How the Global Film Industry Is Working to Mitigate Mass Layoffs

ONE TIME USE - The Business - International-SPLIT -H 2020
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While Hollywood companies like Disney begin furloughs and pay cuts, employees at overseas studios in Germany, Italy, the U.K. and even China are being kept afloat by governments and employers: "People will remember who stood behind their workers in difficult times and who didn't."

As the coronavirus takes a toll on the U.S. job market — nearly 10 million Americans applied for unemployment benefits in the two weeks ending March 28 — U.S. entertainment companies like Disney are furloughing “nonessential” employees and asking executives to take pay cuts. But overseas, a much different approach has taken hold: International governments and media firms are enacting aggressive programs to keep workers on the books.

In Germany, they call it Kurzarbeit (short-term work). In France, it’s Chômage partiel (partial unemployment). Italy has Cassa Integrazione Guadagni (an earnings redundancy fund), while Spain offers ERTE, or Expediente de Regulación Temporal de Empleo (temporary employment regulation process). The British have the newly introduced Job Retention Scheme, and Canadians have the recently unveiled Emergency Wage Subsidy.

Everywhere the goal is the same: "to keep as many people employed as possible during this crisis," as Mark Bishop, co-CEO of Toronto-based producer Marblemedia, tells THR. Instead of firings and furloughs, film and TV companies outside the U.S. are finding ways to reduce staffing costs without mass layoffs. The response overseas underscores the contrast between the speedy, robust support offered by European social democracies and the more measured approach favored by free market capitalism.

UFA, the leading German film and television production house, was forced to shut down virtually all of its drama production, including the long-running crime series Soko Leipzig — but the company isn’t firing anyone just yet. Taking advantage of Germany’s Kurzarbeit program, workers will be compensated by the state for 60 percent to 67 percent of their salaries, with pension, health insurance and unemployment insurance payments also covered. In a deal between the German Producers Association and national service workers union Ver.di, the short-term working arrangement also can extend to temporary and freelance staff. UFA will pay the difference, up to a cap of about $7,400 a month for producers and crew and $6,800 for actors.

"We can’t just do hire-and-fire as if we were an American company," says UFA boss Nico Hofmann. "People will remember who stood behind their workers in difficult times and who didn’t."

It’s a similar situation across Europe. On March 24, French commercial channel M6 announced it would introduce short-term working measures to keep people off the unemployment line, "simultaneously ensuring employees retain most of their purchasing power." M6 parent RTL Group told THR it was looking at the various European programs to find the most "socially acceptable" solutions to the crisis. So far, the company has not laid off anyone at its core German broadcasting division and has not needed to take advantage of the country's short-term work programs.

Meanwhile, Britain’s ITV is understood to have kept permanent staff on for now and aims to use the U.K.’s new retention scheme to prevent layoffs. And, in a statement to THR, the BBC said it wants to do everything it can to support freelancers during this “turbulent” time and expects to re-engage "their services as soon as we can safely continue filming."

The BBC and several public broadcasters across Europe also have set up emergency funds to help self-employed freelancers or independent contractors who might otherwise fall through the cracks. Several countries including Germany, France and Canada have set aside funds to directly help freelancers unable to work during the lockdown.

Many of Europe’s largest production companies, including Studiocanal, EndemolShine and Fremantle, declined to comment for this report, citing the rapidly evolving situation. French-based TV group Banijay noted its full-time staff "are very much still in place across the board" but would not comment on freelance or temporary employees, noting that "right now we’re focusing on creativity, development and the new way of working."

The European plans are already having an impact. The U.K.’s Job Retention Scheme, introduced March 20, directly led to Disney rehiring the U.K. crew working on its Little Mermaid reboot who had been fired when the production was shut down. They were immediately put on the program, which means they will receive 80 percent of their salary, up to 2,500 pounds ($3,100) per month. Other postponed or upcoming U.K. shoots that could take advantage of the Job Retention Scheme include Warner Bros.' Fantastic Beasts 3, NBCUniversal’s Jurassic World: Dominion, Sony’s Cinderella musical and Disney/Marvel’s Doctor Strange in the Multiverse of Madness.

Leading U.K. exhibitor Cineworld reversed course after the program was announced, saying it would put its hourly wage employees, set to be dropped amid the shutdown, on the new short-term work plan. It's unclear if Cineworld will extend the measures to cover its many staff employed under Britain's controversial "zero hours" contracts, which do not guarantee an hourly or weekly wage.

The Spanish exhibitors' association FECE, which estimates its members have lost around $43 million (€40 million) in box office revenue since theaters in the country began closing on March 13, says some 11,500 employees have been put on temporary suspension via Spain's ERTE system, and will return to their jobs after the crisis.

Italy, the country that has the highest number of recorded deaths related to COVID-19, has actually banned companies from firing employees during the crisis. Effective March 17, the Italian government put a 60-day hold on all dismissals.

Sky Italia was one of the quickest companies to respond to the pandemic, signing an agreement with trade unions to top up the salaries to 100 percent for employees sent home under short-term work arrangements. The pay TV group, controlled by Comcast, also added a "business continuity bonus" for employees unable to work from home.

Riccardo Tozzi, founder and CEO of Cattleya, an Italian production company owned by ITV Studios, told THR "about a third" of its workforce is on temporary leave because of the crisis, but it expects "to retain our entire staff and to have everyone back to work before summer." Cattleya also is topping up the government’s offering so employees receive their full salary for nine weeks.

In Germany, where the Kurzarbeit system is credited with having helped save the country from mass unemployment during the Great Recession of 2008-09, short-term work systems are being extended to freelance and contract workers who were previously not covered. Studio Babelsberg and the state governments of Berlin and Brandenburg are close to a deal that will allow several hundred crewmembers, fired when the outbreak hit, to stay on the payroll. The crew were working on Warner Bros.' The Matrix 4 and Sony’s Uncharted, both of which were in preproduction before the shutdown. Normally, crews on such short-term contracts would not be eligible for Kurzarbeit.

"Just three weeks ago all the production companies were saying 'This doesn't apply to us,' but most now are coming around,” says Steffen Schmidt-Hug, a lawyer who represents the more than 300 members of the film crew working group known as Wir sind Babelsberg (We are Babelsberg). He quotes German Culture Minister Monika Grütters, who said the government "won't leave anyone behind” when it comes to support for those hit by the coronavirus crisis. "I think that should apply to every worker in the film and TV industries,” Schmidt-Hug says.

The risk is real. A report published by Germany's umbrella film industry association SPIO on April 2 claimed 36 percent of the 80,000 employed in the country's film industry, or nearly 30,000 people, could lose their jobs as a result of the current crisis. The group values the resulting economic damage at $610 million.

Even with the short-term schemes, many in the industry are still under threat. A SPIO spokesperson noted that the bulk of job losses could come on the exhibition side, where short-term contracts are the norm and where most workers are not covered by government schemes.

Across the Atlantic, Canada has largely followed Europe’s lead. Instead of film tax credits or other delayed business deductions, it has rolled out targeted wage subsidies and cash drops. Its Job Retention Scheme will see the government pay 75 percent of an employee’s wages up to $600 ($847 Canadian) per week. By keeping employees in jobs, Paul Bronfman, CEO of equipment supplier William F. White International, believes the local industry is primed to bounce back after the crisis. The northern powerhouse came off a record year, with visiting productions spending $4.86 billion on film and TV in 2019. "We’re used to turning on a dime,” Bronfman said, noting the nation’s close ties with Hollywood. "When there’s a rebound, Canada will be in the best position of any country to take advantage."

Even in China, whose film industry has suffered longer from the pandemic than anywhere else, there have been remarkably few layoffs, furloughs or pay reductions — despite few laws regulating hire-and-fire and no centralized support policies or government-backed subsidies for the entertainment sector. One reason is China’s pre-crisis film industry was already suffering from a major staffing shortage — with too few experienced workers in a business that has exploded and is now the world’s second largest market with nearly $10 billion in annual box office revenue. On April 3, China’s Film Bureau released its first official statement in weeks, saying it was in talks with China’s Ministry of Finance and other departments exploring "preferential fiscal and taxation exemption policies" for the film sector.

With China's aggressive containment measures to fight the coronavirus yielding results, talk in the industry is more about restarting operations than cutting costs.

Speaking to an online webcast meeting of the China Filmmakers Association in late March, called to discuss the industry's COVID-19 response, Yu Dong, chairman of Bona Film Group, a leading studio and cinema chain, urged the other leaders of private film companies to "take responsibility, not lay off staff, and not owe wages."

Compare that to the response of AMC Theatres, North America's largest cinema chain, which furloughed or fired more than 26,000 employees within a week of shuttering its cinemas. AMC, which is partially owned by China's Wanda Group, even sent 600 of its corporate staff home, including CEO Adam Aron.

But if Chinese cinemas don't reopen soon — a trial run last week involving some 600 theaters across the county was quickly shut down — the major national circuits will need centralized government help if they are to prevent layoffs. Up till now, Beijing has mainly let provincial governments come up with their own schemes to assist coronavirus-affected industries. That's been little help for nationwide players, including cinema chains, which have to cut through thickets of red tape to apply for financial assistance that, they say, doesn't amount to much in the face of the crisis.

"We have had to fight very hard to get small amounts of funds here and there to support our businesses," says Jimmy Wu, chairman of Lumiere Pavilions, an upscale cinema chain with outlets in over 20 Chinese cities. For example, China's Guangdong Province, a commercial powerhouse, has allocated less than $7 million in funds to support the region’s 1,337 cinemas, giving each multiplex the ability to tap just $1,400 to $44,000 in support depending on past sales volumes — paltry sums given that cinemas have been shut, earning zero revenue, for more than 10 weeks.

"I want to keep my employees; they are the best in the business," Wu says. "Now is the time for us to show that we care about them. Post COVID-19, the industry will need quality people."

Back in Berlin, Hofmann is staving off redundancies as long as he can — but there’s a limit.

"Ask anyone, in our industry or in any industry hit by this crisis, they’ll say the same thing. Four weeks of this is no problem. But if this goes on for three months or more, I don’t see how we can continue [without layoffs]."

Alex Ritman in London, Etan Vlessing in Toronto, Jenifer Green in Madrid and Ariston Anderson in Rome contributed to this report.

A version of this story first appeared in the April 8 issue of The Hollywood Reporter magazine. Click here to subscribe.