Former Netflix Exec On LA's Post-Strike Studio Landscape

Whenever the Writers Guild of America and SAG-AFTRA strikes end, many in the industry anticipate a wave of production to follow.

Soundstage projects proposed before the entertainment talent strikes began are in the development process amid a lot of uncertainty, not just about when Hollywood will get back to work but also what getting back will look like and how studio real estate will be affected by the bounce back.

“As a service business and as a landlord, it's a very rough time right now,” The MBS Group Chief Studio and Real Estate Officer Jason Hariton told an audience at a Bisnow event last week.

Last year, soundstage occupancy across the city was in the low to mid-90% range. But as a result of the strikes, it is close to zero across the 10M SF of studio space that The MBS Group and its affiliate company, Hackman Capital Partners, hold globally. 

The silver lining is an anticipated surge in production activity when the strike ends, similar to what followed early pandemic lockdowns, Hariton said. Prior to joining MBS, Hariton was Netflix’s head of corporate and production real estate as well as its head of studio and production operations.

What will be critical when the strike ends is having the space that users want to be in, or "finding that stickiness," as Hariton put it, that makes the creative forces in a given production want to go to a space and return to that space. 

"I think it's fair to assume no one's forcing anybody to go anywhere," said moderator Mike Mosallam, head of studio strategy and operations for Apple. "At any of these content creators, it is very talent-driven, and creative really makes the ultimate decision, regardless of the efficiency from physical production.

"The decision-making is ultimately driven by the talent, the studio and the needs of that specific show." 

Content creation was slowing before the strike compared to its earlier pandemic-era boom, but studios are still pumping out much more than they were pre-pandemic.

“When it started to level off pre-strike, people's reaction — especially in the markets — was to say, ‘OK, now it's a decline of content. We saw the surge and now it’s in decline,’” Hariton said.

“The truth is the new normal is still drastically higher than the old normal” in terms of how much content is being produced, he said. 

Major names in streaming content — Netflix, Amazon Prime, Disney+ and the like — were expected to increase their spending on original content this year to $26.5B, a $3.3B increase over 2022 numbers, The Hollywood Reporter reported in March. While an impressive amount, it is a significant decrease in year-over-year investment compared to the $7.2B hike in spending from 2021 to 2022, according to THR. 

Developers seem confident in at least a continued high level of demand. To meet that anticipated demand for additional space to create new shows and films, Los Angeles has projects in the pipeline that would add about 3M SF to the city’s existing base of 6.2M SF of certified soundstage space, according to FilmLA, a nonprofit that tracks filming activity in the city. 

While at Netflix, Hariton helped lock in long-term leases for studio space — a huge departure from the traditional show-by-show leasing that still dominates the industry. Netflix and a handful of other digital streaming companies gobbled up space aggressively, locking soundstages down in advance of knowing exactly what would go into that space or for how long. 

“In most of those major production hubs, the production [needs] of Netflix exceeded the total amount of infrastructure that existed,” Hariton said of the conditions that existed in the market while he worked at Netflix. 

But while this longer-term lease approach, which resulted in securing space from five to even 15 years, might look like a standard commercial real estate lease, Hariton cautioned against lumping studio real estate in with other types of real estate. Not only are short-term leases still the norm, he said, but the key to success in studio real estate isn't necessarily the real estate itself but the operation of that real estate. 

“It's an operating business that requires technical expertise and operating expertise,” Hariton said. “It's not that it's rocket science, but it is a very unique usage case.” 

Productions might use totally different equipment and have their own unique requirements. 

“To say, ‘What's the standard size of a soundstage?’ that would be like saying, ‘What's the standard size of an office building?’” Hariton said.

Hariton told Mosallam that it is still unclear what will happen post-strike, but he said it may not be long before the future of content creation and its needs will become clearer.

“Around mid-next year, we'll see what the new normal is and where we stabilize,” Hariton said. “That will be a good indicator for all of us in this room of where we see it going into the years following.”