Hollywood Unions Warn US Production Share Is Collapsing: What It Means for Independent Creators

Seed story: "Hollywood Unions Warn U.S. Film & TV Production Is On The Brink In Latest Economic Report" (Deadline) · search original Written from facts verified across 3 news report(s) — original explainer, not a copy or translation. Sources listed at the end.

A new report by a coalition of major Hollywood unions reveals that U.S. market share for film production budgets has plummeted from 74% to 42% over the last 25 years, signaling a critical shift in where content is being made. As Congress debates federal incentives to counter foreign subsidies, independent creators and small entertainment businesses must now rethink their production strategies and rights management to navigate this increasingly fragmented and internationalized landscape.

The Data Behind the Decline

On October 5, 2026, a coalition of major Hollywood unions—including IATSE, the Directors Guild of America, and SAG-AFTRA—released an EY report detailing a stark contraction in domestic production. The data reveals that while total studio spending has surged, the geographic allocation of those funds has shifted dramatically away from American soil.

Key findings from the report include:

Film production budgets spent in the U.S. dropped from 74% to 42% over 25 years.
Television production budgets in the U.S. fell from 94% to 64% during the same period.
For the 25 most expensive films, U.S. market share plummeted from 74% to just 34%.

This divergence highlights a critical risk for creators. As studios prioritize international locations to maximize budget efficiency, the domestic market shrinks. This trend directly impacts contract negotiations and payment structures, as fewer domestic productions mean fewer opportunities for local talent and crew to secure stable, union-standard agreements.

Why Studios Are Moving Abroad

The Economics of Relocation

The primary driver of this exodus is a stark disparity in financial support. While state-level subsidies have historically propped up domestic shoots, supporters of the proposed federal incentive argue these measures are now inadequate. According to the EY report, the U.S. must counter the robust incentives offered by countries such as Canada and the U.K., which have successfully attracted a growing share of global production.

Federal Gap: Congress is currently weighing a 20% to 30% federal production incentive to bridge this gap.
Competitive Pressure: International markets offer more predictable and substantial tax relief than fragmented state programs.
Budget Reality: With studio film budgets rising from $3 billion to $7 billion over 25 years, the cost of missing out on foreign incentives is increasingly prohibitive.

For independent creators, this shift signals that relying solely on local state funds may no longer guarantee a stable production environment. As major studios chase higher federal or foreign returns, the economic foundation for domestic independent projects becomes more precarious, potentially forcing creators to seek co-production deals abroad to secure viable financing.

The Core Issue: A Shrinking Domestic Market

Structural Shifts and Policy Gaps

The proposed 20% to 30% federal incentive aims to counter state-based subsidies and rival nations like Canada and the U.K. However, this legislative move occurs against a backdrop of intense corporate consolidation. Paramount Skydance is expected to close its acquisition of Warner Bros. Discovery on October 6, 2026, forming Skydance Corporation. This merger signals a significant shift in how major players allocate resources globally.

For independent creators, this consolidation creates a dual-edged sword:

Reduced Competition: Fewer major studios may mean fewer diverse entry points for independent talent.
Centralized Power: Decision-making regarding greenlights and budget allocation becomes more concentrated.
Incentive Dependency: Creators may rely heavily on the new federal tax credits to remain viable.

Ultimately, the interplay between federal policy and corporate mergers dictates the stability of domestic production. If the incentive fails to offset the cost of moving abroad, the shrinking domestic market could further marginalize independent voices, forcing creators to navigate a landscape where rights and payments are increasingly determined by a handful of consolidated entities.

Impact on Independent Production Strategies

With domestic production budgets shrinking, independent creators face tighter margins. The EY report highlights that U.S. film market share dropped from 74% to 42% over 25 years, signaling a structural shift. This reduction in local infrastructure means fewer reliable vendors and higher logistical costs for small teams.

Adapting requires strategic budgeting and flexible planning:

Diversify Locations: Consider shooting in jurisdictions with robust incentives, as the U.S. lags behind Canada and the U.K.
Secure Early Funding: Lock in capital before inflationary pressures hit, given the volatility in production costs.
Negotiate Residuals: Ensure contracts account for potential international distribution, as domestic revenue streams weaken.

These shifts directly impact rights management. Creators must scrutinize payment terms to ensure they retain value even if production moves abroad.

Rights Management in a Globalized Landscape

As U.S. production share drops from 74% to 42% for film, independent creators face heightened jurisdictional complexity. When a project shifts from a domestic set to a foreign location, the governing law for intellectual property changes. This shift complicates the enforcement of moral rights and the scope of work-for-hire clauses, which vary significantly across borders.

Key challenges for independent professionals include:

Licensing Ambiguity: Determining which country’s copyright laws apply to digital distribution rights.
Contract Enforcement: Navigating cross-border disputes when a foreign production entity fails to honor payment terms.
Union Coverage: Ensuring SAG-AFTRA or IATSE agreements remain valid when shooting outside the U.S.

According to reports, these legal gray areas can leave creators vulnerable. Without clear contractual language specifying the governing jurisdiction, independent professionals may struggle to protect their residuals and licensing fees. As studios diversify their spending, creators must ensure their contracts explicitly address international compliance to safeguard their economic interests.

Actionable Steps for Creators

As U.S. production share drops and studios chase international incentives, independent creators must proactively secure their positions. Do not assume domestic production guarantees; instead, diversify your project scope to remain viable whether shoots stay stateside or move abroad. This flexibility is crucial as the gap between U.S. and global spending widens.

To protect your rights and income, focus on these key contract elements:

Clarify Territory Rights: Ensure your agreement specifies whether you retain rights for domestic versus international distribution, especially given the 42% U.S. film budget share.
Negotiate Incentive Clauses: If a project relies on federal or state tax credits, verify how these funds impact your compensation or residuals.
Standardize Global Terms: Use clear language for cross-border productions to avoid ambiguity in a market where 64% of TV budgets now leave the U.S.

By treating your contract as a global asset, you safeguard your earnings against the shifting tides of the industry.

FAQ

How much has U.S. film and TV production market share declined over the last 25 years?

According to an October 2026 report by EY, U.S. market share for film production budgets has dropped from 74% to 42%, while television production budgets have fallen from 94% to 64% over the same period. The report also notes that the U.S. share for the 25 most expensive films specifically declined from 74% to 34%.

What is the proposed federal production incentive to support the U.S. film industry?

Congress is currently considering a federal production incentive ranging from 20% to 30% to help support the domestic film and television industry. Supporters argue that this federal measure is necessary because current state-based subsidies are inadequate and the U.S. must compete with incentives offered by countries like Canada and the U.K.

Which Hollywood unions released the report warning about the decline in U.S. production?

A coalition of Hollywood unions, including IATSE, the Directors Guild of America, and SAG-AFTRA, released the report on October 5, 2026. The report, conducted by EY, highlights significant declines in U.S. market share for both film and television production budgets over the last 25 years.