Brexit: Who Stands to Win (or Lose) in Hollywood After the Vote?
The studios could come out on top while U.K. producers struggle with uncertainty following Britain's shock vote to leave the European Union.
When it comes to Brexit, the biggest danger for the entertainment industry is, as former Secretary of Defense Donald Rumsfeld might have put it, the known unknowns.
On June 23, a majority of British voters decided to leave the European Union, but politicians, analysts and the world's stock markets are still scrambling to figure out what happens next.
For the entertainment industry, Brexit could potentially impact everything from where companies set up shop to what movies and TV series get made to even who gets cast in them. But, at the moment, all that is certain is uncertainty.
“In the short term, the main negative effect may be psychological, just the idea in people's heads that everything could change could put a hold on business and investment decisions,” said Bertrand Moullier, an independent industry analyst with London-based Narval Media. “That psychological effect [in the entertainment industry] reflects what we are seeing now in the stock exchanges and currency markets.”
The biz, in the U.K. and across Europe, should probably get used to not knowing, because the full impact of Brexit won't be clear for years. Technically, Britain has voted to leave the EU but hasn't yet officially pulled the trigger — that will happen only when a British Prime Minister activates something called Article 50, a clause in a EU treaty that governs a member state's exit from the group. Only after Article 50 has been invoked will the EU and the U.K. begin official Brexit negotiations. They, in turn, will take at least 2 years.
But we don't even know who the British Prime Minister will be — current PM David Cameron resigned immediately after the Brexit vote — let alone when he, or she, will trigger Article 50 or what sort of deal they will try and work out with the EU.
Given the caveat that nothing is certain and all is conjecture, here's our best guess as to who in the industry best stands to benefit and who has the most to lose from Brexit.
Market-Listed Media Companies
The shock of the Brexit vote triggered a worldwide sell-off of entertainment stocks, even if the true impact is unclear (and for many companies could be minimal). The big seven media conglomerates (Disney, 21st Century Fox, Viacom, Sony, CBS, Time Warner and Comcast) together lost $20 billion in value last Friday after the Brexit results were known. Everyone was hit, from online streaming giant Netflix to European pay-TV group Sky, from Lionsgate to News Corp to companies such as Germany's ProSiebenSat.1 and Italy's Mediaset.
Hardest hit have been British firms. Shares in U.K. TV powerhouse ITV tanked, falling 20 percent on Friday and a further 9 percent on Monday. British billionaire Richard Branson told British breakfast TV on Tuesday that his companies, which include home broadband and TV provider Virgin Media, have had around a third of their value wiped out since the Brexit vote.
Under the current system, British-based producers arguably have the best of both worlds. They benefit from an industry-friendly, lightly regulated national government that encourages production via schemes like the 25 percent uncapped tax credit and, as EU members, they qualify both for EU production subsidies and also come under quota laws which require European television channels to buy a certain percentage of their films and TV series from EU producers.
“The U.K. has the most successful content sector in Europe but that means they are more beholden on export,” says Ted Shapiro, partner and head of the Brussels office at Wiggin, a U.K. law firm specializing in intellectual property law. “They rely heavily on Europe not only for funding but also for revenue. Post Brexit, everything becomes more complicated.”
Outside the EU, British producers might find their access to European markets blocked or restricted. Even if the U.K. and its producers retain access to the EU common market, a post-Brexit British government will have no say in how EU law is set, meaning U.K. producers will have zero lobbying power.
The general jitters that have gripped the industry since last week's vote will likely intensify a trend already seen in the international film markets: a move away from anything that smells of experiment or risk. A film like sleeper hit The Lobster, a European co-production with major British investment, will be even harder to package.
“It's a cliché, but movies are a risky business and the more risk, the more uncertainty you have, the more people will look for safe havens,” says Shapiro, noting that Brexit negotiations will mean years of uncertainty for the industry. “We're not talking about six months here, we're talking two years or more. It could hurt investment.”
Short-term, the majors may take a beating on the stock market, but in the long run, “they are best equipped to adapt whatever happens,” says Shapiro. Most analysts think the U.K. tax credit, one of the main reasons the studios shoot in Britain, will remain largely intact post-Brexit. Even if it doesn't, there are plenty of countries across Europe only too happy to accommodate the next Avengers or Star Wars movie with a fat tax incentive and a high tech backlot.
Depending on the outcome of Brexit negotiations, British talent — actors and directors but also writers and tech personal — could face restrictions on where they work and travel, from something as benign as passport checks at the border to a more prohibitive system of visa and work permits. It won't mean James McAvoy or Benedict Cumberbatch won't get work in Europe, but having an EU member passport (Hello Michael Fassbender!) could become a significant advantage.
“The first thing I'm doing is applying for my Irish citizenship,” Michael Ryan, chairman of the Independent Film & Television Alliance, said only half-jokingly following the Brexit vote.