This report does not constitute a rating action.

While unlikely to proceed at face value, S&P Global Ratings believes President Donald Trump's post on the social platform Truth Social calling for 100% tariffs on movies made outside the U.S. could lead to higher costs for the film industry and result in the release of fewer films. However, the president’s focus on the film and TV industry could lead to the consideration of other approaches to reinvigorate domestic film production. In our view, tax incentives would be more effective in helping the film industry than the proposed tariffs.

What's Happening

Against the backdrop of a rapidly changing ecosystem, Hollywood has recently experienced a trilogy of drama--disrupted most prominently by the pandemic in 2020, trade guild strikes in 2023, and the Los Angeles County Wildfires earlier this year. Following the standstill in 2020, spending on content recovered with a vengeance only to grind to a halt amid a freeze in major studio productions three years later. The resolution of the strikes was followed by a resumption of film and TV production, though at starkly lower levels than in 2022 (the high-water mark for TV show output with 600 original scripted shows in production according to FX Networks). Now, President Trump’s May 4, 2025, proposal to implement 100% tariffs on films developed outside of the U.S. could further pressure the entertainment industry, which serves as a significant source of American exports.

Concerns around Hollywood losing its coveted spot as the epicenter of global film and television production have been buzzing over the last five years as the number of filming days recorded in Los Angeles declined precariously, with TV shooting days down 58% in 2024 from their 2021 peak. Companies have shifted their productions both domestically and internationally--to other U.S. states (including Georgia, New York, and New Mexico) as well as foreign countries (such as the U.K., Australia, and Canada)--due largely to high labor and production costs in California and the more-attractive tax incentives offered in other jurisdictions.

The U.S. film industry is inherently low margin and high risk, with most studios operating with EBITDA margins in the 10%-15% range. Many film projects are either unprofitable or have been scrapped prior to completion, making breakout hits relatively rare. Managing costs on individual projects is increasingly a key factor in achieving profitability, which has led to productions choosing to film in locations that offer sizable tax rebates.

Despite these cost issues, the U.S. film industry generated a positive $15.3 billion trade surplus across every major market worldwide in 2023, according to the Motion Picture Association.

The administration has not clarified the specifics of the potential tariffs, which the president proposed to counteract what he characterized as the national security threat stemming from foreign countries offering film production incentives. In response, California Governor Gavin Newsom proposed the creation of a $7.5 billion federal tax incentive on May 5 to counter those offered by other countries. This was followed by a May 12 request by a Hollywood group led by Jon Voight to change the federal tax code and focus primarily on tax incentives to bolster U.S. film development.

U.S. film box office
Year	Releases	Wide releases*	Box Office (mil. $)	Year-over year change (%)	Versus 2019 (%)
2026e		114
2025e		110	9,300	8.9
2024	640	95	8,541	(4.1)	(24.8)
2023	592	100	8,908	20.9	(21.6)
2022	502	78	7,370	64.4	(35.1)
2021	442	71	4,483	112.1	(60.5)
2020	455	37	2,113	(81.4)	(81.4)
2019	910	120	11,363	(4.4)	N/A
2018	993	119	11,892	7.4%	4.7
2017	854	114	11,075	(2.6)	(2.5)
2016	855	127	11,375	2.0	0.1
2015	845	126	11,149	7.5	(1.9)
2014	849	112	10,369		(8.8)
*Wide release defined as over 2,000 screens. e--Estimate. N/A--Not applicable. Sources: Boxofficemojo.com, Variety, and S&P Global Ratings estimates.

Why It Matters

We believe these proposals represent the start of a more-substantive conversation that could lead to the implementation of increased incentives for the domestic film industry. We will assess the ratings impact of any proposed incentives for U.S. media and entertainment companies as more concrete details (and specific legislation) become available. Based upon the initial proposals, we believe the tariffs would increase costs for American film and television projects. In our view, tax incentives are a preferential path to support the U.S. film and television industry’s domestic production.

The Trump Administration’s recent playbook has involved the introduction of tariffs to prompt changes in the country's trade relationships. However, S&P Global Ratings believes it is unclear what facets of the global film and television value chain could be tariffed, though we view one proposal to tariff overseas tax incentives as a possibility.

Although industry participants have acknowledged a shared goal of returning film production to the U.S., any tariffs imposed will likely further weaken the industry's output. We believe the proposed 100% tariffs on movies made outside the U.S., which we view as unlikely to be implemented, will lead to increased production costs for the film and television companies that they will be unable to pass on to theater operators or consumers through higher ticket prices. Given the industry’s already thin margins, we believe this would ultimately result in a reduction in the number of projects that are greenlit, especially small- and mid-size films with budgets below $75 million. A smaller supply of films to exhibit in theaters would also pressure theater operators, which have seen the supply of new releases shrink since Disney acquired Twenty First Century Fox in 2019. As an additional risk, foreign countries could impose retaliatory tariffs against U.S. films, which would act as a further headwind to the industry.

U.S. tax credits for film and television productions vary from state to state. For example, some states (like Georgia and New York) offer very attractive packages, as does the U.K. However, Hollywood’s home state, California, has tried to reduce its exposure to the industry, which accounts for about 1.5% of its GDP. This state-by-state variability has led to elevated competition across the U.S. for projects, which has disproportionately hurt California due to its still-dominant industry market share and less-attractive incentive program.

We believe that a federal tax incentive program would be neutral for our ratings on U.S. media companies. While such a regime would not lead to an increase in the overall volume of projects, we expect it would result in a greater number of projects being filmed in the U.S. over foreign jurisdictions. And, if the federal program led to an increase in the overall incentive pool, we expect more projects would have a chance of achieving profitability.

What Comes Next

Whether President Trump moves forward with his 100% tariff proposal remains be seen, though--in our view--the key benefit of his proposal could be to instigate the development of other initiatives intended to increase the competitiveness of domestic film production.

Governor Newsom will likely advance his proposal to more than double California’s cap on its film and television tax credit program to $750 million annually (from $330 million currently) this summer. We will be closely watching any developments related to potential state and federal partnerships for similar tax incentives.

While the industry’s request to change the federal tax code (if granted as asked) would lead to an increase in the number of projects filmed domestically, it would not necessarily increase the total volume of projects. Greater incentives create a modest opportunity to increase the competitiveness of locales to lure creators to produce content in their jurisdictions, which could help reduce production costs for studios. Although we don’t believe this will lead to a material shift in their cost structure, such tax incentives could have marginal benefits for the low-margin industry.

While not part of our base-case expectations, the biggest risk to any U.S.-imposed tariffs on content could come from official and unofficial retaliatory measures by foreign countries. China already limits the number of U.S. films that it allows to enter its market for theatrical release, and has threatened to further reduce this number if the U.S. imposes elevated tariffs against China (the U.S. had threatened 145% tariffs but recently agreed to leave them at 10% as negotiations continue). The U.S. film and television industry could face material headwinds if other countries respond in a reciprocal fashion by limiting the volume of domestically filmed content from entering their respective markets, given that the industry derives about two-thirds of its box office revenue from outside of the U.S. Additionally, international consumers could choose to boycott American-owned content, leading to reduced demand for movies and streaming services.

Our rating outlook for companies focused on creating and owning film and TV content is generally neutral. Looking ahead, we expect the pace of content spending in 2025 will be materially lower relative to the so-called "Peak TV" era, which lasted from the mid-2010s through 2023. Nonetheless, we continue to believe that content is king and companies with robust franchises and IP stand the best chance of benefiting from a strategic flight to quality.

Primary Contact:

Naveen Sarma, New York 1-212-438-7833; naveen.sarma@spglobal.com