Hollywood is under pressure: United States film and TV production has been in free fall since its peak in 2022, driven by a move towards cheaper locations and an uneven recovery from labour strikes.
Last year, total U.S. production spending fell 5% to $41.4 billion, a ProdPro report found. Among high-budget productions, spending decreased by 20%.
While production has contracted significantly, broadening tax incentives for U.S. film and TV has led to an uptick in 2025’s second half. However, Paramount Skydance’s pending purchase of Warner Bros. Discovery threatens large-scale layoffs and budget cuts that could continue to imperil the industry.
How bad is it in Hollywood?
Film production and spending in the U.S. have fallen dramatically since 2022.
Spending on U.S. TV and film productions in 2025 was down 15% from 2022, according to ProdPro. The number of TV production starts was 481 last year, well below its 2022 peak of 618.
Even with total project starts increasing by 8% last year, the U.S. share of global film and TV production dropped from 52% in 2022 to 38% in 2025.
Production in California, the usual epicentre of the U.S. film industry, has declined even more precipitously.
The number of mid-budget production starts in the state plummeted by 31% last year, while states like New York and New Jersey saw large increases. Total filming days in Los Angeles dropped 16.1% year-over-year in 2025, FilmLA found.
In 2023, production ground to a halt as both the actors’ union SAG-AFTRA and the Writers Guild of America went on strike for well over 100 days each, and has failed to recover to previous levels. Los Angeles soundstage occupancy plummeted from 90% in 2022 to 69% in 2023, and has continued to drop in the years since.
Executives are also seeking to film in cheaper locations that offer tax incentives, per ProdPro. “With continued downward pressure on budgets, 65 percent of executives cited tax incentives as a top-three lever for cost containment in 2026. When asked how much of their slate is produced in the lowest-cost viable location, responses averaged ~70 percent.”
Could tax incentives spur a rebound?
U.S. film and TV production began to tick back up in the second half of 2025, largely due to new tax incentives.
In July, California enacted a major expansion of its Film & Television Tax Credit Program, more than doubling annual funding to $750 million through 2030. Eligible productions can receive a 35-40% refundable incentive.
Since the program’s expansion, 135 film and TV projects have been awarded incentives. Filming days in Los Angeles rose 5.6% from the previous quarter in the last three months of 2025, and 53% of surveyed studio executives told ProdPro that their 2026 production volume would increase from last year.
Other states that have broadened their tax incentives for the industry have also seen increases in film and TV production. New York raised the cap on its production subsidy to $800 million in its state budget last May, and posted a 96% surge in mid-budget production starts across 2025.
Nationwide, spending on both feature films and series increased 3% year-over-year in the second half of 2025.
California Senator Adam Schiff has said he will introduce federal tax incentive legislation to increase film and TV production across the U.S. “State programs cannot simply substitute for the kind of global federal and competitive tax incentive that are needed to bring production back to American soil and stop its offshoring,” Schiff said at a March hearing.
How much of a problem is Paramount's purchase of Warner Bros.?
Paramount Skydance’s pending acquisition of Warner Bros. Discovery stands to significantly hamper the industry, meanwhile. The transaction, reportedly worth $110 billion, would unite two of the industry’s largest film studios.
“The proposed Warner Bros. Discovery–Paramount transaction would combine two of the largest entertainment companies in the world, further concentrating control over content libraries, television networks, streaming platforms, and the pipelines for content development, production, and distribution,” said Jax Deluca, executive director of the advocacy group Future Film Coalition.
Although Paramount Skydance CEO David Ellison has said that both Paramount and Warner Bros. will produce at least 15 movies each per year, this did not include a promise to shoot a certain number in the U.S. Just 15 movies released by either studio were shot in the U.S. over the past two years.
Ellison has also said the merged company will have around $6 billion in synergies, which could indicate major layoffs as functions are consolidated. Paramount’s Paramount+ streaming service will be combined with Warner Bros. Discovery’s HBO Max under the deal, the companies have already announced.
Paramount’s bid is backed by $54 billion in debt commitments, which is likely to spur cost-cutting. Skydance’s acquisition of Paramount last year resulted in the layoffs of about 2,000 employees, 10% of Paramount’s workforce.
The Paramount-Warner Bros. transaction is scheduled to close in 2026’s third quarter, though California Attorney General Rob Bonta has said the state’s Department of Justice is investigating the deal.
