the Hollywood model and market.

The economic impact a new paradigm has on entertainment is immense. China has leveraged this strategy, and domestic films have taken 99 per cent of the top 20 earners in their domestic market, essentially removing any Hollywood films. South Korea has become a transmedia titan, creating a global cultural phenomenon through K-dramas, K-films, and K-pop that rivals the previous influence of traditional Hollywood soft power.

Industry experts anticipate that Asia could be as much as 60 per cent of the global box office within the next twenty years, radically changing the calculus of Hollywood production that has existed for decades. As one scholar has observed, "Hollywood is becoming an export industry, producing movies for people who live outside the U.S.," but these international audiences are increasingly seeking local content that reflects their specific cultural values and tastes.

This shift has significant ramifications for the location decision to produce. Hungary has become the second most popular European shooting destination after London, successfully attracting major projects like "Dune" and "The Martian" due to its competitive costs and tax credits. These incentives are also found in Canada, the United Kingdom, and Australia, which continue to attract business away from California, creating a global marketplace for film services that now places Hollywood among many other options.

The Economics of Decline: Rising Costs and Diminishing Returns

The financial pressures that constantly shift production out of Hollywood reflect significant economic challenges that extend beyond labour costs. California's high cost of living, strict environmental regulations, and complex permitting process have made it increasingly difficult for many producers to operate successfully.

Labour costs have been steadily increasing due to better union contracts and general wage inflation, and previously accounted for about 30 per cent of production budgets. At the same time, commercial real estate for sound stages and office space has also increased, meaning it is more costly now to build or maintain production in Los Angeles than in competing markets.

The situation is further complicated by the conclusion of what industry analysts dubbed "Peak TV," a period of unprecedented content creation spurred by streaming platforms' desire to rapidly establish a subscriber base. As these platforms have matured and prioritised profitability over growth, they have reduced content budgets and become more cautious about greenlighting projects. This has impacted productions based in Los Angeles more than those in lower-cost markets, as Los Angeles productions generally have higher overhead costs than those in other markets.

California legislators have responded to these circumstances by proposing an increase in the state's film and television tax credit program from $330 million per year to $750 million per year. Industry analysts indicate the expansion would produce only 4,400 to 5,500 additional jobs, while the estimated job losses from pre-pandemic employment levels were 40,000. This reflects the fact that, naturally, tax incentives cannot change the fundamental mismatch in production costs that has made other states more attractive to producers in comparison to the state and Los Angeles in particular.

The Streaming Disruption: Changing the Rules of the Game

Streaming services have transformed the economic structure that has supported Hollywood for decades. Revenue channels from theatrical distribution, television syndication, and home video sales have been mainly replaced by subscription-based systems, which tend to provide less stable and often lower income for content creators.

Mid- and lower-level performers have been particularly affected by this shift, as their incomes were previously based on residual income from reruns and syndication. Many actors and writers report struggling to meet the threshold for their union health insurance, and feel they now must take low-paying jobs or become content creators on social media, for example, simply to maintain their health insurance. The explosion of content creation from platforms like TikTok and YouTube has opened new pathways for some of these creators. Still, it has also oversaturated the market with content that many viewers (including performers) compete for.

The streaming model has also transformed production patterns in ways that are harmful to conventional Hollywood infrastructure. Streaming platforms are often more inclined to produce content in several markets aimed at global audiences, thereby decreasing their reliance on production in Los Angeles. To illustrate, Netflix has invested heavily in creating local content production facilities in markets as diverse as Nigeria and South Korea, building entertainment ecosystems that operate independently of traditional Hollywood distribution networks.

The Infrastructure Challenge: Empty Lots and Shuttered Stages

The physical infrastructure that once provided Hollywood with a competitive edge is increasingly becoming a liability. Studios that had occupancy rates above 90 per cent for decades are now mostly unused, as occupancy for the region fell to 63 per cent in 2024. Underuse reinforces a cycle in which fixed costs are diluted by fewer productions, thereby increasing the cost of using these facilities for the remaining productions in the region.

The organisation FilmLA, which tracks production activity throughout the region, has documented the systematic decline across every major production category. Whereas television pilots, which have always provided a steady flow of production activity, fell to just 13 in Q1 2025 (the lowest amount ever). Commercial production, which has generally been more resilient to the industry ups and downs, is down 38.3% compared to its five-year average.

The implications extend beyond simple real estate concerns. The downturn in the entertainment sector affects real estate values, local tax revenue, and the broader economic ecosystem that has been built around film and television production over the past century. Restaurants, hotels, equipment rental companies, and numerous other businesses are left with uncertain futures as their primary customer base continues to diminish.

The Creative Brain Drain: Talent Exodus and Industry Atrophy

One of the most concerning long-term impacts of the decline of Hollywood is the loss of creative talent seeking reliable work. When the Art Directors Guild announced it would cancel its training programs, it signalled a growing awareness that the industry can no longer absorb new talent at its historical rate. More experienced talent is moving into technology, advertising, and other creative sectors, where there is greater stability and less disruption to their income.

This loss of talent creates a downward cycle. As experienced crew members leave the industry, productions struggle to attract the best talent within their budgets, which further erodes quality and raises costs when trying to fill the gap. The knowledge and experience that took decades to develop, specialised technical skills, and understanding of a complex production to create a seamless experience, are likely to be lost to other occupations.

This problem is particularly evident among workers in the below-the-line category, where an individual’s specialised skill set is not transferable to other industries. Individuals, such as sound engineers, camera and lighting designers, and costume designers, who have perfected their craft over decades, may find themselves starting over in an entirely different industry. Some industry veterans say it is the worst their region has experienced over the course of their decades-long careers.

International Production: The New Reality

The global character of contemporary film production has drastically shifted the competitive balance in ways that do not favour traditional Hollywood businesses. Major productions today commonly shoot in various countries to take advantage of local tax breaks, exchange rates and speciality facilities that may not exist in Los Angeles.

The success of films outside of Hollywood fully demonstrated that high-quality content can be created anywhere there is sufficient infrastructure and the requisite number of skilled personnel. Films like "Parasite," "Everything Everywhere All at Once," and "RRR" achieved both critical recognition and commercial success and were produced entirely outside of the traditional Hollywood system. These films have inspired international producers and demonstrated to global audiences that great entertainment can be introduced into the market anywhere that seeks original stories and has the resources to support production, talent, and content.

The tendency toward international production is expected to accelerate as modern filmmaking becomes increasingly digital. Visual effects work, sound editing, and post-production services can be done anywhere that has dependable internet service and reliable software. This has created the opportunity to exploit the cost difference between markets and sustain the quality requirements for international distribution.

The Technology Disruption: Democratisation and Displacement

The increasing accessibility of content creation technology presents both opportunities and challenges for the traditional Hollywood business model. Cameras, editing software, and distribution platforms are now more accessible than ever before, providing creators worldwide with opportunities and lowering barriers to entry in content creation, which once had a monopoly held by established industry players.

Social media platforms have created new routes of engagement that are entirely independent of traditional gatekeepers. An individual content creator operating on a limited budget can build a global audience and monetise that audience without involvement from established production companies and distribution companies. This has resulted in a fragmented attention span among audiences, as well as a reduced market share that can be serviced by traditional entertainment content.

At the same time, artificial intelligence is beginning to perform numerous functions that previously required ontological competency. AI systems already perform script dissections, casting choices, and rudimentary edits with increasing fidelity. Even as these systems function as tools to enhance and extend human creativity, they will continue to develop and replace many entry-level jobs that have historically served as gateways into the profession.

The pace of technological change shows no signs of slowing. Industry observers predict that within the next decade, AI systems will be able to create entire films from simple prompts typed into them, thereby eliminating the need for a comprehensive production infrastructure. Although we are not there yet, the remarkable advancement of an almost indescribable set of capabilities makes the foreseeable prospect of profound disruptions to traditional filmmaking seem practically confident.

Trump’s 100% Film Tariff: A Global Shockwave for Cinema

US President Donald Trump's announcement of a 100% tariff on all films made outside the United States sends a shockwave through the global movie business, with consequences for American viewers, international filmmakers, and international trade relations. Framing it as a move to reclaim what he believes to be American filmmaking that had been "stolen" from the U.S., Trump pointed to California's recent difficulties as proof that the country's filmmaking industry is in decline and claimed the tariff would fix what he believes to be an ongoing issue of unfair competition.

Still, the administration now has to explain when such a tariff would be imposed or whether it would apply to streamed content as well as in theatres. The announcement has already prompted immediate concern from all parts of the entertainment industry.

Indian cinema is especially vulnerable, as the United States accounts for 40-60% of overseas earnings on a major Indian release. Unfortunately, even the prospect of raising ticket prices would extend that vulnerability by driving audiences and, worse, reducing distributor profits. The reactions to the potential tariffs vary significantly within India's creative community. One filmmaker views a tariff as a barrier to market access. At the same time, someone like Anurag Basu sees it as an opportunity to inspire greater self-sufficiency, perhaps through reciprocal concessions for domestic businesses, which could ultimately lead to increased consumption of Indian films.

Industry experts also note the complexities associated with regulating digitally delivered services, particularly within an inextricably tied global supply chain system, with a significant concern about the motivation behind trade negotiations and litigation based on failed rights. Indeed, as the world awaits any additional policy, one thing is clear: Trump's tariffs mark a turning point in the future trajectory of global trade.

Government Response and Policy Implications

Policymakers at all levels have begun to recognise the decline of the entertainment industry as an important economic and cultural issue. California Governor Gavin Newsom's proposal to expand tax credits for film production in California is one approach to halting the loss of productions to other states. Still, critics wonder if financial incentives alone can address competitive disadvantages that have made other markets appealing.

Federal policymakers face more complex challenges related to international trade and cultural policy. Former President Trump's proposal to impose 100 per cent tariffs on films produced outside the United States demonstrates increased concern about the cultural and economic ramifications of Hollywood's declining global market share. However, implementing policies like those proposed by the former President would be complicated by the international nature of film financing and production.

The questions raised above extend beyond basic economic protection to encompass concerns about cultural influence and the projection of soft power. For decades, Hollywood has been an industry that conveys American values and perspectives to audiences worldwide. As international content continues to accumulate a larger share of the market and cultural cache, the U.S. risks forfeiting a crucial means of global engagement and cultural diplomacy.

Labour policy is also a critical consideration for future competitiveness in the industry. Union contracts negotiated during the 2023 strikes provided workers with important protections but also increased production costs in ways that could accelerate the shift of production to non-union markets. Balancing protections for workers and competitiveness in the industry will continue to be a balancing act for policymakers at every level.

The Path Forward: Adaptation or Decline?

Different perspectives surrounding the future of the entertainment industry exist among experts and practitioners alike. Those who are optimistic about the future will cite, among other things, the ongoing advantages of creative talent, existing infrastructure, and cultural cachet. They will insist that there is a contraction in the current moment that is correcting itself, rather than a permanent decline or departure from traditional business practices. Experts also agree that the entertainment industry has a history of adapting and evolving in response to societal changes and new technologies, and it is likely that it will do so again going forward.

The emergence of new technologies can present a chance for advancement and distractions. For instance, filmmakers can now create complex environments without leaving the production studio significantly, thanks to the integration of LED wall technology and real-time rendering. Studios that adopt and utilise this technology can have some of the possible decreased cost structures while maintaining flexibility in imaginative spaces, allowing some facilities in LA to recapture their competitive advantage, which is currently limited.

However, sceptics suggest that the economic fundamentals of entertainment production have changed permanently for lower-cost markets and new distribution mechanisms. They argue that Hollywood's decline is part of broader shifts in global financial and cultural patterns that will not be reversed exclusively by better public policy or adapting technology.

The answer to this question will likely define the future of Los Angeles as an entertainment centre, as well as the future of American cultural influence in a more multipolar world. As one veteran stated, "We're in a race against time to understand what Hollywood will become in 10 years, because the current structure is not sustainable."

The Takeaway

The combination of artificial intelligence, labour discontent, and international competition has presented unprecedented challenges for Hollywood's traditional leadership in global entertainment. The industry has experienced disruptions in the past, but the current situation appears more fundamental and consequential than previous adjustments.

The numbers reveal a stark picture of decline: historic lows in production, crisis-level unemployment, and infrastructure that is non-functional while other markets' competitors are expanding their businesses. The human toll of this transformation extends well beyond the actors and writers who made headlines in the public eye in connection with the strikes of 2023; for thousands of knowledgeable workers and small businesses reliant on industry health, every aspect of their livelihood has been worth what was made possible by a healthy, vibrant entertainment industry.

However, as professionals in the industry point out, being at rock bottom can sometimes be a way to rebuild and reinvent. The question for Hollywood is whether it will be able to reinvent itself quickly enough to survive in an entertainment landscape that is increasingly operating under different rules and new economic models.

The answer will not only determine the fate of countless individual careers and businesses but also the future of American cultural influence in an increasingly interconnected world. As Detroit learned in the automotive industry, assuming perpetual dominance can be a dangerous mistake. Hollywood's challenge is to prove that it can adapt, evolve, and continue to create the compelling content that has made it the world's entertainment capital for over a century.

The next few years will be critical in determining whether Hollywood's current crisis represents a temporary setback or the beginning of a fundamental shift in global entertainment production. For an industry built on storytelling, perhaps the most important narrative will be the one it writes about its own future.