Hollywood content spending rebounds as S&P Global sees steadier outlook for U.S. media

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Hollywood spending rebounds

Highlights

S&P Global Ratings reports Hollywood content spending stabilizes and begins to rise modestly, with U.S. box office gross revenue up 10.8% through July 13, 2026.
Industry consolidation risks remain acute as the Paramount Skydance and Warner Bros. Discovery merger could trigger layoffs and studios adapt to tighter streaming economics.
California's annual film and TV tax credit doubles to $750 million, prompting potential production resurgence in Los Angeles, while independent lots struggle amid declining peak-TV demand.

Recovery outlook and operational shifts

As reported by S&P Global Ratings, its media and entertainment analysts see Hollywood's existential crisis as largely passing after a spring visit to Los Angeles that included meetings with studios, talent agencies and diversified media companies.

Analysts say content spending stabilizes after a hard reset and is starting to rise modestly. They also point to a stronger domestic box office, with total gross revenue up 10.8% through July 13, 2026, as evidence that U.S. consumers are returning to theaters across a broader film slate, not only major studio releases.

That improving mood is tempered by near-term concerns over consolidation. Industry participants are closely watching the proposed Paramount Skydance and Warner Bros. Discovery merger because of the risk of layoffs across Hollywood, while studios continue adjusting their businesses around streaming and tighter production economics.

Smaller studios remain under heavier strain because buyers, especially streaming services and broadcast networks, reduce content purchases after the end of peak TV. S&P says larger diversified studios are better insulated thanks to scale, established talent ties and lower funding costs, while many niche studios launched during the cheap-money era have shut down or retreated to single-project production.

Artificial intelligence is also gaining ground across the production chain. Studio executives do not expect AI to replace writers, directors or actors, but they do expect it to speed up creative work in areas such as storyboarding, virtual production, visual effects and reshoots, while the eventual use of any cost savings remains uncertain.

California incentives and industry impact

Hollywood executives are also watching whether production activity returns more strongly to California after the state doubles its annual film and TV tax credit to $750 million. Some also see potential for a federal incentive plan that could add to the state's program and improve the economics of shooting in Los Angeles.

The sound-stage market shows a split landscape. Major studio lots are increasingly capacity constrained, prompting expansion plans including Warner Bros. Discovery's additions in Burbank and at Leavesden in England, while Fox can lease more third-party space after Disney leaves the Fox Studios lot in Century City.

At the same time, many independent lots developed during the peak-TV boom now sit idle or have closed as demand softens. S&P also expects the Paramount lot in Hollywood to fill with more internal projects as Paramount Skydance reinvests in film and television production.

Talent agencies remain comparatively well positioned in this environment. S&P says leading agencies gain influence as top-tier talent stays in high demand, while agencies broaden revenue through brand representation, project packaging and growing international opportunities, including sports endorsements supported by AI-driven digital replication.

For credit markets, S&P expects ratings on most Hollywood-focused entertainment companies to remain stable or improve as the sector turns a corner. Even so, mergers and acquisitions are likely to remain the main driver of rating actions in 2026 and 2027, with Comcast's planned NBCUniversal spin-off potentially creating another participant in industry dealmaking.

Our earlier article covered Fitch Ratings’ upgrade of Cook County, Illinois, to ‘AA’ from ‘AA-’ on its sales tax and general obligation bonds, pointing to improved long-term fiscal stability and stronger financial performance. We noted that the move was linked to disciplined financial policies and was expected to support investor confidence and the county’s borrowing flexibility by lowering perceived credit risk.

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