Existential hand-grabbing has long been a part of the Hollywood persona. But the crisis that the entertainment capital now finds itself in is different.
Instead of facing a single, unwelcome disruption — the 1980s video hardware boom, for example — or even overlapping disruptions (broadcast, pandemic), the film and television industry is being hit hard on a staggering number of fronts. It seems that no one has any solutions.
On Friday, nearly 160,000 union representatives went on strike for the first time in 43 years, saying they were tired of the exorbitant wages of entertainment tycoons and feared they would not receive a fair share of the spoils of a future dominated by streaming. They join the already battered 11,500 screenwriters who walked out in May over similar concerns, including the threat of artificial intelligence. Actors and writers haven’t been on strike at the same time since 1960.
“The industry we once knew — when I did The Nanny — everyone was a part of the gravy train,” said Fran Drescher, former sitcom star and Actors Guild president, while announcing the strike. “Now it is a void surrounded by a wall.”
At the same time, Hollywood’s two traditional businesses, box office and television, are severely disrupted.
This was the year cinema was finally supposed to return to the pandemic that closed many theaters for months on end. Finally, the cinemas will reclaim a site of urgent cultural interest.
But ticket sales in the United States and Canada for the year so far (about $4.9 billion) are down 21 percent compared to the same period in 2019, according to Comscore, which compiles box office data. Glimpses of hope, including strong sales for “Spider-Man: Across the Spider-Verse,” were erased by the disappointing results of expensive blockbusters like “Indiana Jones and the Dial of Destiny,” “Elemental,” and “The Flash.” Shazam! Wrath of the Gods,” and, to a lesser extent, “The Little Mermaid” and “Fast X.”
The number of movie tickets sold globally could reach 7.2 billion in 2027, according to a recent report from accounting firm PwC. The total attendance was 7.9 billion in 2019.
It’s a slowly dying business, but at least it’s better than a fast dying business. Fewer than 50 million homes will pay for cable or satellite television by 2027, down from 64 million today and 100 million seven years ago, according to PwC. When it comes to traditional television, “the world has changed forever for the worse,” Michael Nathanson, analyst at SVB MoffettNathanson, wrote in a note to clients Thursday.
Disney, NBCUniversal, Paramount Global, and WarnerBros. For decades, Discovery relied on TV channels to drive fat profits. The end of that era sent stock prices into a malaise. Shares of Disney are down 55 percent from their March 2021 peak. Paramount Global, which owns channels like MTV and CBS, saw an 83 percent drop over the same period.
On Thursday, Disney CEO Robert Iger put the sale of the company’s “non-core” channels, including ABC and FX, on the table. He described the decline of traditional television as “a reality that we have to deal with”.
In other words, it’s over.
Then there is flow. For some time, Wall Street had been intrigued by the subscriber-acquisition potential of services like Disney+, Max, Hulu, Paramount+, and Peacock, so big Hollywood companies poured money into building online viewing platforms. Netflix has been taking the world by storm. Amazon arrived in Hollywood bent on making hits, as did the massive Apple. If the older entertainment companies are to remain competitive—not to mention—there is only one direction to run.
“You now have, really in control, tech companies that don’t have any interest or idea, so to speak, about the entertainment business — it’s not a pejorative, it’s just a fact,” media veteran Barry Diller said on the phone last week, referring to Amazon. hail.
He added, “For each of these companies, their small business, rather than their main business, is entertainment. However, given their size and influence, their secondary interests are paramount in making any decisions about the future.”
A little over a year ago, Netflix reported losing subscribers for the first time in a decade, and Wall Street’s attention rotated. Forget subscribers. Now we care about profits – at least when it comes to the old liners, because their traditional businesses (box office and channels) are in trouble.
To make services like Disney+, Paramount+, and Max (formerly HBO Max) profitable, parent companies have cut billions of dollars in costs and cut more than 10,000 jobs. Studio executives also put the brakes on ordering a new TV series last year to curb costs.
Warner Bros. The streaming business, anchored by Max, will be profitable in 2023, Discovery said. Disney has promised profitability by September 2024, while Paramount hasn’t predicted a date, except to say peak losses will happen this year, according to Rich Greenfield, founder of research firm LightShed. Partners.
Giving in to union demands, which could threaten the flow of profitability once again, is not something companies will do without a fight.
“In the short term, there will be pain,” said Tara Cole, co-founder of JSSK, an entertainment law firm that counts Emma Stone, Adam McKay and Halle Berry as clients. “Too much pain.”
Each indicator points to a long and devastating confrontation. Agents who have been in show business for 40 years said the rising outrage in Hollywood surpassed anything they had ever seen.
One longtime executive described the high drama, anti-them mood in a text message to a reporter “straight out of Les Miz.” Pictures circulating online from last week’s Allen & Company Sun Valley media conference, the annual “billionaires” summer camp attended by Hollywood’s super-rich, ignite the situation.
On the Paramount Pictures picket line Friday, Ms. Drescher attacked Mr. Iger, something few people in Hollywood would dare do without the cloak of anonymity. Critics criticized his salary package (his performance-based contract allows for up to $27 million a year, including stock awards, which is half way ahead of entertainment CEOs) and likened him and other Hollywood moguls to “medieval land barons.”
“He clearly has no idea what’s really going on on the ground,” she added. Mr. Iger told CNBC on Thursday that the unions’ demands were “not realistic.”
In the coming weeks, studios will likely cancel lucrative long-term deals with writers (and some actors and producers) under a force majeure clause in their contracts, which begins on the 60th or 90th day of the strike, depending on how the agreements are structured. A force majeure clause states that when unforeseen circumstances prevent someone from fulfilling a contract, studios can cancel the deal without paying a penalty.
Ultimately, the contracts would be done with the Writers Guild of America and SAG-AFTRA, as the Actors Union is known.
The deeper business challenges will remain.
Nicole Sperling Contribute to the preparation of reports.