As everyone grapples with the recent tariff policy enactment and attempts to predict the impact it will have on businesses and individuals, the film and television industry should brace for positive and negative results — as well as many unknowns.

TARIFFS MAY BOOST ENTERTAINMENT CONSUMPTION 

As the entertainment industry is generally less impacted by recessions and economic woes — due to audiences often turning to entertainment as a form of escape from reality — it is not unreasonable to expect the same to occur here.

• Advertising: Advertising businesses may contract; however, the industry can expect to see free ad-supported platforms (such as AVOD and FAST channels) begin to attract larger audiences. This shift could increase advertising demand on these platforms and benefit streamers — particularly those offering lower-cost, ad-supported options, which often deliver higher margins. 
• Distribution: If the recent devaluation of the dollar continues, it could support the efforts of studios and distributors that export content overseas. Additionally, lower interest rates may help reduce the cost of financing film and television production, as well as support debt repayment efforts.
• Content Consumption: Tariffs, at this stage, are primarily targeting manufactured goods rather than content consumption, meaning the entertainment sector may avoid the brunt of the impact.  

HOW TARIFFS COULD HURT THE ENTERTAINMENT INDUSTRY 

If studios have to focus more on cost containment, this could lead to budget constraints and even layoffs across the industry. 

• Income Streams: Optimism around a box office rebound is likely to taper or, at minimum, be delayed, with consumers avoiding luxury spending. At the same time, an important source of income for networks and streamers — advertising revenue — could decline as businesses reduce marketing budgets during recessionary periods. Licensing of intellectual property may also decrease alongside a drop in merchandising sales. 
• Production Costs: The recent contraction in film and television production may worsen as studios are forced to prioritize cash preservation, especially when production costs rise, driven by more expensive equipment and materials.

GLOBAL IMPACT: WHAT COULD COME NEXT

There are ongoing discussions in both the European Union and China about expanding non-tariff countermeasures to include services — an area where the U.S. currently maintains a trade surplus. 

• European Union: The EU's Anti-Coercion Instrument (ACI) has proposed restrictions on intellectual property rights held by American companies, bans on certain services and the imposition of duties on digital platforms. 
• China: China may respond by reducing imports of American movies and content or potentially implementing an outright ban. 
• Global Response: Further deterioration in international political relations may also lead to reduced availability of production incentives, heightened barriers to market entry and more retaliatory actions against American-made content.
• Industry Impact: The broader macroeconomic environment could impact the financial stability of heavily indebted studios and media companies, which could raise apprehension about their ability to continue as going concerns and increasing the risk of bankruptcy.

TAKE STEPS TO PREPARE 

The entertainment industry is no stranger to economic hardships. While the industry could face challenges resulting from tariffs, there are also opportunities present. Entertainment leaders should evaluate their options and plan to take action to remain financially and operationally sound. 

Overall, considering Hollywood is a place people from across the globe find an escape, like with past financial downturns, the entertainment industry will weather the storm and see a brighter future.

If you are looking for resources or need help navigating these changing times, please contact GHJ’s Entertainment Practice.