Tuesday, May 6, 2025 - American media stocks dropped on Monday, May 5, following President Donald Trump's announcement of a 100% tariff on all movies produced outside the United States, a move that could significantly impact Hollywood's global operations and the broader entertainment industry.
The proposed tariff, though lacking in specific details,
raises uncertainty about whether it will apply to films on streaming platforms,
theatrical releases, or if it will be calculated based on production costs or
box office revenue.
In 2023, American movies generated $22.6 billion in exports,
contributing to a trade surplus of $15.3 billion, according to data from the
American Motion Picture and Television Industry. The potential impact of the
tariff comes at a time when Hollywood increasingly relies on international
production hubs. A recent survey by ProdPro revealed that the top five
preferred production locations for studio executives planning for 2025 to 2026
were all outside the U.S., driven largely by tax incentives and cost efficiencies.
Streaming services, particularly Netflix, may be the most
vulnerable to the tariff policy, analysts told Reuters. Netflix has built its
content model around a global production network aimed at delivering localized
and international content. Following the announcement, Netflix shares fell 4.9%
in premarket trading, leading the decline in media sector stocks.
Despite Los Angeles’s reputation as the center of the movie
industry, none of this year’s top ten Oscar contenders were filmed in the city,
highlighting the extent to which production has shifted overseas. Many studios
now operate through a global supply chain, with filming in Europe,
post-production in Canada, and visual effects work outsourced to Southeast
Asia. A forced return of production to the U.S. could drive up costs
substantially.
Shares of major entertainment companies, including Walt
Disney Co, Warner Bros, Discovery, and Universal-owner Comcast, also declined
on Monday, dropping between 0.8% and 2.7% amid investor concerns over the
financial implications of the proposed tariffs.
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