Existential hand-wringing has always been part of Hollywood’s personality. But the crisis in which the entertainment capital now finds itself is different.
Instead of one unwelcome disruption to face—the VCR boom of the 1980s, for instance—or even overlapping ones (streaming, the pandemic), the movie and television business is being buffeted on a dizzying number of fronts. And no one seems to have any solutions.
On Friday, roughly 160,000 unionized actors went on strike for the first time in 43 years, saying they were fed up with exorbitant pay for entertainment moguls and worried about not receiving a fair share of the spoils of a streaming-dominated future. They joined 11,500 already striking screenwriters, who walked out in May over similar concerns, including the threat of artificial intelligence. Actors and writers had not been on strike at the same time since 1960.
“The industry that we once knew — when I did ‘The Nanny’ — everybody was part of the gravy train,” Fran Drescher, the former sitcom star and the president of the actors’ union, said while announcing the walkout. “Now it’s a walled-in vacuum.”
At the same time, Hollywood’s two traditional businesses, the box office and television channels, are both badly broken.
This was the year when moviegoing was finally supposed to bounce back from the pandemic, which closed many theaters for months on end. At last, cinemas would 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 blotted out by disappointing results for expensive 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.”
The number of movie tickets sold globally may reach 7.2 billion in 2027, according to a recent report from the accounting firm PwC. Attendance totaled 7.9 billion in 2019.
It’s a slowly dying business, but it’s at least better than a quickly dying one. 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 forever changed for the worse,” Michael Nathanson, an analyst at SVB MoffettNathanson, wrote in a note to clients on Thursday.
Disney, NBCUniversal, Paramount Global and WarnerBros. Discovery have relied for decades on television channels for fat profit growth. The end of that era has resulted in stock-price malaise. Disney shares have fallen 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, Robert A. Iger, Disney’s chief executive, put the sale of the company’s “noncore” channels, including ABC and FX, on the table. He called the decline in traditional television “a reality we have to come to grips with.”
In other words, it’s over.
And then there is streaming. For a time, 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 make inroads, as had the ultra-deep-pocketed Apple. If the older entertainment companies wanted to remain competitive—not to mention relevant—there was only one direction to run.
“You now have, really in control, tech companies who haven’t a care or a clue, so to speak, about the entertainment business — it’s not a pejorative, it’s just the reality,” Barry Diller, the media veteran, said by phone this past week, referring to Amazon and Apple.
“For each of these companies,” he added, “their minor business, not their major business, is entertainment. And yet, because of their size and influence, their minor interests are paramount in making any decisions about the future.”
Netflix reported a subscriber loss for the first time in a decade, and Wall Street’s interest swiveled. Forget subscribers. Now we care about profits—at least when it comes to the 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 have slashed billions of dollars in costs and eliminated more than 10,000 jobs. Studio executives also put the brakes on ordering new television series last year to rein in costs.
WarnerBros. Discovery has said its streaming business, anchored by Max, will be profitable in 2023. Disney has promised profitability by September 2024, while Paramount had not forecast a date, except to say peak losses will occur this year, according to Rich Greenfield, a founder of the LightShed Partners research firm.
Giving in to union demands, which would threaten streaming profitability anew, is not something the companies will do without a fight.
“In the short term, there will be pain,” said Tara Kole, a founding partner 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 standoff. Agents who have worked in show business for 40 years said the anger surging through Hollywood exceeded anything they had ever seen.
“Straight out of ‘Les Miz'” was how one longtime executive described the high-drama, us-against-them mood in a text to a reporter. Photos circulating online from this past week’s Allen & Company Sun Valley media conference, the annual “billionaires’ summer camp” attended by Hollywood’s haves, inflamed 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 pay package (his performance-based contract allows for up to $27 million annually, including stock awards, which is middle of the road for entertainment chief executives) and likened him and other Hollywood moguls to “land barons of a medieval time. “
“It’s so obvious that he has no clue as to what is really happening on the ground,” she added. Mr. Iger had told CNBC on Thursday that the demands by the two unions were “just not realistic.”
In the coming weeks, studios will probably cancel lucrative long-term deals with writers (and some actor-producers) by virtue of the force majeure clause in their contracts, which kick in on the 60th or 90th day of a strike, depending on how the agreements 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 known, will be hammered out.
The deeper business challenges will remain.
Nicole Sperling contributedreporting.