America's top-earning movie and TV stars are jostling for roles in Hollywood's biggest production in decades and one that could cost the industry billions of dollars. The script calls for top earners such as Tom Hanks and Julia Roberts to pick up placards and stand shoulder-to-shoulder on the picket line with bit-part players.

For Tinseltown is heading towards strike action. By the early summer the entertainment capital of the world could be paralysed by disputes involving both actors and writers. And there's little doubt the strikers will be chanting "Show me the money" just like Cuba Gooding Jr's grasping footballer in the sports drama Jerry Maguire.

Pre-production work on the project has been going on for months as studios and producers try to beat the June 30 deadline when the current actors' union contract runs out. Added to that is a threatened walkout by writers, who began negotiating this week for a new deal to replace the old one which expires in May.

The double whammy of industrial disputes adds up to The Labour War, the one scenario that Hollywood executives don't want to see get the green light. Both the film and TV industry will suffer once production grinds to a halt. At least TV stations can re-run old shows until the cows come home. An absence of actors and writers working for the big screen means that come 2002 there'll be a shortage of films to release in cinemas.

The very thought has provoked an unseemly rush to sign up top stars and green light movies, even before scripts have been polished, in a bid to stockpile the product just in case actors down tools later in the year. Producers know that if cameras haven't started rolling by April 1, then they'll be left with unfinished movies gathering dust on the shelves if the strike goes ahead.

The dispute would cost the movie-making capital of the world a fortune - as much as two billion dollars in wages and ancillary business a month in Southern California alone, according to one prediction. The timing could not have been worse, coming soon after a six-month strike against advertisers by the Screen Actors Guild and the American Federation of Television and Radio Artists. The cost to the industry was a staggering 240 billion dollars. Now existing contracts for film and TV actors and writers are up for re-negotiation amid widespread predictions that a strike is inevitable. Those who imagine top stars will be content to sit back and add up their 20 million dollar a movie pay cheques could be in for a shock. Many stars showed their support for strike action during the recent dispute involving commercial actors. American Beauty Oscar-winner Kevin Spacey and Indiana Jones star Harrison Ford were the top donors, both giving 100,000 dollars to the strike relief fund. George Clooney, Britney Spears and talk show host Jay Leno were others who chipped in with cash. Vocal support came from Tom Hanks, Paul Newman and Susan Sarandon as they joined other actors showing public support for the strikers at rallies around the country.

Ford demonstrated his solidarity with strikers by asking union approval before signing up to appear in a car ad to be shown only in Europe. Those who didn't toe the line were punished publicly. Golf star Tiger Woods was fined £70,000 by the Screen Actors Guild for shooting a car commercial during the dispute. British actress Elizabeth Hurley had to face protestors shouting "Scab!" as she arrived at the LA premiere of her comedy film Bedazzled last winter. They were angry that she ignored the strike to shoot a TV advert. She apologised, claiming she was unaware of the dispute but was later fined by the union.

Under the new agreements, writers and actors want to ensure they don't lose out because of technological advances. Previous agreements were hammered out in the early days of home video, pay TV and cable - and before digital technology and the Internet offered additional ways of distributing films and TV programmes.

They want fairer ways of working out fees for cable and foreign sales as well as a bigger cut from video and DVD sales. They want safeguards in case producers distribute old work over the Internet.

There are worries too that advances in digital technology enables directors to tamper with an actor's performance in post-production. In some cases, like the computer-generated Toy Story, producers don't need flesh-and-blood actors at all.

Negotiations between the Writers Guild of America and the Alliance of Motion Picture and Television Producers are in their second week with WGA President John Wells calling for a deal "that recognises that the community of writers feels strongly that we are not being accorded the respect due to us given our contributions to the industry".

As well as financial matters, writers are pushing for more creative muscle. They've angered the Directors Guild of America by calling for an end to the possessory "A Film By so-and-so" director's credit on movies which they feel downgrades the writer's contribution to the project. Writers are also demanding guaranteed access to sets and more say in the creative process.

The DGA says, while backing the economic issues, it will be watching talks closely for any developments that may reduce the power of directors.

TV networks face heavy advertising losses if the disputes happen. The last strike in 1988 seriously hurt network TV and saw ratings fall, losing the big networks nine per cent of their audience. Today, with so many channels available, the big networks are scared that viewers may not return to them once they've tasted the others.

Observers in Hollywood are not optimistic at the outcome of the writers' talks, on which the union has put a two-week deadline. One headline announced the start of talks with the "Day of reckoning".

Failure to reach agreement, according to the industry newspaper Variety, would be "a nightmare scenario that could have a cataclysmic impact on the Hollywood community". The Hollywood Reporter is running a "contract countdown" on its front page.

WGA president John Wells says that a strike is not inevitable but the heads of seven major TV studios indicated before talks began that they expected a walkout by writers.

Settling with the Screen Actors' Guild may be even more difficult for AMPTP negotiators. The majority of members of the acting union, about three-quarters of them, are "resting" - the actors term for being out of work - and earn their living as waiters or office temps. They'll still be collecting pay cheques even if the union orders an acting strike so they have nothing to lose.

Added to that, the recently-settled commercials strike has given the Screen Actors Guild (SAG) the confidence to fight hard for film and TV performers.

The withdrawal of labour by actors would hit the TV schedules first with production on new dramas and comedies for the autumn coming to a halt. Networks would have to fill the schedules with re-runs as well as reality and news shows which don't depend on actors. The sides are even far apart on exactly how much the union's proposals will cost the industry. Studio executives reckon at least 2.2 billion dollars over three years. The WGA's estimate is 725 million dollars for contracts covering writers, actors and directors.

Whatever the cost, The Labour War is one story that Hollywood executives are hoping doesn't run and run.