Existential hand-wringing is part of the Hollywood personality. But the crisis facing entertainment capital is different.
Rather than facing the VCR boom of the 1980s — or overlapping ones (streaming, pandemic) — as an unwelcome disruption, the film and television business is being buffeted on a dizzying number of fronts. And no one seems to have a solution.
On Friday, nearly 160,000 union actors went on strike for the first time in 43 years, saying they were tired of being overpaid by entertainment moguls and worried they weren’t getting their fair share of the spoils of a streaming-dominated future. They join an already impressive 11,500 screenwriters who walked out in May over similar concerns, including the threat of artificial intelligence. Not since the 1960s had actors and writers gone on strike at the same time.
“The industry as we once knew it — when I was doing ‘The Nanny’ — everyone was part of the gravy train,” former sitcom star and actors’ union president Fran Drescher announced of the walkout. “Now it’s a vacuum with a wall.”
At the same time, two of Hollywood’s traditional businesses, the box office and television channels, have been badly damaged.
This was the year when cinema was finally coming back from the pandemic which had closed many theaters for months. Eventually, cinemas will reclaim their place as a cultural emergency.
But ticket sales in the United States and Canada so far this year (about $4.9 billion) are down 21 percent from the same period in 2019, according to ComScore, which compiles box office data. Shades of hope, including strong sales for “Spider-Man: Across the Spider-Verse,” were offset by the disappointing results of expensive films 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.”
According to a recent report by accounting firm PwC, the number of movie tickets sold globally could reach 7.2 billion by 2027. The total attendance in 2019 was 7.9 billion.
It’s a business that dies slowly, but it’s better than dying quickly. By 2027, fewer than 50 million households will pay for cable or satellite television, compared with 64 million and 100 million seven years ago, according to PwC. In terms of traditional television, “the world has turned forever worse,” Michael Nathanson, an analyst at SVB Moffett Nathanson, wrote in a note to clients Thursday.
Disney, NBC Universal, Paramount Global, Warner Bros. Discovery has depended on television channels for fat profit growth for decades. The end of that era resulted in stock-price malaise. Disney shares have fallen 55 percent from their peak in March 2021. Paramount Global, which owns channels such as MTV and CBS, suffered an 83 percent decline in the same period.
On Thursday, Disney’s Chief Executive 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 have to come to grips with.”
In other words, it’s over.
And then there’s streaming. Wall Street was for a time mesmerized by the subscriber-siphoning potential of services like Disney+, Max, Hulu, Paramount+ and Peacock, so Hollywood giants poured money into building online viewing platforms. Netflix was taking over the world. Amazon has also arrived in Hollywood. If legacy entertainment companies want to stay competitive — not to mention relevant — there’s only one direction to run.
“You really have control right now, tech companies that don’t have a care or a clue about the entertainment business — it’s not a slur, it’s reality,” media expert Barry Diller said by phone. This past week, mentions Amazon and Apple.
“For each of these companies, their small business is entertainment, not their main business. Yet, because of their size and influence, their small interests are paramount in making any decisions about the future.
A year ago, Netflix reported a subscriber loss for the first time in a decade, and Wall Street’s interest shifted. Forget subscribers. Now we care about profitability – at least when it comes to old-line companies, because their traditional businesses (box office 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 control costs.
Warner Bros. Discovery said its streaming business, anchored by Max, will be profitable in 2023. Disney had promised to turn a profit by September 2024, while Paramount had not predicted a date, except to say it would post its biggest loss this year, according to founder Rich Greenfield. of research firm Lightshed Partners.
Giving in to union demands would once again threaten streaming profits, something companies won’t do without a fight.
“In the short term, there will be pain,” said Tara Cole, founding partner of JSSK, an entertainment law firm that counts Emma Stone, Adam McKay and Halle Berry as clients. “A lot of pain.”
All signs point to a long and disastrous standoff. Agents who have been in show business for 40 years say the anger in Hollywood is more than they’ve ever seen.
“Straight out of Les Miz,” was how one longtime executive described the high-drama, us-versus-them mentality in a phrase to a reporter. Photos circulating online from this past week’s Allen & Co. Sun Valley media conference teased the status quo at the annual “billionaire summer camp” attended by Hollywood’s haves.
Friday at Paramount Pictures’ Picket Line, Miss. Drescher attacked Mr. Iger, something few people in Hollywood dare to do without the cloak of anonymity. She criticized his pay package (his performance-based contract, which pays up to $27 million a year, including stock awards, is in the middle of the path for entertainment chief executives) and likened him and other Hollywood moguls to “a medieval capitalist.”
“It’s very clear that he has no clue what on earth is going on,” she added. Mr. Iger told CNBC on Thursday that the two unions’ demands were “unrealistic.”
In the coming weeks, studios may cancel lucrative long-term deals with writers (and some actor-producers) based on force majeure clauses in their contracts, depending on how the strike starts on the 60th or 90th day. Contracts are structured. A force majeure clause says that when unforeseen circumstances prevent someone from fulfilling a contract, studios can cancel the contract without paying any penalty.
Eventually, contracts with the Writers Guild of America and SAG-AFTRA, as the actors’ union is known, will be broken.
Deeper business challenges remain.
Nicole Sperling Contributed reporting.