How the Tariffs and Stock Market Will Impact Hollywood

Every entertainment company is in the advertising business now, from YouTube and Netflix to Disney and Warner Bros. Discovery. And in a recession, advertising budgets are among the first things to be cut. As The Hollywood Reporter previously noted, the timing of the turmoil couldn’t be worse for the business, as the networks and streamers are set to begin their upfront talks with advertisers in the coming weeks.

Consumer packaged goods companies and retailers will all be directly impacted by the tariffs and will likely be reevaluating their spend, while tech companies will be challenged with their own imports (like Apple’s products) or ecommerce plays (which power Amazon and Meta, among others). The travel sector is also likely to be impacted.

With tremendous uncertainty, the ad market will feel the pain, though how much, how long, and how widespread are to be determined.

The streaming business, to be certain, would be seriously hampered in an advertising downturn. But the business could also benefit in a recessionary environment. In a world where spending tightens, streaming services like Netflix and Disney+ can make for compelling values, providing endless entertainment at a reasonable set price. In other words, streaming subscriptions could benefit in this environment, much as they did in the early days of the COVID pandemic (albeit without everyone stuck inside their homes all day).

But there is an associated risk: Streaming services are easy to sign up for, but just as easy to cancel. And in a world where customer churn is already high, a recession could supercharge that churn, making it harder to retain subscribers, who could come and go month to move as they seek fresh fare.

Free streaming options could flourish, despite a gloomy ad outlook, as more and more people flock to them in a search for value, and perhaps stick around. YouTube would be an obvious beneficiary, of course, but Fox’s Tubi, Paramount’s Pluto and other FAST channels will also likely see a viewership bump.

With entertainment companies tightening their belts, programming budgets will likely fall. And because every company is investing more in live sports, those cuts will come at the expense of entertainment programming.

Why? The Costs for live sports are mostly fixed.

NBC, for example, will pay the NBA about $2.45 billion per year for the next 11 years for the rights to its games, and will need to spend hundreds of millions more per year to produce the games and shoulder studio programming. There is no room for that budget to go down meaningfully.

When you look at all the sports rights deals that the large TV networks and streamers are committed to, between the NBA and NFL and everything in between, the ability to shift budgets around falls on the entertainment side of the portfolio. Expect fewer scripted projects as the streamers and networks focus on safer bets, and perhaps more reliance on unscripted shows to wring more hours of programming out of the same budget bucket.

The post-pandemic landscape brought with it a tidal wave of pent-up demand for live events and experiences. Concerts (looking at you Taylor Swift), sporting events, theme parks (hi, Disney) and other experiential businesses have boomed, delivering record-breaking revenues for companies like Live Nation, and causing an influx of investment into the space.

It should go without saying that in a recession, expensive concert tickets and vacations are among the first thing households cut out of their budgets. There will always be premium tickets for events, but in a changed market the perhaps irrationally exuberant prices for normal tickets can’t stand. Similarly, expensive theme park trips to the likes of Disney World and Universal Studios will be tempered, as deals and offers permeate.

And as Disney CEO Bob Iger noted in an ABC News editorial meeting April 3, Disney requires steel and other raw materials to build its new fleet of cruise ships, not to mention its new theme park worlds and attractions.

There are few bucks easier to earn in Hollywood than a good licensing deal. Studios, networks and streaming services hold valuable IP, and lots of consumer product manufacturers would love to leverage that IP to sell more goods. Toys, makeup, games, clothing: Take a trip to Walmart or Target and count how many products bear the likeness of a popular franchise or character.

For an entertainment company, it is an asset and investment-light business. Yes, you need to ensure that the product are on brand and meet a quality standard, but you aren’t taking on the manufacturing the risk (though brand risk is another story, just look at last year’s Wicked doll fiasco). But when you see shares in Mattel sinking by more than 14 percent, and Hasbro by 11 percent, you can tell there’s a problem.

Toys, games, clothing and other products are about go get a lot more expensive, or margins are going to collapse, or some combination thereof. Licensing deals could be cut lose and product makers focus on core lines, or sales could decrease, pulling down the easy cash for the IP holders.

Just look at Disney, where licensing accounts for about 5 percent of the company’s revenue, but 13 percent of its operating income, reflective of the rich margins.

Already many theatrical executives are looking toward 2026 as a year to turn the movie business around, but a recession certainly doesn’t help bring any clarity to the moment. In fact, the past suggests that economic downturns may not be as devastating to theaters as some may think.

The 2008 crash only saw box office fall by 0.3 percent, while in 2009 it rose by 10 percent (2010 and 2011 saw very slight declines). The dot com crash in 2000 had no discernible impact on the box office. In the late 1980’s, the Black Monday crash did little to stop box office growth, which remained consistent in 1987-1989. At a time when people are pulling back on concerts and fancy vacations, maybe a trip to the movies is a less expensive alternative?

On the other hand, the past few years have seen theater owners lean into premium formats like Imax and 4DX, and charging premium prices to boot. While everyone from studio executives to theater owners know that the theatrical experience needs to be better than what consumers can get at home, it has also become significantly more expensive to take a trip to the movies thanks to these new offerings.

Don’t be surprised if more discounted tickets, perhaps even for premium screens, become more common. Whether that helps or hurts box office is unclear.

While most of the entertainment business isn’t built on physical goods, there are connected pieces. TV sets, after all, still cost money. And new ones tend to by wifi-enabled and a big driver of new streaming users.

Streaming sticks and boxes from Roku, Apple, Amazon and Google could see their prices rise, at the same time that advertising falls, a dilemma considering those devices are essentially sold at cost, with the hope of making up for it with ads later.

And video games and video game consoles are already premium products, and will only get more expensive in a tariffed world. Already Nintendo delayed pre-orders for the Switch 2 console, citing “the potential impact of tariffs and evolving market conditions.”

Many Wall Street executives were salivating at the prospect of M&A under the new administration. But not only has antitrust enforcement remained vigorous, but the stock market declines have put deals on ice.

StubHub paused its IPO amid the market turmoil, though it is willing to reengage once things stabilize. With so much uncertainty in operating businesses and overall prices, it won’t just be IPOs that grind to a halt.

Data from Boston Consulting Group shows that M&A activity slows down amid economic downturns, as valuations and fundamentals become harder to quantify and predict. CEOs and boards become reluctant to sell at deflated prices (barring a financial emergency in their company, of course). Does David Zaslav want to cut a deal for a Warner Bros. Discovery that lost 30 percent of its value in the last month, given that it could all be reversed on a whim if the tariffs are removed?

Even TikTok became harder to sell, with Trump now using tariffs as a leverage point against China to try and force a deal. Figuring out the new values, the new profit margins and th new business models became harder, and deals will decline as a result.