Existential hand-wringing has always been part of Hollywood’s personality. But the crisis the entertainment capital now finds itself in is different.
Rather than one unwelcome disruption – say, the VCR in the 1980s – or even overlapping ones (streaming, the pandemic), the film and television business is being ravaged on a dizzying number of fronts. And nobody seems to have a solution.
On Friday, about 160,000 unionized actors went on strike for the first time in 43 years. They joined 11,500 already notable screenwriters, who walked out in May over similar concerns, including the threat of artificial intelligence. Since 1960, actors and writers hadn’t gone on strike at the same time.
“The industry we once knew — when I was doing ‘The Nanny’ — everyone was part of the justice train,” Fran Drescher, the former sitcom star and the president of the actors’ union, said as he announced the strike. “Now it’s a walled-in vacuum.”
At the same time, Hollywood’s two traditional businesses, the box office and the television channels, are both seriously broken.
This was the year when cinema attendance would finally recover from the pandemic, which saw many theaters shut for months. Cinemas would finally reclaim a position of cultural urgency.
But ticket sales in the United States and Canada for the year to date (about $4.9 billion) are down 21 percent from the same period in 2019, according to Comscore, which compiles box office data. Blips of hope, including strong sales for “Spider-Man: Across the Spider-Verse,” have been erased by disappointing results for high-priced films like “Indiana Jones and the Dial of Destiny,” “Elemental,” “The Flash,” “Shazam.” ! Fury of the Gods’ and, to a lesser extent, ‘The Little Mermaid’ and ‘Fast X’.
According to a recent report by accounting firm PwC, the number of movie tickets sold worldwide could reach 7.2 billion by 2027. In 2019, there were a total of 7.9 billion people in attendance.
It’s a slowly dying business, but at least it’s better than a rapidly dying business. According to PwC, fewer than 50 million households will pay for cable or satellite TV by 2027, compared to 64 million today and 100 million seven years ago. When it comes to traditional television, “the world has changed forever for the worse,” Michael Nathanson, an analyst at SVB MoffettNathanson, wrote in a note to clients on Thursday.
Disney, NBCUniversal, Paramount Global and Warner Bros. Discovery has relied on television broadcasters for decades for big profit growth. The end of that era has resulted in stock price slumps. Disney shares are down 55 percent from their peak in March 2021. Paramount Global, which owns channels like MTV and CBS, has experienced an 83 percent decline over the same period.
On Thursday, Disney CEO Robert A. Iger put the sale of the company’s “noncore” channels, including ABC and FX, on the table. He called the decline of traditional television “a reality we need to come to grips with”.
In other words, it’s over.
And then there’s the streaming. For a while, Wall Street was mesmerized by the subscriber-siphoning potential of services like Disney+, Max, Hulu, Paramount+, and Peacock, so the big Hollywood companies poured money into building online viewing platforms. Netflix was conquering the world. Amazon had arrived in Hollywood determined to penetrate, just like Apple with its ultra-deep pockets. If the older entertainment companies wanted to stay competitive – not to mention relevant – there was only one direction.
“You’re really in control now of tech companies who have no interest or idea of the entertainment business, so to speak — it’s not pejorative, it’s just the reality,” Barry Diller, the media veteran, said by phone last week, referring to Amazon and Apple.
“For each of these companies,” he added, “their small business, not their big business, is entertainment. And yet, because of their size and influence, their small interests are paramount in making decisions about the future .”
A little over a year ago, Netflix reported its first subscriber loss in a decade and Wall Street’s interest turned. Forget subscribers. Now we care about profit – at least when it comes to the old-fashioned companies, because their traditional businesses (cash register and channels) are in trouble.
To make services like Disney+, Paramount+ and Max (formerly HBO Max) profitable, their parent companies cut billions of dollars in costs and cut more than 10,000 jobs. Studio executives also put the brakes on ordering new television series last year to keep costs under control.
Warner Bros. Discovery has said its streaming business, anchored by Max, will be profitable in 2023. Disney has pledged to be profitable by September 2024, while Paramount had not predicted a date other than peak losses this year, according to Rich Greenfield, a founder of the research firm LightShed Partners.
Giving in to union demands, which would again threaten profitability, will not be without a fight for the companies.
“In the short term, there will be pain,” said Tara Kole, one of the founders of JSSK, an entertainment law firm that counts Emma Stone, Adam McKay, and Halle Berry as clients. “A lot of pain.”
Every indication points to a long and destructive confrontation. Agents who have worked in show business for 40 years said the anger that was pouring through Hollywood was greater than anything they had ever seen.
“Straight out of ‘Les Miz’,” a former manager described the dramatic, us-versus-them mood in a text to a reporter. Photos circulating online from last week’s Allen & Company Sun Valley media conference, the annual “billionaires’ summer camp” attended by Hollywood proprietors, fueled the situation.
On a Paramount Pictures picket line on Friday, Ms. Drescher attacked Mr. Iger, something few people in Hollywood would dare to do without the cloak of anonymity. She criticized his compensation package (his performance-based contract allows up to $27 million annually, including stock awards, which is middle-of-the-road for top entertainment executives) and compared him and other Hollywood moguls to “land barons of the Middle Ages.” ”
“It’s so obvious he has no idea what’s really going on on the ground,” she added. Mr Iger had told CNBC on Thursday that the two unions’ demands were “just not realistic”.
In the coming weeks, studios are likely to cancel lucrative long-term deals with writers (and some actor-producers) under the force majeure clause in their contracts, which go into effect on the 60th or 90th day of a strike, depending on how the arrangements are structured. The force majeure clause states that when unforeseen circumstances prevent someone from fulfilling a contract, the studios can cancel the deal without paying a penalty.
Eventually, contracts with the Writers Guild of America and SAG-AFTRA, as the actors’ union is called, will be signed.
The deeper business challenges will remain.
Nicole Sperling reporting contributed.
