Media and entertainment sector not immune to trade war implications

Automakers, agriculture producers and consumer electronics manufacturers have dominated headlines in recent months as the global trade war intensifies. However, one industry that—until recently—has received less coverage is media and entertainment. While it may not feel the effects of the trade war directly, the industry may experience a downstream impact as consumers and businesses make critical spending decisions driven by ongoing economic uncertainty.

Traditionally, marketing (including advertising) is one of the first items an organization cuts in times of uncertainty. This is a big issue for media and entertainment businesses, many of which rely heavily on advertising revenue to keep operations going. Streaming channels are one example, as the majority have changed their business models to rely heavily on advertising and less on subscribers.

At the same time, consumers are feeling pressure as costs increase for everyday items such as food (the food index rose 0.4% in March, according to the U.S. Bureau of Labor Statistics), and as a result are cutting back on media-related expenses. For example, Bloomberg found that theater ticket sales were down 10% in Q1 2025, compared to the same period last year.

Reduction in ad spend

The ripple effect of businesses cutting marketing budgets to focus their spending on core operations will strike media and entertainment companies in different ways, depending on their primary revenue source. According to Bloomberg, approximately one-third of media revenue (including from ads) and discretionary consumer spending on entertainment such as theme park visits may be at risk. Companies with greater ad exposure are particularly vulnerable.

U.S. gross domestic product and advertising spend are highly correlated, with declines in advertising spend typically aligning with periods of economic downturn. For example, during the Great Recession of 2008−09, the ad market declined by 13%, according to an estimate by The Economist, with traditional media (radio, print, etc.) hit the hardest.

As companies gear up for a potential recession, expect traditional ad spend budgets to shrink as executives shift to cheaper alternatives, such as digital advertising, or cut spending altogether to focus on investments with a more tangible return.

Reduction in discretionary income

As tariffs set in, the costs will get pushed to consumers, who will have less money to spend on entertainment such as concerts, sporting events and streaming services. Recent data has shown a sharp nominal decline in personal income and disposable income as economic challenges emerge, while spending has dropped significantly in a wide range of economic categories. With many households likely looking to reduce spending in the coming months, entertainment expenses will likely be among the first to be eliminated. Businesses that rely heavily on consumer spending (theme parks, for example) could get hit hard as discretionary funds decrease for individuals and families. 

While Netflix—which reported a record profit in Q1 2025 and told shareholders that “there’s been no material change to our business outlook”—has seemingly been unaffected by recent tariffs, other streaming services may find themselves less insulated. Still, consumers are rapidly cutting the cord with traditional television by ending cable contracts—a shift that could help insulate streaming services, which typically offer subscribers more cost-effective options for at-home entertainment. 

Shifting foreign relations

In May, the administration authorized a plan to enforce a 100% tariff on films produced outside the United States to incentivize U.S. studios to shift to domestic filmmaking and away from the increasing trend of production overseas. According to Bloomberg, spending on film and TV production in the U.S. fell 28% between 2021 and 2024, with filming in the Los Angeles area declining 22% in Q1 2025.

Meanwhile, other countries such as Canada, Australia and the UK are gaining market share due to tax incentives and lower production costs. If these foreign film tariffs are implemented, additional costs could be passed on to consumers.

In addition, China, the world’s second largest film market and a key component of Hollywood’s international strategy, has been the primary target for the most aggressive U.S. tariffs. Depending on the outcome of the ongoing trade dispute, U.S. studios may have to develop new strategies to account for reduced revenue from China.

The takeaway

While media and entertainment may not be the first industry that comes to mind when estimating the potential impact of tariffs, executives will have to manage multiple indirect downstream effects to navigate the new financial reality in 2025 and beyond.