Now that the strikes are over, the mood in Hollywood is decidedly mixed
It should be an exciting time in Hollywood.
Writers have been back at their keyboards for a month now, having struck a deal so favorable that even they seemed a little stunned. On Wednesday, the actors’ union said it had negotiated its own interim contract, all but ending the 118-day strike and paving the way for the film and television industries to return to life for the first time since May.
Champagne for everyone!
Instead, the mood in the entertainment capital is decidedly mixed, as festive sentiments compete with resentment over the work stoppage and concerns about the coming business era.
“People are excited — thrilled — to get back to work,” said Jon Liebman, co-chief executive of Brillstein Entertainment Partners, a venerable Hollywood management company. “But they are also aware of some sobering challenges ahead.”
Analysts estimate that higher labor costs will add 10 percent to the cost of making a show, and studios are expected to offset this by cutting back on production.
“Companies are not going to increase their budgets accordingly,” says Jason E. Squire, editor of “The Movie Business Book” and host of an accompanying podcast. “They will compensate by earning less. The end.”
Hulu, for example, expects the number of new shows it makes in 2024 to drop by about a third compared to 2022.
The Directors Guild of America also has a new contract that guarantees pay increases. And two more union contracts, both for crews, are set to expire in the coming months. Studios will either have to pay up or risk being closed again. “READY for our contract fight next year,” Lindsay Doughertyrecently lead organizer for Teamsters Local 399 said on X, formerly known as Twitter. Her branch represents more than 6,000 Hollywood employees, including truck drivers, location managers and casting directors.
Even before the strikes, Hollywood went from boom to austerity. Peak TV, the glut of new programming that helped define the streaming era, ended last year when Wall Street began pressuring streaming services to prioritize profits over subscriber growth. According to research firm Ampere Analysis, TV networks and streaming platforms have ordered 40 percent fewer adult scripted series in the second half of 2022 than in the same period in 2019.
In other words, 599 adult scripted series were created last year. Some analysts predict the annual number will be closer to 400 by 2025, a decline of roughly a third. Even the most modest series employs hundreds of people, including agents, managers, publicists and stylists, who in turn fuel the wider economy.
“Now that the strike is over, we are all staring down the barrel of a painful structural adjustment that predates the strike,” said Zack Stentz, a screenwriter whose credits include “X-Men: First Class” and “Thor.” wrote on X. “Many careers and even entire companies will disappear in the coming year.” (He added, on a glass-half-full note: “This is also a time for smart little mammals to survive and even thrive in the new landscape. Your job is to be a smart mammal.”)
The problem with streaming profitability remains largely unsolved. Netflix and Hulu are making money, and Warner Bros. Discovery has said its Max service will turn a profit by the end of the year. But Disney+, Paramount+, Peacock and others continue to lose money. Peacock alone will bleed $2.8 billion in red ink by 2023, Comcast said last month.
Most analysts say there are too many streaming services and that the weakest one will eventually close or merge with larger competitors.
The entertainment industry’s underlying cable television and box office problems also remain dire and in some cases worsened during the five months it took to restore labor peace.
According to accounting giant PwC, fewer than 50 million households will pay for cable or satellite TV by 2027, down from 64 million today and 100 million seven years ago. In July, Disney announced it was exploring a once-unthinkable sale of a stake in ESPN, the cable giant that has driven much of Disney’s growth over the past two decades. Paramount Global’s once-venerable cable portfolio, centered around Nickelodeon and MTV, has also been ravaged by cord-cutting; Paramount shares have fallen nearly 50 percent since May.
The film world is also restless. Movies now arrive in homes (via digital stores or via streaming) after just 17 days in theaters, compared to about 90 days, which was the standard for decades.
Audiences are finally starting to tire of Hollywood’s prevailing movie business strategy — endless sequels, each more bloated than the last — with mediocre results for the seventh “Mission: Impossible” film, the fifth “Indiana Jones” installment and the 11th “Fast & Furious” chapter as proof.
Theaters aren’t dead, as evidenced by strong turnouts for “Five Nights at Freddy’s,” “Taylor Swift: The Eras Tour,” “Barbie” and “Oppenheimer.” But ticket-buying data points to a troubling trend: People who went to six to eight movies a year before the pandemic are now going to three or four. Even the most ardent fans of big-screen entertainment are turning away.
Movie theaters in North America sold about $7.7 billion worth of tickets in October this year, down 17 percent from the same period in 2019.
There is more competition for free time; TikTok has 150 million users in the United States, the majority of whom are under the age of 30, and the average time spent on the app is growing rapidly.
Everywhere you look in Hollywood, it seems, companies are trying to cut costs. Citing the strikes and the “volatile greater entertainment market,” Anonymous Content, a production and management company, laid off 8 percent of its staff last month. Also United Talent Agency the number of heads reducedas do several competing agencies.
DreamWorks Animation was recently eliminated 4 percent of the working population, while Starz, the premium cable network and streaming service, is cutting its workforce by 10 percent. Netflix is restructuring its animation division, which is expected to result layoffs and fewer home movies.
Consider what’s happening at Disney, which is widely considered the strongest of the old-school entertainment companies, in part because it’s the largest.
Before the strikes, Disney had about 150 television shows and a dozen films in production. But concerns about the profitability of streaming and the decline of cable TV have hurt Disney’s stock price. Shares were trading around $80, down from $197 two years ago. Sorting out ESPN’s future is Disney’s first priority, but the company is also selling shares in India and considering whether to part with assets like ABC; the Freeform cable channel; and a chain of local broadcasters.
Disney is so vulnerable that activist investor Nelson Peltz announced this to The Wall Street Journal that he plans to push for board seats for the second time in a year. Disney fended off Peltz in February, in part saying it would cut $5.5 billion in costs and cut 7,000 jobs. On Wednesday, Disney said it had ultimately cut $7.5 billion and more than 8,000 jobs. It added that it would continue to tighten its belt.
Phil Cusick, an analyst at JP Morgan, said in a note to clients about Disney in late September: “The company plans to create less content and spend less on what it does create.”
Nicole Sperling reporting contributed.