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How to Fix All of Hollywood’s Woes

By Roy Price   Substack   4.5.25

People have been worrying about Hollywood since its inception, like America’s beautiful but sickly child, but they seem extra worried now — for studios, for creators and for customers. Which concerns are real, and: as the walls close in, what can possibly save Hollywood from a grisly fate?

The Woes

1. Most SVOD services are just barely breaking even, if that; both profitability and growth are under pressure. Meanwhile, the miraculous cash cow of pay TV seems to be dying and everyone wants to or is spinning out cable assets into a third party “Bad Co.”
2. Movies aren’t doing very well at the box office.
3. Quality certainly doesn’t seem to be up, and some genres seem quite unjustly shunned (comedy).
4. A few years ago, there were a lot of sequels but now it’s truly nuts.
5. Creators (writers, directors, producers) feel they don’t get the upside they used to get.
6. All these dumb kids are on #!€}#! TikTok and seem to be less interested in film than they used to be.
7. AI threatens us all!
8. No one can finance an indie film; streamers cared about them for a minute and then hastily dropped them off on the church steps.
9. Consolidation of the business puts decisions in the hands of fewer people than ever.
10. Now that producing has become some sort of nonprofit dilettante sideline for trust fund kids, the exec career path sort of lacks a “career path.” (In fact, other than being a lawyer maybe, does any role in showbiz feel stable and promising?)

I think people are pretty familiar with these problems so I’ll save you (and me) the 10,000 words spent substantiating every one. But I will note that “survive until ‘25” has become “‘25 box office is down 11% versus ‘24 and is expected to wind up down 17% vs the average of the last three pre-pandemic years.” Cool.

What happened in Hollywood over the past ten to fifteen years is that everyone saw the subscription video train coming. And they ultimately, very slowly, decided that they needed to be on that train. That beautiful, perfect train needed to be part of their growth story. So everyone hopped in with their own service. But. It turned out that most of them, well, all of them I suppose, didn’t quite have a sufficiently robust selection — didn’t have “31 flavors,” if you will — to offer customers. They just had a smattering of this and that, which didn’t really blow everyone away, and so pricing and subscription numbers were lower than hoped. But the SVOD frenzy was so great that they optimized their entire business for SVOD, limiting for example theatrical exclusive windows or foregoing theatrical entirely.

Meanwhile, the ubiquity of the services and the more or less immediate availability of movies on demand killed or seriously damaged four things: cable, DVD, syndication, and theatrical. Netflix was optimizing everything for the service, so everyone followed that approach. But not only were those critical revenue sources diminished, but the business dynamic for creators was somewhat changed. Compensation used to be highly variable. A big hit movie would drive a lot of DVD sales attributable specifically to that film and key creators would get a big cut. But in a streaming world, most MAGR definitions (Modified Adjusted Gross Receipts — the contractual definitions of what “profit” means and how you might participate in it) changed from being an uncapped percent of a waterfall of various revenue sources to essentially a table that would yield bonuses under defined circumstances. I shouldn’t complain because Dan Scharf and I got that rolling at Amazon, but I’m just telling you what happened. So the difference here was that instead of having uncapped upside so that if you made Star Wars you could walk away a billionaire, you would now get a bonus. It had the advantage of simplicity and clarity, but “Montecito money” was off the table. Many creators do not like this.

On to the solutions.

I’m going to lay out some possible solutions that range from small adjustments to major changes. Some of these ideas revolve around the same basic notion which is that the pricing and availability of film and TV seems to be capturing a smaller share of customer surplus than the old windowing system that went from theatrical to DVD to cable pay one to cable pay two and to TV syndication. The idea with the old, good, system is that the people who are most excited about the product and want to see it early, or own it, contribute more. People who are more indifferent (the product offers them less “surplus”), can catch it for free on TBS in a couple years. Price and timing discrimination, like charging higher prices for great seats at the theater, is how you capture more customer surplus from keen customers who can afford to pay.

But if you just have one window, which is subscription, you don’t price discriminate at all. You could be Bill Gates and Wicked could be your favorite movie that you’d pay anything to see as soon as possible and to own, and you want the special Blu-Ray sku at Target with the witch’s hat included, but in a subscription format Bill winds up paying the exact same as everyone else and getting the exact same product. In business this is usually called “leaving money on the table.”

There is a question underlying a lot of this which is: can we walk some of this back? Or has a genie been let out of a bottle once and for all?

You might say oh well I don’t care if the big companies make money. That’s their problem and it doesn’t affect me. But, no, my friend. Because when the big companies make money, that trickles down to everyone, from agents to the talent to the valet parkers at Hinoki and the Bird. There is no doing well if the studios don’t do well.

WINDOWS

I think that, in all the excitement, mistakes have been made. Would it be possible to create more of an exclusivity window around theatrical and would this improve theatrical grosses? I don’t know why not. There used to be a 90 day window. Theatrical results were stronger. Now we have a variable but much shorter window and results are worse. All the other variables have pretty much remained constant so this experiment is roughly “ceteris paribus” as the economists say. Why not try it? And indeed people are discussing a 45 day window now. I endorse this effort.

I will note that when we launched Amazon Studios movies, we put all our films into theatrical with an exclusive window and it seemed to help drive awareness and demand, which was the reason for doing it. For example, Manchester by the Sea grossed $48M in 2016. Last year, Anora grossed $20M and The Brutalist grossed $16M. I liked Manchester, but part of that is windows.

Secondly, is there any way, through windows or otherwise, that some value can be brought back into the ownership model that used to be represented by DVD and Blu-Ray? I’d like this to be the case, but I’m less bullish. If you look at music, it seems that once people have an all you can eat subscription with everything forever, then people stop caring about ownership. However, what about the windows on the backend, the “forever” part? Should it not be forever? How long should a movie be on an SVOD service? What if it was just six months or a year? What if people did not have a sense that once a movie was on SVOD it was permanently on SVOD? Would purchase have more attraction? Or would it drive up piracy to an unacceptable degree? I’m not sure the allure of ownership can be restored but certainly a lot of money has been lost as it has faded away.

OWNERSHIP/DIN AYN

From 1970 to 1993, networks could not own their TV shows. There were two benefits to this in theory. First, it allowed a more competitive and more diverse content ecosystem. Also, an open system should yield better shows because networks wouldn’t favor their shows over third-party shows — all shows would have the same shot.

What if streamers could not own shows and could not license them for more than three seasons at a time?

In that case, the future seasons of hit shows would essentially be up for auction after season three. So Bridgerton, Netflix’s most watched show, would be soliciting offers now for the next three seasons. What do you think they’d get? Well, they’d capture a lot of the surplus they create. Let’s say an episode costs $8 million. Could they get $20 million per episode for ten episodes per season for three seasons? Who knows? But we’d certainly be closer to an open, uncapped comp system than we are now. (And a similar dynamic would apply to future licensing of past produced seasons.)

A STREAMER FOR INDIES

Indie films are somewhat neglected today. Maybe it’s algorithmically justified, but I watch indie movies and I find I don’t come across them. I don’t know where they are. And now we see that there are only 15 films per year that are scripted original non-horror films with a budget under $35M whereas in 2019 there were 33 (details here). This market is getting smaller partly because (I think) the films are mishandled in the massive bin of subscription video services. I think there would be an audience out there for an “indie streamer,” by which I mean a streamer with indie films plus original series plus some of whatever Hollywood is not doing, like comedy. This would benefit this category and the customers for this category. I wrote about this here.

A DECENTRALIZED STREAMING UTILITY

As discussed here, the ideal design for streaming would be a streamer that is truly just an open and transparent decentralized censorship resistant protocol out there living in space, on servers just unstoppable running via code and an economy of tokens. Anyone could add a show or movie to this system which would transparently distribute revenues after taking a modest share. Windowing would be up to content owners. Filmmakers could independently finance their projects on a global open market, which I suspect would leave them with greater upside and control. Instead of the whole industry revolving around one big streamer P&L and one concentrated leadership team, many studios would experiment and thrive — more like in the video game business. Note how currently one company is capturing most of the value in the industry…

CONCLUSION

I feel like “Hollywood” used to have a cool vibe, like a Laurel Canyon summer house party with original music suffused with the idea that we’re about to create the next big thing. But now — and I don’t think it’s just me — doesn’t Hollywood have more of a tense, low key Hunger Games vibe? This may be a consequence of all the other factors, all the woes, of the walls closing in on Han and Leia at last, of the stern and judgmental culture, of the politicization of everything, of the feast or famine nature of the business, but somehow it has gotten a lot worse over the past ten to fifteen years, and this has to be repaired. How can this be repaired? Maybe the whole situation has to be repaired? I don’t know. But I think this is part of the problem. People are tense.

As Fitzgerald wrote, “Not half a dozen men have ever been able to keep the whole equation of pictures in their heads.” The equation is changing, and not always in a good way. The industry must be open to creative changes — some tech-enabled, others legislative — to get good results for creators, studios and customers.

Roy Price was an executive at Amazon.com for 13 years, where he founded Amazon Video and Studios. He developed 16 patented technologies. His shows have won 14 Best Series Emmys and Globes. He was formerly at McKinsey & Co. and The Walt Disney Co. He graduated from Harvard College in 1989.

Film and TV Production In L.A. Was Already Plummeting. Wildfires May Hasten the Exodus

Devastating blazes have scattered thousands of crewmembers, raising fears of a quickened migration of projects away from California.

By Winston Cho, Katie Kilkenny The Hollywood Reporter 1.17.25  

Surfacing from the ashes of Los Angeles’ raging wildfires is a plea from local entertainment industry folk gutted by the blazes: Bring production back to the region. 

“One of the biggest things you can do to help our city is to shoot here,” wrote prominent cinematographer and director Rachel Morrison (The Morning Show, The Mandalorian, The Fire Inside) in an Instagram post making the rounds among behind-the-scenes film and TV workers. “We have some of the best crews in the world who need work now more than ever.”

Morrison’s message speaks to an unprecedented slump in local production. The pandemic came first. Then the strikes. And when it appeared as if filming in Los Angeles had bottomed out and would soon be on the upswing amid an escalating tit-for-tat battle among filming hotspots vying for Hollywood dollars, wildfires fueled by hurricane-force winds battered L.A.

The city has seen its share of devastation in earthquakes, fires and civil unrest, but nothing like this in recent memory. Apocalyptic flames fortified by 100 mile per hour gusts destroyed upwards of 12,000 structures built over the course of more than a century in days, ushering in a cloud of uncertainty to a gloomy production landscape yet to recover from back-to-back crises that transformed the economics of Hollywood.

Now, L.A faces a new set of challenges brought by the historic blazes that, if left unabated, may further chip away at its share of filming. Near the top of that list: the possibility that the blazes accelerate a mini migration of the entertainment industry’s workforce away from California. 

The degree to which production will be impacted by the number of filmmakers and crew members who have been displaced from their homes is unknown. The wildfires ravaged tens of thousands of acres in the Pacific Palisades and Altadena, two areas with tight-knit film and TV communities. And while the names of celebrities who have lost residences garnered the most headlines — Mandy Moore, Paris Hilton, Milo Ventimiglia, Jeff Bridges and Billy Crystal to name a few — lesser known are the losses suffered by members of local film and TV crews.

 Below-the-line union IATSE has estimated that at least 8,000 members have been evacuated or had their homes destroyed; Lindsay Dougherty, Local 399’s top staffer, says her organization’s initial outreach found that at least 25 members saw their homes devoured. An Excel document that has been circulating and lists the GoFundMe’s of affected crewmembers is now at more than 200 entries.

As crew members scatter to relatives’ homes, shelters, rentals, hotels and Airbnb’s, production could suffer, at least in the days and months to come. “The fires really did go through a lot of communities that are so central to housing film workers,” says Jason Lester, a music video and commercial director who has worked with Hozier, Phoebe Bridgers and Sabrina Carpenter and works primarily in L.A. “That can’t help but have an effect on the industry, especially in the short term.” 

…This could be an inflection point, with the fires potentially accelerating the flight of talent and film crew away from L.A. and to other production hubs. After all, why live in L.A., where the median rent is 70 percent higher than the national average, when Georgia has voluminous levels of production and a cheaper cost of living?

Those who stay face a housing market flooded by prospective renters displaced by the fires who are driving up bids. Steven Moritz, a real estate agent in Los Angeles, says he has 50 clients who lost their homes, adding that a house brought on for lease at $7,500 before the fire received multiple offers for double that amount last week (the lease was signed for $8,100 per month). Exacerbating L.A.’s housing crunch are the homeowners in the Pacific Palisades and Altadena, some of whom are getting checks from their insurers for temporary housing at the value of their former properties. 

…Then there’s the issue of production insurance. Wildfire season in Southern California has typically been June to October. That’s changed, and along with it the risk profile for shooting in certain regions of the state, particularly those buffeted by the Santa Ana winds. The tail end of 2024 and start of 2025 is an atypical timeframe for major wildfires in Southern California. Wildfire season may simply be year-round now. Expect an increase in insurance premiums and lower deductibles. “The risk doesn’t have the same temporal limitations anymore,” says Kirk Pasich, an insurance lawyer at McGuireWoods. “So, if there’s a production in January or February in an area susceptible to winds, the price will go up.”

Productions that aren’t backed by major studios will be hit the hardest. Studios typically procure insurance on a slate of titles, which equates to lower prices because insurers can spread out their risk across multiple projects in several locations over different times of the year. Independent productions, which spend around 2 percent of their budgets on insurance, do not have that luxury and will likely have to pay more for coverage. “I doubt it’s going to be tough to get a policy, but there are going to be higher premiums than you saw before,” says Bryan Sullivan, an entertainment lawyer who handles a variety of business affairs for production companies.

…Insurance policies will cover tabs for shutdowns caused by wildfires, but there’s a limit. That’s why banks and financiers that lend money for film and TV projects insist on a completion bond, which effectively acts like another layer of insurance to ensure that productions are able to cross the finish line in case there’s a shortfall. The completion bond industry — already in distress with last year’s bankruptcy of Film Finances, a global leader in film completion guarantees — may collectively decide that certain productions in wildfire-prone areas during high-risk times of the year are no longer bondable. 

Also at play: how well-to-do individuals who put millions of dollars into productions a year, mostly into the independent film space, and lost their homes or were otherwise financially impacted by the fires respond to the crisis. 

“There are a lot of high-net-worth film financiers who were definitely impacted,” says Elsa Ramo, a lawyer who handles production and distribution for companies such as Fox and Skydance. “Will they leave the L.A. dream or double down?” 

Some board members of the Producers Guild of America lost their homes in the fires, according to a person familiar with the situation. 

In the wake of the blazes, a brighter spotlight has been put on Gov. Gavin Newsom’s plan to rescue production in L.A. by more than doubling the amount in tax credits given to film and TV productions from $330 million to $750 million per year. Whether productions now opt to shoot in the city at historically comparable levels will largely swing on other changes to the program. Some revisions industry folk have been calling for include broadening the types of expenditures and categories of production that qualify for tax credits, like reality TV, and upping the maximum amount a single title can receive in subsidies. One idiosyncrasy to California’s film and TV tax credit program in particular has been leveraged by competing jurisdictions to coax productions into leaving: It’s the only major film hub to bar any portion of above-the-line costs — like salaries for actors, directors and producers — from qualifying for tax relief.

“It’s about getting the bottom line to a point that’s competitive with other jurisdictions,” says PGA CEO Susan Sprung. “What L.A. has that some of those other places don’t is the best crews and best producers in the world. We have all the infrastructure, so you just have to get budgets close enough to make the argument for why to shoot here.” 

…Still, Hollywood has long abided by the maxim requiring that the show must go on, so any doomsaying may be premature. One bright spot has been that the major soundstages that host the majority of TV and movie shoots in LA remain unscathed…

Hollywood and The Harris Campaign

By Roy Price Substack 11.13.24

Woke is the new disco, and nowhere is this cultural shift more evident than in the parallel decline of Hollywood and the collapse of the Kamala Harris presidential campaign. Both share a fatal flaw — an insistence on catering to an ideological bubble while alienating vast swaths of the potential audience. For Hollywood, this miscalculation carries existential implications. It’s time to move on.

For the past seven years, every prospective film and television project has gone through an ideological filter before two or three Standards and Practices apparatchiks massage it further into conformity. This aligns projects (with rare exceptions) with a subset of Americans and alienates the rest, which is not ideal for a business trying to be popular and make money.

Consider the audience Hollywood has chosen to disdain and ignore: half the country’s voters, 40% of Americans who own guns, another 40% who attend church monthly, and the 74% who live outside the West Coast, New York or New England. Add to this the roughly 50% of Americans who are male. This isn’t just a demographic miscalculation — it’s an industry-wide blind spot that precisely mirrors the Harris campaign’s fatal error.

Both Hollywood and Harris speak to an America that exists mainly in Hollywood HR departments, Columbia’s faculty lounge, and at CNN and MSNBC. America is changing the channel on all that. Many seem to agree with Quentin Tarantino, Chris Rock, Donald Glover, and Kevin Hart that the obsession with politics holds TV and film back.

Back in Hollywood, executives made a similar assumption: that audiences had no alternative to their messaging because every major network was pushing the same ideology. In a difficult time, this has unnecessarily made the business more difficult. Important genres like comedy have been particularly suppressed, as they don’t easily conform to ideological restrictions.

There are no good consequences to not giving customers what they want. US Box Office is down, churn has been high, and, while there are multiple reasons, creative constraints are one reason.

…To succeed in art, you have to put art before politics. There are few exceptions. Why did Hollywood people embrace wokeness with such fervor? For most people it is conformity. Hiring decisions are subjective in Hollywood, so there is always pressure to conform. In addition, at this point some people believe that if not for wokeness they would not have their jobs. (They’re probably right about that).

Hollywood is having a difficult time partly because, like Kamala Harris, it has been denying the reality of the audience. It has not been meeting customer expectations, mostly because it disdains them. It is time to focus on doing well, making great shows, hiring the best people, and responding to customers. Meeting customers where they are. Giving the people what they want. Because making customers the enemy of your industry is never viable.

The Kamala Harris campaign, and indeed Kamala Harris’s political career, is over and cannot be saved. But Hollywood can be — and must be — saved and it is time to save it.

Roy Price was an executive at Amazon.com for 13 years, where he founded Amazon Video and Studios. He developed 16 patented technologies. His shows have won 14 Best Series Emmys and Globes. He was formerly at McKinsey & Co. and The Walt Disney Co. He graduated from Harvard College in 1989.

Netflix To Pitch Top Agents, Managers On Transparency At Event Tuesday: Talent Payment Proposal Expected To Be Discussed

By Dominic Patten, Peter White, Nellie Andreeva Deadline 9.23.24

EXCLUSIVE: The topic of how the major streamers pay talent has been one of the dominant conversations in Hollywood over the past few months.

Netflix is holding a presentation for top agents and managers where it will likely be discussed as the streamer is understood to be reevaluating how it structures its deals going forward.

We hear that reps for WME, CAA, UTA, Paradigm, Verve, Gersh and other agencies as well as a number of the large management companies are heading to a breakfast event – titled Netflix Explained – at the Tudum Theater tomorrow morning.

Billed as an event aimed at providing talent representatives with better understanding how Netflix operates, agents and managers are expecting information about more transparency on how the streamer pays their talent.

While the subject of streaming pay models is not officially on the agenda for the presentation, which we understand will be given by Chief Content Officer Bela Bajaria, Chief Marketing Officer Marian Lee and Olivia De Carlo, who is Director of Title Merchandising, sources tell Deadline that it will be brought up.

Essentially, the streamer is considering a new way to pay talent, rewarding them for creating hits, rather than relying on the cost-plus model that sees stars, including top directors, get paid a big number upfront with little back-end.  

One of the considerations that could be on the table is Netflix asking top talent to reduce their fees by between 20-30%, in exchange for giving them twice that amount on the back-end if the show or movie is successful, on top of other bonuses that are already part of Netflix’s package.

What apparently is not yet under discussion or consideration is a change in Netflix’s rights situation so these stars and auteurs can eventually own their own IP after a certain period.

This all comes days after Netflix released its latest tranche of data around its semi-annual engagement report, which saw over 94B hours of content watched on the service in the first half of 2024.

That report highlighted the success of shows such as Fool Me Once, Bridgerton and Baby Reindeer, The Gentleman and Avatar: The Last Airbender as well as movies such as Damsel and Lift and specials such as The Roast of Tom Brady.

This transparency is key for the town if deals are to be struck in a new way. Netflix has led the way in offering data on its own shows compared to many of its rivals.

As one source told Deadline Netlix is moving into a “real adjustment phase” and any movement towards a new payment model is a “work in progress”.

Netflix declined to comment.

Wolf’s review: Dreadful, laugh-free slog tests limits of what Pitt, Clooney’s star power can salvage

By Johnny Oleksinski New York Post 9.17.24

Rated R AppleTV+

George Clooney and Brad Pitt made a public stink when Apple shifted the release of their movie Wolfs, for which they were paid tens of millions to make, from theatrical to streaming.

“It is a bummer,” Clooney moaned at the Venice Film Festival when asked about his paycheck, er, sorry, his movie.

Really, the pair should send Apple CEO Tim Cook an Edible Arrangement for saving them the embarrassment of what would have been a giant flop.

Wolfs, a so-called comedy written and directed by Jon Watts in which Clooney and Pitt play rival New York fixers tasked with discreetly disposing of a dead body, is a dreadful, laugh-free slog that tests the limits of what star power alone can salvage.

The A-list presence of Brad and George cannot mask the elementary school dialogue they utter, the jumbled tone and Dollar Store aesthetic. In fact, their attachment to this compost only exacerbates its many, many problems.

The boldface names suggest a certain level of quality — or, at the very least, competence — that this movie does not meet. Maybe I’d be more forgiving if this buddy-cop retread starred Stephen and Billy Baldwin. Alas.

As it stands, woeful Wolfs won’t make you howl so much as huff and puff.

Watts’ 108-minute yawn begins with a woman’s scream. That’s Margaret (Amy Ryan), and she has just encountered a naked, dead body in a luxury hotel suite.

Covered in the young man’s blood, Marge lowers the blinds and shakily picks up her iPhone. Apple, trying to make lemonade from its lemon, can at least hawk some mobile devices.

“I was told if I ever need serious help to call this number,” she says. “There is only one man in the city who can do what you do.”

In walks black-clad Clooney, whose character has no name or, you know, traits. He dons rubber gloves and prepares to make the damaging situation disappear. 

But it turns out he’s not the only man. A few minutes later, a downcast Pitt knocks on the door. 

His character has been hired by the hotel’s owner, a disembodied voice, to complete the same task since it turns out Margaret is a powerful district attorney who slept with the dead guy, and the proprietor doesn’t want her business tarnished by scandal. 

(Every New Yorker knows that high-profile crimes actually make locales more alluring. Ask Sparks Steak House.)

The two shadowy fixers have never met or even have any familiarity, but they immediately hate each other for some vague reason. And that, readers, is the only joke of this entire movie: Anything Brad can do, George can do better.

Watts, whose “Spider-Man” films for Sony are great fun, tosses away centuries of comedy rules by having both Pitt and Clooney play the straight man. 

So, we grimace as two smug, deflated, blasé dudes speak so robotically they could be in a biopic called “Siri.”

Two unspeakably bland men being quietly annoyed at each other is not humor as the world understands it. What’s funny is how much product is in their mummified hair.

In the pantheon of Clooney and Pitt collaborations, I’d sooner rewatch Oceans 12.

Wolfs briefly finds a pulse from the introduction of the only actor who’s awake, the talented Austin Abrams, who plays Kid. Geeky and inquisitive, he tags along with George and Brad on their underwhelming tour of New York’s underbelly.

But as soon as the focus shifts back to the two huge movie stars, our eyes glaze over. They noncommittally natter on about Croatian and Albanian crime syndicates and get in an impressively boring shootout while always being totally unbelievable in their roles. 

The sole virtue of Wolfs being released straight to streaming is the incredible ease with which viewers can switch over to Oceans Eleven after the first five minutes.

Development Fees For Writers On The Rise Amid Depressed TV Buying: “We Call It Schmuck Insurance”

By Nellie Andreeva Deadline 8.22.24

A strong pitch is key to selling a show, which is why TV writers put so much effort in preparing one. Now they want to get paid for that — and increasingly are. In a trend that started after the pandemic and took hold after the strike, many writers are earning a fee ranging from $5K-$25K to develop a pitch for a series.

Traditionally, production companies and studios make “if come” deals with writers for a project, guaranteeing them a script fee, typically in the low six figures, which is only paid if the project sells. Writers spend time to prepare what is referred to as “development material,” which they use during the pitch meetings to better present their vision for the series with the goal of securing a buyer. If that does not happen, they don’t get any money.

This was not a major issue during the golden age of broadcast when the five networks would order a combined 100 pilots a year, purchasing several times as many scripts, and during the feeding frenzy era of Peak TV that followed, which kept 500-600 scripted series going at any time. There were always buyers looking for content, giving writers and studios plenty of options.

That started to change after the pandemic. And with the Hollywood contraction accelerating post-strike, selling a show has become extremely difficult, making the preparation of a pitch a high-risk proposition.

“Everyone feels so depressed by the environment right now; I’ve never seen it like this,” one veteran TV executive-turned-producer said of the current state of the TV business. “Other than Netflix, which is doing its thing, no one is really buying a lot.”

Fewer scripts selling has led to writers putting more work into their pitches to make them stand out in hopes to boost their chances of success. And, with overall deals also drying up and staffing jobs harder to find amid a decline in U.S.-made original scripted series post-Peak TV, there are lot of writers struggling to support their lifestyles with house, car and private school tuition payments who are no longer willing to spend a considerable amount of time developing pitches for free. So their agents started asking for development fees.

“Pitches sometimes take as much work as writing an outline for a script or writing a full script. If a writer is spending the time and putting in the work, they should have something to show for it,” one agent said. “We call it schmuck insurance.”

Further exacerbating the problem is the proliferation of the so-called “bake-offs” where studios sometimes have three or so writers all develop pitches for a series based on the same idea/IP before choosing one of them to take out.

“Writers keep doing free work, and it kind of gets old,” one manager said. While more prevalent in features with free rewrites and other unpaid assignments — something the WGA has been pushing back on in contract negotiations — free work is largely frowned upon in TV, which is likely why the development fee asks have taken hold.

Smaller production companies and independent studios such as Fifth Season, Skydance TV, A24, A+E Studios and Future Shack have been early adopters as they have less leverage to land pedigreed writers while also having more leeway to be creative with deals.

The major studios, which have more clout as sellers and rely on large volume where development fees would add up, have been less receptive to the trend, with such payments for pitch development considered rare exceptions. Still, at least one major is known to have paid writers $10K development fees. Observers believe others would follow.

Sometimes, the development money a writer gets is applied toward the script fee if the pitch sells. There are tussles over that too, with agents asking for the development fee to be separate and studios pushing for it to be considered an advance toward the script fee if the project sells. Because a production company pays for writers to work on pitches, the company owns the development material that is created even if the pitch doesn’t find a buyer.

Lit agents, who can no longer take a packaging fee on projects they sell, get a cut too. While not substantial, the development fee business has created a new revenue stream for agents who commission them.

One bit of good news for writers amid the dearth of pitch sales and studios’ pullback on overall deals is the fact that script prices have gone up, with premium scripts going for $300K-$400K.

We’ve also seen the rise of what some refer to as “super blinds,” blind script deals for A-list creators that can pay $400K-$500K or even more. Employed by top streamers like Netflix, they are essentially a blank check aimed at enticing high-caliber creators to write something new with no specific idea attached to it.

That is still cheaper than an overall deal, which would pay $1.5M-$2M a year to an established showrunner and yield 1-2 scripts. Traditional studios and streamers have been pulling away from expensive overall pacts in favor of cheaper — and less restrictive for talent — first-look deals. Premium script deals — $300K-$350K for comedy, $400k-$450K for drama — are considered another financially advantageous alternative to overalls for top talent.

Ironically, the proliferation of overall deals over the past decade had kept script fee levels artificially depressed at around $150K-$200K for experienced writers under overall deals as those fees are being applied toward the deal amount. If the combined script, episodic and other fees for work under a deal surpass its total, the studios have to shell out fresh cash, something they have been avoiding by charging off less for script fees.

With overall pacts on the decline, the script market has now normalized, with seasoned writers consistently landing script fees north of $200K, I hear.

Also, because the script fees are not guaranteed in “if come” deals, some production companies and studios put some premium on them, sweetening the offers to writers in lieu of upfront money. If the pitch sells, writers get that amount regardless what price it sells for.

At the end of day, development fees are one of many “innovative ways” people are approaching the business but it is not a game changer, one agent stressed. “You can’t make a living off development fees; it’s not going to replace a script sale or a staffing job. It’s just a placeholder.”

The fees are also a validation of writers’ self-worth and a way for studios to show that they appreciate the work put into pitches, the person added.

Said another rep, “It’s a way to get some money in writers’ pockets and to incentivize them, give them a little more skin in the game.”

Hollywood’s Message to Red States: Our Movies Are for You

DNYUZ 7.28.24   The post Hollywood’s Message to Red States: Our Movies Are for You appeared first on New York Times.

For nearly two decades, Hollywood has seemingly missed no opportunity to sound the alarm about climate change.

There have been cri de coeur documentaries, most notably An Inconvenient Truth. Superheroes have been concerned, with Batman bemoaning mankind’s treatment of the planet in Justice League. Nary an award show goes by without a star or several begging viewers to take environment-saving action.

So it was startling when the weather-focused Twisters arrived from Universal Pictures this month with no mention of climate change at all. If ever there was a perfect vehicle to carry Hollywood’s progressive climate change messaging — a big-budget movie about people caught in worsening storm patterns — wasn’t this it?

Apparently not. Movies should not be about “preaching a message,” Lee Isaac Chung, who directed Twisters, said in a prerelease interview that served as a dog whistle to conservative ticket buyers.

Trend spotting in cinema is a hazardous pursuit. Sometimes a movie is just a movie. Twisters, however, is emblematic of a clear shift in Hollywood: After a period of openly using movies to display progressive values, sometimes with success at the box office (Barbie) and often not (Strange World, The Marvels, The Color Purple, Dark Waters), studios seem to be heeding a message that many ticket buyers — especially in the center of the country — have been sending for a long time: We just want to be entertained, no homework attached.

Put bluntly, it amounts to an attempt by Hollywood to bend to red state audiences.

“It’s a reflection of economics and the desperation of the film industry,” said Corby Pons, a movie marketer who focuses on the faith community and is based in Nashville. “We want you to attend our movies. We need you to attend our movies.”

Disney, which owns seven studios, including Pixar, Marvel, Lucasfilm and 20th Century, has put its creative ranks on notice. “We have to entertain first — it’s not about messages,” Robert A. Iger, Disney’s chief executive, said at a conference late last year. “I don’t really want to tolerate the opposite.”

His comments were a sharp reversal from Disney’s shareholder meeting in 2017, when he spoke with pride about more openly weaving sociopolitical messages into the company’s movies. “We can take those values, which we deem important societally, and actually change people’s behavior,” Mr. Iger said then. (The shift seems to be going well, with escapist Disney movies like Inside Out 2 and this weekend’s Deadpool & Wolverine arriving as instant smash hits.)

For 20 years, Participant Media was Hollywood’s pre-eminent maker of films with a conscience. An Inconvenient Truth was one of its early successes. But the company shut down in April. Participant relied on studios and streaming services to distribute its eat-your-broccoli documentaries and dramas about underrepresented communities, and those partners have cut back on such “niche” content in favor of more populist offerings. Streaming services like Netflix have also started to sell ads, and advertisers prefer all-audience, apolitical content.

Paramount describes its current focus as “all-audience, flat-out entertaining films.” Those include Gladiator II, one of the most-anticipated movies of the fall. “Many moviegoers don’t want agendas or Hollywood telling them what they should be thinking,” said Chris Aronson, Paramount’s president of domestic distribution. He cited IF, a feel-good PG movie that came out in May about a girl with imaginary friends, as one that “resonated strongly” with ticket buyers in the heartland.

Some stars are steering more directly to the right. Although it didn’t result in the hit he envisioned, Kevin Costner squarely pitched his Horizon: An American Saga — Chapter 1 to state moviegoers last month. (One Horizon ad prominently quoted the conservative commentator Glenn Beck saying, “Kevin Costner may be the only one capable of telling the true American story.”) Dwayne Johnson, ever attuned to the marketplace, went on Fox News in the spring to decry “woke culture” and say that he regretted endorsing President Biden in the 2020 election.

Universal’s approach to Twisters involved positioning the movie as escapist fun and studiously avoiding sociopolitical issues. The last thing Universal wanted was a film that doubled as a climate-change scolding, which would likely repel conservative ticket buyers. “We couldn’t afford to overlook any audience,” said Michael Moses, chief marketing officer at Universal. “With every decision, it was about how can we include and not exclude.”

Twisters, which cost $155 million to make, not including tens of millions in marketing costs, collected $82 million in ticket sales over its first three days in theaters in North America, roughly 65 percent more than box office analysts had expected, with red states providing most of the upside. To play up the movie’s countrified bona fides, Universal arranged for marketing tie-ins with RAM trucks and Wrangler jeans; Mr. Moses dispatched the film’s stars to a Luke Combs concert, where they shotgunned Miller beer.

“This movie is killing it for us,” said Mike Barstow, executive vice president of Main Street Theaters, which operates 50 screens across Nebraska, Ohio, Wisconsin, Illinois and Iowa. “It’s a relatable story — our communities deal with tornadoes all the time — but it’s also just fun and doesn’t feel condescending to rural values.” (Instead, city dwellers are mocked. “Kate’s from New York,” one guy sneers in the film, which was written by Mark L. Smith. “You can’t trust a thing she says.”)

A lot of people in Hollywood only seem able to discuss the middle of the country while holding their nose. But entertainment is a reactive business: chase what worked over the weekend, drop what didn’t. And some moviegoers and theater owners in the vast center of the country have recoiled from films they see as too progressive.

“WARNING,” read a sign taped to the glass door of an Oklahoma movie theater in 2022. “The management of this theater discovered after booking Lightyear, that there is a same-sex kissing scene within the first 30 minutes of the Pixar movie. We will do all we can to fast-forward through that scene, but it might not be exact.”

There was a line outside that same theater over the weekend to see “Twisters,” which played on two of its three screens.

“Go woke, go broke” jokes, in some ways, have calcified into conventional film industry wisdom. Disney’s storytelling shift came after an extended period in which the company was attacked by conservative pundits and politicians. Rival studios watched in terror, afraid they might be next.

More than ever, studios need every dollar they can find. Most are part of larger entertainment conglomerates that are under severe pressure to boost revenue, not to mention profit, as traditional cable channels wither and streaming services struggle with high programming costs. Last summer, ticket buyers in red states caught Hollywood’s attention when they turned Sound of Freedom, a thriller with QAnon overtones, into a runaway hit. Sound of Freedom, made independently for $15 million, collected $184 million in the United States, beating big-budget Indiana Jones and Mission: Impossible sequels.

Hollywood has not recovered from the pandemic (in part because pandemic closures were followed by two lengthy union strikes against studios). Ticket sales so far this year in North America total $4.3 billion, down roughly 35 percent from the same period in 2019, according to Comscore, which tracks box office data.

As studios try to climb back, the heartland represents a specific opportunity. Ticket buyers in red states were the fastest to return to theaters after the pandemic, while those in coastal cities were the slowest. Some large markets, including San Francisco, have not fully recovered, according to studio distribution executives.

As Sarah Unger, the co-founder of Cultique, a firm in Los Angeles that advises companies on changing cultural norms, wrote in an entertainment industry newsletter on Wednesday, “Hollywood is missing a massive audience in plain sight.”

Why Hollywood’s Jobs Picture Remains Bleak

By Don Lee and Samantha Masunaga Los Angeles Times 6.9.24

The iron fist of history seems finally to be coming for Tinseltown.

Beyond the financial blows inflicted by the pandemic and the actors’ and writers’ strikes, the vast Los Angeles-based entertainment industry known as Hollywood is facing the far greater forces of economic disruption that have already struck the rest of the United States.

Much like manufacturing, agriculture and other major segments of the U.S. economy before it, the result for Hollywood appears to be mixed: a possible return to prosperity and good times for some, ever tighter times for others.

“There is something of an existential question mark over large swaths of the traditional Hollywood economy,” said Stuart Ford, chairman and chief executive of Los Angeles-based AGC Studios, which develops, produces, finances and licenses films and television series.

The decades-long way of making money in the film and TV industry has been turned upside down by new technologies, changing public appetites and the globalization of the workforce.

“The key thing here is that you have so many of these things happening at once that it’s really hard for anybody to feel confident,” said Kevin Klowden, an economics expert at the Milken Institute who has done extensive research on California’s entertainment industry.

“There’s a very, very real question right now on the business side that’s playing out, because nobody’s quite sure of the economics.”

What is clear is that the numbers are bleak — for box office receipts, filming activity and especially employment.

Coming out of the strikes in the fall, many expected a rebound in local film and TV jobs. But employment in L.A. County’s motion pictures and sound recording industries — the main category for film and television production — has barely budged from about 100,000 through April, which is about 20% less than pre-pandemic levels. Aside from the early months of COVID-19 in 2020 and the strikes in the summer last year, employment in the sector hasn’t been this low in more than 30 years, according to the U.S. Bureau of Labor Statistics.

The effect on lost wages and purchasing power is significant for the regional economy. Employees in the motion pictures and sound recording industries earned on average $2,600 a week last year, making up in total about 5% of L.A. County’s wages in the private sector, although less than 3% of employment.

And there are tens of thousands more people in Southern California who work for Hollywood as freelancers and contractors but aren’t counted in government payroll data. Taken together, they make up the biggest concentration of entertainment industry workers in the world and are part of the explanation of why California’s overall labor market is lagging behind the nation’s.

What’s disrupting the future for entertainment industry workers is much like what began convulsing U.S. manufacturing decades ago: new technology that has transformed the business and reduced the need for workers, as well as the rise of cheaper production sites elsewhere in the U.S. and abroad.

Even before the strikes, studios had already dramatically cut back on spending on new shows after the so-called streaming wars — when companies lavished huge amounts of money on direct-to-digital content to compete with Netflix.

Globally, film and TV production lagged by about 7% in the first quarter of 2024 compared with the same period in 2023, according to tracking company ProdPro.

Los Angeles probably will remain a thriving center for those who work at the top of the film and TV industry, but much of the production and distribution work may continue to move elsewhere.

Toronto, for example, has long been an attractive alternative location for shooting movies, while the streets of New York are widely used for television. In recent years, a host of other locations including Atlanta have begun cutting into L.A.’s share of the business.

In fact, outside L.A., the film and TV industry’s payrolls nationally have largely recovered, reflecting in part California’s high costs and the long-term outflow of production to other locales, including Atlanta, Vancouver and London.

California’s share of U.S. employment in motion pictures and sound recording is now down to less than 30%, from almost 40% just a decade ago.

The economic ripple effects are being felt across the region, including by prop manufacturers, design studios, talent agencies and the scores of caterers and ancillary businesses serving Hollywood.

…The world also looks topsy-turvy in the offices of studio executives and for the so-called showrunners who call the shots on television series. Amid waves of consolidation and reorganization, partly in reaction to the rise of Netflix, YouTube, TikTok and other internet video platforms, legacy film studios are all asking the same questions: What can we do to win back today’s audience and how can we make money when the old business model has faded?

On top of budget pressures of much higher borrowing costs, the traditional way of doing “gap” financing, which involves borrowing against future revenue from unsold distribution rights — a longtime part of the independent film and TV model — is now prohibitively expensive, said Ford of AGC Studios.

Private equity partners and even once-enamored Chinese investors, all previously drawn by the limelight of the entertainment industry, have become scarce.

And nobody seems sure about the long-term viability of Hollywood’s bread and butter — the feature film made for the big screen.

…The extraordinary back-to-back strikes in the summer last year virtually halted production and caused long-lasting disruption to shooting schedules this year and next.

At the same time, the popularity of streaming, led by Netflix, has cut into not only theater attendance and DVD sales but also licensing and reselling revenues that studios long enjoyed. Disney, Paramount and others have joined the streaming bandwagon, but to succeed they need enough long-term subscribers — not so easy when many cancel after watching the particular programs that drew them in.

…Over the last 15 years Hollywood rode the superhero genre with movies such as “Spider-Man” and the “Avengers” films, but that run appears to be on its last legs — and nothing has come to replace it, said Jonathan Kuntz, a film historian at UCLA. The reaction to last year’s twin blockbusters, “Barbie” and “Oppenheimer,” essentially papered over the industry’s core challenge of exciting the public at the box office.

“The very basis of what made Hollywood universally popular in the 20th century was the theatrical feature film. That seems to be ending now,” Kuntz said. “It seems the audience has moved on to other things.”

…As U.S. movie attendance has foundered, the international market has grown even more important. But U.S. producers are facing more competition from South Korea, India and other countries producing what’s popular with their audiences at home and beyond.

Nor can major U.S. studios count on the big China market as it had once hoped. Beijing still maintains a strict limit on foreign film showings. Many Chinese are downloading pirated versions of even first-run U.S. movies. And dreams of U.S.-China co-production basically died with the flop of “The Great Wall” in 2016, said Stanley Rosen, an expert on Chinese film and politics at USC.

“It would be great if they had China,” he said. “But you can’t really rely on China.”

The Cost Factor

With production and budgets scaled back, film and TV producers have been opting for cheaper places to shoot.

Wages matter, of course. But while producers and directors in L.A. on average earn 40% more than those in Atlanta, for example, when it comes to crews, the difference is only about 10% for sound engineers, camera operators and lighting technicians, according to May 2023 figures from the U.S. Bureau of Labor Statistics.

Where there is a bigger gap is in government support for filming. Georgia has no cap on tax credit incentives, which also cover actors’ salaries. Nor does the United Kingdom. And New York state lawmakers last year sharply boosted the annual film tax credit allocation to $700 million — double California’s today.

In most shooting locations outside L.A., the entertainment employment base can still be a limiting factor on production. That’s why people from Southern California are often brought in to supplement and lead local projects, said the Milken Institute’s Klowden.

But not so much these days, he said. “If the productions are cut back, and budgets are trimmed, a major place to see those cuts is in not employing the workers from out of state who need their travel costs covered.”

What worries experts is that as local film industry workers continue to struggle, many will leave the area or quit the business outright because it’s so expensive to build a career and live in Los Angeles…

Why is No One Going to the Movies?

By Sasha Stone   Hollywood Woketopia   5.6.24

“Film doesn’t occupy the pinnacle in the social, cultural hierarchy that it did for most of our lives. When a movie came out, if it was good, we all went to see it. We all discussed it. We quoted lines and scenes we liked. Now we’re walking through a fire hose of water, just trying to see.” – Jerry Seinfeld

Most people outside the bubble of the Left already know why movies are bombing. Not only has Hollywood alienated them in almost every way imaginable, from the “woke” content to their hatred of Trump, but the stories just aren’t that good anymore. TikTok and YouTube are far more entertaining because they rely on algorithms to give users what they want and the free market. What goes viral is what’s popular—end of story.

20 years ago today Gladiator opened to the public and I began my website writing about the Oscar race. That was the last time, up until Oppenheimer, that a Best Picture winner got anywhere near the top of the box office. It wasn’t number 1 but it was close enough at number 3. Oppenheimer was number 5.

The reason for this is complicated. But the story goes something like this. Right around 2003, with the Harry Potter and Lord of the Rings franchise movies, Big Hollywood cracked the code on how to make lots and lots of money not just here but internationally.

For the next twenty years, there would be two Hollywoods. One that pushed out franchise movies—Marvel, Star Wars, animated films—mostly aimed at one reliable demographic: 13-year-old boys. Movies catered to that base, and they were rewarded handsomely for it—all over the world. Why? Because human beings, for whatever reason, respond to a central male protagonist. Women like men, and men like men.

The numbers were staggering for Hollywood up until 2020, when it the box office collapsed.

They modeled the movies after fast food: fewer choices, familiar brands, and expectations met. But in the Obama era, many who cover movies (like me), started to look at things differently, from the point of view of being “good people” rather than entertaining audiences. That meant things had to be equal – why was every movie about “one special boy,” and why was everything so white?

…After Trump won, and mass hysteria overtook the Oscars, where La La Land was “racist,” Three Billboards Outside Ebbing, Missouri was “racist,” and Green Book was racist, the Oscars and Hollywood decided that big changes had to be made. They invited thousands of voters of color, most of them international. Now, the Oscar membership was close to 10,000.

Trump’s win didn’t just dramatically transform the Oscars as they scrambled to be seen as Good Puritans in our new world; it hit every part of the industry. Trump’s win meant everyone had to pay, but especially males, especially white males. Now, it was time to take away their power by removing the male protagonist or white male protagonist from movies and either replacing them with women or adding a woman.

It went on and on as they tinkered with their utopian diorama, swapping out entertaining for “educational” to transform it into dogma, a new way for people to think. We all came out of 2016 thinking that America was broken and it was time to fix it.

They cut their audience in half when they took a side against Trump and MAGA. They reduced their reach even further when they “wokeified” their movies. When they married the Democratic Party, everything they did had to reflect the worldview of the Obama/Clinton/Biden coalition. There is no dividing line between the two. They are the same organism. If the Democrats are going down, so is Hollywood.

They rely on news from inside the bubble, where journalists and major news media outlets also reflect the worldview of the Democratic Party. The problem is that this country and this world are much bigger than that. They have a class of film critics who parrot the party line and never push back. They have journalists who are as out of touch with the rest of America as they are. Anyone who loudly dissents is purged.

Jerry Seinfeld did just that. He said movies are over, and comedy isn’t funny anymore because of the “far left” crazies. He wasn’t wrong, but film critics on Twitter almost instantly threw him under the bus.

When I want to read an honest take, I do not read film critics. Not anymore. Instead, I go to YouTube or TikTok to hear opinions that the hive mind hasn’t been cleansed for maximum purity. I can’t stand the collective fear of these people. Give me some truth.

The Fall Guy is the latest movie to bomb. No one has heard of it, no one wants to see it, and in a tough economy, why would they spend that much money on a movie they can see on streaming in a couple of weeks? Sounds logical enough. But the real problem is that Hollywood is out of touch with the real world that surrounds the insular bubble. They can’t give the people what they want because they don’t know the people anymore.

Could the aristocracy before the French Revolution tell good stories for the people of France? No. Could they make movies that reflect their point of view? Not a chance because that puts them at risk. The Trump delusion has hurt Hollywood is so many ways, but the biggest has been the “us vs. them” dividing line.

Audiences have mostly lost interest in what Hollywood puts out because the storytelling doesn’t reflect what is actually going on. Instead, it must adhere to the “good behavior” of the Woketopia.

We all know what kinds of stories are out there that no one in Hollywood tells. Imagine making a movie about a man wrongly accused of sexual harassment, and it snowballs into an episode of mass hysteria at the company.

Imagine telling a story of a corrupt government that weaponizes the Justice System to take down a political opponent but telling it from the point of view of the Trump side.

Imagine making a parody of Hollywood called The Woke Movie. It would be hilarious. They’d never do it. They are married to the Democratic Party, which means they have to spout the same nonsensical virtue signaling that is turning everyone off.

A counterculture movement springing out of this moment is an easy call because we’ve reached that moment where Hollywood has run out of good stories to tell and must rely instead of brands and franchises.

Since they’ve alienated so many people, getting them back won’t be easy. The movies this summer will probably do decently at the box office, like the Mad Max sequel.

… But overall, Holywood should divorce itself from the Democratic Party. They should open the gates to the castle and let the people back inside. They should get over their Trump Derangement Syndrome, which is destroying them. They should do these things, but they probably won’t. To quote one of the great movies from days gone by, “The ship is made of iron, and it will sink.”

Warner Bros. Discovery Lost Money Last Year. Its CEO Got a $50 Million Payday

By Joe Flint and Theo Francis   Wall Street Journal   4.28.24

Warner Bros. Discovery shares have slumped since the media and entertainment company was created two years ago, but that hasn’t dented its chief executive’s pay. 

Last year, CEO David Zaslav received pay valued at $49.7 million, a 27% increase from 2022, the company said in a securities filing Friday. That is more than three times as much as the $15.6 million median pay of S&P 500 CEOs whose compensation had been disclosed through late March. 

The company, home of the Warner Bros. movie studio, the Max streaming service and cable channels including HBO, CNN, TNT and Food Network, posted a smaller net loss—but also narrower revenue—last year. But Zaslav’s stock award was tied to another metric: free cash flow, which nearly doubled to $6.16 billion last year as the company moved aggressively to pay down debt. 

Zaslav has been cutting costs ever since he took the helm of the company, the result of a merger between Discovery and AT&T’s WarnerMedia. That effort continued in 2023 through staff reductions and tighter budgets on content spending and marketing. The company also wrote off projects, such as the movie “Coyote vs. Acme.”

Overall, Zaslav’s compensation included a $3 million salary, $23 million in stock awards tied to cash flow and a guaranteed $22 million cash bonus. He also got perks, including personal security at his various residences valued at more than $700,000, and $768,000 for use of the corporate jet. 

Free cash flow reflects funds available to a company after operating expenses and capital investment, and is one measure investors use to gauge a company’s health. For compensation purposes last year, Warner Bros. Discovery disregarded about $1 billion in cash flow that resulted from the 2023 strikes by writers and actors, which temporarily reduced movie and television production expenses.

In 2022, Zaslav’s equity award was tied to multiple performance metrics, including measures of company revenue and subscriber volume, as well as cash flow, securities filings show.

Like other entertainment conglomerates, Warner Bros. Discovery has faced challenges across many fronts in the past few years. Cord-cutting and an extended advertising slowdown have taken a significant bite out of its cable networks.

The movie studio’s performance last year was so-so. While “Barbie” was a megahit, there were several pricey flops, including “The Flash,” “Blue Beetle” and “The Color Purple.” 

While its Max streaming service is profitable, Warner Bros. Discovery also includes the licensing of Warner Bros. content to other services such as Netflix as part of the revenue for its direct-to-consumer unit that houses the platform.

The company’s stock has lost about two-thirds of its value since the merger was completed in April 2022, though it ended 2023 20% higher than it ended 2022. The S&P 500 index rose 24% last year.  

The second-highest compensated corporate officer at Warner Bros. Discovery was JB Perrette, who oversees streaming and games, with a package valued at $20.1 million. Chief Revenue and Strategy Officer Bruce Campbell’s 2023 compensation was valued at $18.3 million and Chief Financial Officer Gunnar Wiedenfels had a package of $17 million. 

By emphasizing cash flow so heavily, Warner Bros. Discovery shifted Zaslav’s pay away from the mainstream for the biggest U.S. public companies, data from ISS-Corporate, a unit of Rockville, Md.-based Institutional Shareholder Services, show.

Over the past five years, the share of companies using sales or stock-market metrics has grown somewhat, while other measures have stayed fairly flat. Companies can use multiple performance measures when setting pay.

Of S&P 500 companies reporting 2023 pay details so far, about 70% used earnings to help set executive pay, and about the same share relied at least in part on stock-price performance or shareholder returns, ISS-Corporate found. Around half took sales into consideration, and just under half relied on other returns or margins. Only about 29% used a measure of cash flow.

Customers Have a Say in What Gets Made Too

By Sonny Bunch   The Bulwark Goes to Hollywood   4.19.24

Harper’s this week published a lengthy reported feature about the state of Hollywood, particularly the state of screenwriting and whether or not folks can credibly make a living while doing so. It’s kind of interesting in the sense that the author has an idea (deregulation is bad and greedy CEOs are ruining everything) and writes backward from there. I am … skeptical that Ronald Reagan is the proximate cause for the streaming bubble popping, but, you know, maybe. You should give it a read and decide for yourself.

Ultimately, that’s what we’re dealing with: a bubble. An insane amount of money was poured into the production of an enormous number of scripted television series—633 seasons were released in 2021 and 2022, by one measure, a number that dropped by nearly a quarter last year—and that bubble is rapidly deflating as streamers turn their focus from subscriber-acquisition to profit-making and start to acknowledge that spending enormous gobs of money on stuff that almost no one actually watched was a real mistake. Fewer shows being produced means fewer writers will be hired and competition for the remaining slots will likely be tighter, driving salaries down further.

What was most intriguing about the Harper’s piece was what was missing. At first, I thought I’d accidentally skipped over a section. But then I did a command-F and realized, no, I was right. There’s no mention, at all, of the pandemic. Or of Covid. Or of lockdowns. Or the resultant boom in streaming content as studios rushed to sate the desires of audiences stuck at home. Or the resultant theatrical crash as local and state governments kept theaters closed in New York and California, crushing the ability to distribute films domestically and putting the entire theatrical economic ecosystem at risk.

Audiences were already turning to streaming, for sure—note the rapid decline in DVD and Blu-ray sales in this post’s chart titled “U.S. Home Entertainment Market by Category” that begins in 2008, right around the same time Netflix introduced streaming—but the lockdowns undoubtedly hastened the process. Every studio decided at the same time they needed to build up a subscriber base NOW NOW NOW, and they were happy to pay handsomely to do it. How do we know they paid handsomely? Well, the screenwriters were putting up what appeared to be record-breaking numbers, as best as we can tell from WGA dues collected in 2023.

Speaking of the collapse of physical media, this is another key factor in the evolution of the business of Hollywood that gets short shrift in the feature. I don’t think you can fully understand the hard turn to IP and the reliance on foreign box office grosses in the form of big-budget spectacle without grappling with the collapse of DVD and home video alongside the increase in advertising costs that accompany every movie opening on 2,500 or more screens. It’s harder to recoup the cost of a mid-budget movie if you don’t have an extra eight figures of disc revenue coming in for every movie with Matt Damon in a courtroom on the cover. As much as it pains me to say this as a physical media die-hard, most folks are content not owning anything so long as they think they can stream it whenever they want. Customer behavior matters.

Plus, audiences liked the franchise boom. Ten of the 20 highest-grossing films of all time, domestically (unadjusted for inflation), are either comic book or Star Wars movies. Add in other sundry franchise sequels and that number climbs to 14 of 20. Throw in live-action remakes of cartoons and movies based on long-running children’s properties like Barbie and Super Mario Bros., and that number climbs to 18 of 20. By my count, there are precisely two truly original films in the 20 highest-grossing films of all time, and James Cameron directed both of them: Titanic and Avatar.

So, sure, deregulation played some role in the current state of screenwriting, though some measure of contraction was likely always coming as creating dozens of TV shows that no one watched on services that lost money was not sustainable indefinitely. But let’s give audience preferences some measure of the credit/blame here, too, shall we?

The 20 Biggest Myths in Hollywood and the Entertainment Industry Right Now

The Entertainment Strategy Guy 12.21.23

As my tagline says, I try to explain the “entertainment industry and business strategy”, but often that means trying to both explain what’s happening now (especially streaming ratings data) and to some extent, trying to “predict” the future, or at least list off potential futures and their likelihoods.

This often means pushing back against conventional wisdom and trying to inject nuance and detail into what “everyone knows”, especially since it seems like the moment “everyone knows” something in Hollywood these days that thing then becomes untrue a few months or years later.

Yes, things are changing, but at what rate and how fast? Here’s an analogy I’ve been thinking in terms of my own writing. Say in the past, a given thing was a “two” in importance or value out of ten. Now—with “disruption”—it’s a five. Usually, the news reports it as if it’s a “10”. Then say I come along and I say, “Actually, that’s a four.” Well yes, I’m off by one, but that’s much closer than reading articles arguing that “This new trend is a ten!!!”

This isn’t just idle media criticism; it actually matters. If you don’t know what’s actually happening, you can make some really bad mistakes. (I point out one half a billion potential mistake later.)

To close out 2023, I want to share a bunch of “myths” about Hollywood that keep getting repeated, which also serves as a semi-recap of my writing over the last year. It’s free to all, so please share. Share it far and wide if you like. Finally, if you support me or my work, please subscribe!

Myth 1: Films Should Go Straight-to-Streaming

Reality: Films that Go to Theaters are More Popular

Perhaps my favorite thing I got to write this year was the start to my big ‘ol series “The Data Is In: Theatrical Films Massively Outperform Straight-To-Streaming Films” which I even conveniently subtitled “That’s Right…I’m Debunking One of the Biggest Myths of the Streaming Wars”.

In short, every entertainment company, even massive tech conglomerates, should be sending their movies to theaters before they go to streaming, not just to make more money (and help keep theaters alive) but because it makes the movies more popular. And yes, I’m taking marketing costs into account.

For years, a ton of people argued the exact opposite, mainly because Netflix became the dominant player in streaming without sending their films to theaters. (As if this choice, and not a whole bunch of other, way important factors, led to their rise.) Just this month, in one week, six streamers released seven straight-to-streaming films, at least three of which could and should have gone to theaters.

Yes, some of you are asking, “Hey ESG, didn’t you promise us part four of that series?” I did! And there will be a 2023 data update in the new year, along with some strategy thoughts.

Myth 2: There’s No Ratings! No One Knows What a Hit Is Anymore

Reality: We Have Streaming Ratings Now

After “The Data Is In: Theatrical Films Massively Outperform Straight-To-Streaming Films” my most popular article of the year (and actually, all time) was “No, That’s Not a Hit Show: And Other Thoughts on Why So Many People in Hollywood Don’t Realize That We Have Streaming Ratings Now” which I think reflects a very common source of frustration among a lot of news consumers:

We know which shows are hits! We know which shows people like!

But there’s still a disconnect between these very basic facts (which I describe each week in the Streaming Ratings Report and in other columns like my bi-annual articles on the flops, bombs and misses, or the updates on renewals nd cancellations) and the news coverage. At this point, (almost) every entertainment journalist acknowledges that ratings exist, but…

• Many writers (especially for pop culture websites)¹ still want to argue that the unpopular shows that they personally like are actually popular.
• Many analysts still pretend like it’s impossible to figure out what TV shows are hits or claim that it’s impossible to figure out why streamers like Netflix cancel or renew shows.

For 90% of renewal or cancellation decisions, it’s fairly obvious why decisions get made. Sure, there’s always been edge cases or hard decisions (especially when you take into account budgets) but many people’s borderline epistemological nihilism (“We don’t/can’t know anything!”) just doesn’t square with reality.

Related, it’s probably too extreme to say that “no one” has ever canceled a popular show, but as I wrote in my third renewals and cancellations update, popular shows don’t get cancelled.

Myth 3: All Content is Global Now

Reality: Foreign Content Still Isn’t Popular in the U.S., Most Countries Prefer Content in Their Native Language/From Their Region, But the Global Market Still Matters

Ever since Squid Game, many, many, many pundits and reporters proudly proclaimed, “All content is global now !” when…no, it’s not. I’ve written about this for years (six times actually since Squid Game first came out)

In this case, reality is nuanced and complicated. Two things are true:

• Due to technology changes, media companies can compete across the globe now, which means that they’re competing for a bigger potential market.
• But content doesn’t scale globally nearly as easily as everyone was led to believe.

Again, go back to what I wrote in the introduction: things changed from a 1 (foreign content never played in America) to a 3 (foreign shows make up 1-3% of streaming viewing), but the media pretended like it was now a “ten” (“All content is global now!”). And nearly every media company followed the hype and invested globally…and now a bunch are pulling back.

Myth 4: Netflix’s Formula 1: Drive to Survive Made F1 Popular in the U.S.

Reality: It Was ESPN. Also, F1 Still Isn’t That Popular

For years, I’ve been pointing out that Netflix’s sports docu-series, F1: Drive to Survive didn’t make F1 popular in the US. (It helped, but if anything airing races on ESPN drove the most gains.) But people are still saying this all the time. (I could cite half a dozen examples since Netflix’s big PR push at the end of November to publicize Swing to Survive, which I just wrote about flopping this week in the Streaming Ratings Report.)

I mean, Formula 1: Drive to Survive didn’t even make the Nielsen charts earlier this year. It’s just not that popular.

This matters. Liberty Media reportedly spent a half billion dollars on the race on the Las Vegas strip. And how were local business owners rewarded for this? With half-empty hotels, during a week that’s normally really busy, and the tickets for the event got marked down by 60%.

Myth 5: The “Algorithm” Picks Which Shows Netflix Makes

Reality: Humans Pick the Shows

I’ve written about this twice, in both “The Algorithm is Still a Lie” earlier this year and in “The Algorithm Is A Lie” from last year. In short, despite tons of people complaining about the “almighty algorithm”, there’s no algorithm that picks and chooses shows; humans do.² (Netflix has a recommendation engine, but that’s a totally different thing.) Read both articles for all the details—I think the case is pretty iron tight—and it’s pretty obvious that many people (especially creatives) don’t really understand the data limits at play here; there’s just not enough data to make the conclusions that many people think.

In reality, a lot of development execs pretend to have data that they don’t so creatives don’t get mad at them. Yeah, data can help identify certain genres to invest in, but that’s been the case since the advent of cinema.

Indeed, as I cited last fall, in June, Bela Bajaria told a conference, “Algorithms don’t decide what we make…There’s not an algorithm that would probably say, you know what’s a great idea? A period show about a woman playing chess.””

Myth 6: Celebrity Production Companies Are Valuable

Reality: Celebrity Production Companies Are Overvalued

In another one of my favorite articles of the year, both here and at The Ankler, I wrote about how celebrity production companies (like Reese Witherspoon’s Hello Sunshine, the Obama’s Higher Ground, and LeBron’s The SpringHill Co) are really, really overvalued right now, especially with tons of high profile investments from a ton of private equity firms like Candle Media and RedBird Capital. Towards the end of the year, there were a few news stories about cash flow troubles at celebrity production companies for their private equity owners, bearing out my concerns.

Myth 7: Most Viewers Binge Watch TV Shows

Reality: Some (probably 30% to 50%) of Viewers Binge Watch TV Shows

The “binge versus weekly” release battles aren’t as fierce as they once were, but you still see folks arguing that customers “love binge releasing”. I’ve pushed back on this for a while.Samba TV regularly publishes charts on binge-watching and the most interesting part of their charts is that the most binge-watched shows usually are only binge-watched by about 30% of customers.

But don’t take their word for it. There’s a reason Netflix is releasing some many of their most popular shows in batches now. Over time, I suspect those batches will get smaller and smaller and more and more spread out.

Myth 8: Social Media Represents What People Think

Reality: Most Americans Do not Regularly Use Social Media

Most people don’t use social media all day. It’s not real life. It’s just more accurate to say that the conversation on social media represents what people on social media think. Studio heads, take note.

Myth 9-16: The Following Genres Are Overrated:

Okay, there’s a bunch of myths here, so let’s knock them out in one list. The following genres are overrated or overvalued, which isn’t to say that you should never make them, but you should know that the hype doesn’t match the reality and spend/invest accordingly:

• Prestige TV shows. Elaine Low, at the Ankler, just reported that “No one wants any ‘homework’ projects,” says the first TV agent. “Esoteric pieces that were awards bait aren’t popular right now.” I agree, as I’ve been writing for years now.
• Anime. There’s some very loyal anime fans out there in America, but it doesn’t match the hype or constant prediction that anime is the future. Plus, this is a really competitive marketplace. If I were an executive, I wouldn’t recommend competing in it.
• Horror. Horror films can have a tremendous ROI, but they’re not nearly as popular as other blockbusters/franchises. This is especially true on streaming. Frankly, a lot of people don’t like scary movies, but they can definitely put butts in seats for an affordable budget! Two things can be true: young people like seeing horror films in theaters and grandmothers never watch horror films.
• Adult Animation TV Shows. One of my favorite shows on TV is an adult animated comedy. But this genre is still perpetually overrated by the Hollywood entertainment press.
• The Kardashians. I’m not saying the Kardashians aren’t popular, they’re just not as popular as a lot of people think.
• Concert films. Post-Beyonce, I think it’s clear that Taylor Swifts: The Eras tour concert film was a one-off event, despite many think pieces arguing otherwise. It’s hard to see any other musician pulling off the same feat.
• Sports Docu-Series. The sports documentary and docu-series genre is really, really overrated right now. Outside incredibly popular sports (think Quarterback) and stars (think Beckham), very few break out.
• Basketball TV Shows and Films. I’m a diehard basketball fan saying this. I can separate my personal opinion from the trends I’m seeing in the data. And basketball movies and TV shows just aren’t that popular.

Myths 17-20: The Following Genres Are Under-Rated

Similarly, the following genres are underrated right now, at least according the apocalyptic headlines or the streamer’s lack of interest in them:

• Superhero films. Listen, I just wrote two articles on the MCU/Marvels struggles, but five of Marvels’ last seven films made over $700 million globally. Two of the top four and three of the top eight films in North America this year were superhero movies. Again, this genre is dipping, but it’s not dead.
• Sitcoms/Comedies that are actually funny. Even though its ratings dipped later in the season, the Night Court reboot was the breakout hit of the year. Meanwhile, as Elaine low reported in the Ankler, people in town want funny comedies now. I couldn’t agree more.
• Procedurals. Thanks Suits! Now everyone realizes (again?) that many, many viewers like procedural dramas.
• Animated Movies. I think a lot of people are burying this genre, when it’s still really popular and, really, it’s just Netflix and Disney who are struggling.

1 I do want to give a shout out to one pop culture website, The Ringer, which has been really great about using ratings data (and to be fair, quoting me or my writing) to actually figure out what shows are popular. Well done, The Ringer!

2 Already, tons of critics are complaining that movies and scripts sound like they’re being written by Chat-GPT. Which is either just kind of insulting to hard-working screenwriters or shows how easily humans are going to be replaced…

Real Life Hollywood Horror Stories

By Richard Rushfield The Ankler 10.24.23

Hollywood has created thousands of classic monsters and tales of terror over its century of entertaining. From the Creature from the Black Lagoon to Freddy Krueger, our industry has delighted the world with some of the most fiendish specters ever brought to life.

But as terrifying as are the goblins and vampires we bring to the screens, the most dreadful tales are the ones we live out right here at home. Anyone who works in this business has them: stories seared into their memories of behavior so awful they count as real-life horror stories: the meeting gone wrong, the project from hell, the star off the leash — as diabolical as any tale from Bram Stoker, Mary Shelly or Jason Blum.

As a special Halloween treat, I rounded up a basketful of some of these diaries of dread, calling a few of my friends and asking them, off the top of their heads if they had some nightmares to share in this holiday season. All shared their tales on condition of anonymity, knowing the demons still lurk and wait. Sit back and enjoy a few examples of the kind of egomaniacal awfulness that we do like no one else. It came from Hollywood! 

Boss Level

From a PR/marketing exec:

My Hollywood horror was most of the bosses I’ve known.

One used to literally do nothing. Go to yoga at lunch, come back and eat at her desk for 45 minutes while she spoke to her decorators about remodeling her house on speakerphone. Then launch into how she needed a weekend nanny because she had no time to herself. 

Another boss used to speak to her therapist on speakerphone, complaining about her husband. 

A male boss used to torture the poor girl in the music department to get concert tickets always claiming they were for his boss (they weren’t).

Another boss used to torture his assistant to get him and his entire family “free” first-class upgrades without paying for it. The company travel agent was so exhausted by it, he would just bury the charge. I also recall him having flatulence issues and those were the days you weren’t allowed to leave the desk without permission.

Another honcho used to expense her clothes and claim they were purchased for talent and got kickbacks from the limo service which she demanded that everyone use. 

I once interviewed with a bigwig’s office and the first assistant spent the entire time explaining how important it was that I knew how the boss liked her apples cut.

The Big Sleep

From a writer/director:

A few years back, I was asked to pitch on a remake of one of my favorite films. I jumped at the chance, went ham on the pitch and a deck, made it past the first few gauntlets until only one remained: to pitch my take to a venerable, legendary, iconic (you get it) producer. The icon would be the final decider. So, I was all excited and I pay out of pocket to fly across the country and pitch this legend in person. (Out of pocket!) 

Kids, if you’re worried about me at this point, you’re very very smart. My pitch was in the late afternoon on a Friday. I sat in a boiling-hot waiting room, listening to the producers laugh with delight at whoever was pitching before me. 

Laughing, like, a lot. 

So. I should note that my take involved the following keywords: Appalachia, opioid crisis, trailer park. But yeah, they were laughing, like, a lot at the person before me. 

It’s finally my turn, and after some intros, I jump in. As the late afternoon sun fries a veritable hole in the conference table, the venerable, legendary, iconic producer falls asleep. 

Obviously, this means I’m not getting this job. See, kids, in Hollywood when an icon falls asleep in a meeting, no one dares wake them. It’d be like waking a sleeping giant if the giant could fire you. So, we all had to pretend it wasn’t happening and I finished the pitch knowing there was no way they could hire me. And they didn’t. Because they were “looking for something a little lighter.”

Location, Location, Location

From a director/screenwriter:

Back in the ’90s, I was asked to come up with a sequel for a very, very popular high-school movie. Development execs were super involved — insisted I set it in college — and spent months micromanaging every beat. I finally get the okay to pitch to the big producer (their boss), who says: “Well, I look forward to hearing your take… as long as it doesn’t take place in college. College movies don’t work.”  At which point I glance over to the development execs who nod along — he’s right. College setting is a terrible idea. 

I barf out the pitch — whatever strangled version I can muster. The producer gives me an extra hard cover copy of a popular novel he’s producing as a consolation prize.

The Idea Factory

From Kit Sargent

I wrote a spec screenplay that didn’t sell but got me some meetings with producers. It was a legit producer, not just a rando. After some preliminary chit-chat, we get down to business. The guy — very nice guy — says my spec wasn’t a fit for them but that they liked the writing, and asked if he could pitch me an idea they’d developed in-house. I said “Sure!” and he goes, “Okay, two words: man cave.”  

Then he said that they saw it as a vehicle for someone like Zach Galifianakis except “not him, because he’s totally over.” (This was pre-Hangover, btw.)

I also worked on a sitcom where guys in the room kept making truth-or-dare bets that culminated in a guy pissing into a big potted plant in the hallway.

Tiny Tales of Hollywood Terror

From a writer/comedian:

1. I once had a staffing meeting during which the showrunner showed me a picture of a pretty teen who was posing provocatively and said, “What do you think?” And I said, “She’s very pretty.” And he said, “Yeah, but hot or not hot?” I said, “Hot?” And he said, “Thanks, that’s my daughter.”

2. I once worked on a show where the room typically ended around midnight and the star wouldn’t let us leave until we drank the very strong cocktail she made resulting in many of us having to sleep in our cars.

3. I was once asked to punch up a script written by another staff member who was so enraged they threw it at me and sliced my eyeball.

4. I was once in a room where the showrunner would pick his nose and then insist on massaging my neck.

It All Goes Black

From a screenwriter:

I once wrote a script that was purchased for a major action star of the day. We had a meeting with the studio execs and this star to talk about the script.

Star in a thick Austrian accent: “I like the first 48 pages then it goes a little flat.”

Me: “OK, sure. What should we do from there?”

Star: “Nobody told dese guys?”

We look around the room full of execs, A skinny guy in an army green T-shirt asks: “Have you met Shane Black?”

A couple of the great studio notes of my career:

“You need to change the main girl’s name to Chrissy. Chrissy is good luck.”

 “You don’t have to add jokes. It’s funny enough that they’re on a bus.”

At another, I was developing a quasi-documentary show for a certain youth-oriented cable network. The execs at the network were obsessed with catering to the network’s target demographic, 18- to 24-year-olds. At one meeting, we were talking about a plotline that was about something very teen-oriented. The top exec in the room kept saying, “The demo is never going to get this.” My partner and I were very confused because the thing that we were talking about couldn’t have been more 18- to 24-year-old specific, and we kept asking why they wouldn’t get it, to which he would say things along the lines of, “They just won’t.”

After about 10 rounds of this, he finally put down his papers, sighed and stared us hard in the eyes. “Look,” he said. “When we say 18- to 24-year-olds, what we are talking about,” he said with scorn, “is 10- to 13-year-olds.”

Behind the Restroom Door

From an aspiring writer:

A few stories come to mind.

1. I was hired to adapt a foreign TV show for an American audience. The contract negotiations took an insanely long time, even for Hollywood. Two years later, we were all about to sign on the dotted line but they hadn’t kept the original creator of the show in the loop over the two years. She got so pissed that she refused to sign and the deal was dead. 

2. An A-list actor took me out on a date to a concert. On the way he told me there was a co-star of his who thought they were dating, but told me to just ignore her — it was a business thing he was doing to string her along. When I got there the co-star turned out to be another A-lister. The entire time she was giving me the evil eye. Then after a few drinks, she started acting overly happy with me. She grabbed my hand and dragged me to the bathroom where she proceeded to piss in front of me and tell me the A-list guy I was on a date with was hers and to back off — like a dog marking its territory. 

3. My manager told me to drop my TV agent two years ago because he had another agent lined up who was eager to sign me. So, I did. Then my manager never followed up with the agent. My manager then called to say he didn’t want to help his clients get staffed anymore because “it wasn’t where he wanted to put his focus.” So, I’ve been agent-less for two years now and my TV meetings have completely dried up because of his decision to cut the TV opportunities off. I’ve attempted to find new reps but he controls every professional relationship I have to the point where my lawyer won’t even get on the phone without him being on the call.

How the Strikes Could Impact Lavish Hollywood CEO Pay

By Ashley Cullins Hollywood Reporter 8.3.23

As Hollywood actors and writers strike together for the first time in more than a half a century, executive pay is in the spotlight. Talent are posting residuals checks barely worth the postage it cost to mail them alongside captions criticizing Hollywood execs’ eight-figure pay packages.\

SAG-AFTRA and the Writers Guild of America didn’t strike because of C-suite pay, of course, but the optics of such disparity are fueling the flames.

“What’s happening right now in Hollywood is a microcosm for what’s happening across America,” says Robert Reich, former U.S. Secretary of Labor and co-founder of the Economic Policy Institute. CEOs of major corporations often earn hundreds of times the salary of the typical worker, he notes, and some entertainment companies have ratios even more jarring.

“Is this fair? Fairness is in the eyes of the beholder, obviously, but it certainly doesn’t feel it and it does rub a lot of people the wrong way,” says Reich. “It seems like the game is rigged against average working people in favor of people at the top. You have a lot of anger, a lot of frustration, and you ultimately have work stoppages and strikes.”

When the writers and actors struck in 1960, top executives made a mere fraction of what they do today and only about 20 times the pay of the typical worker. According to a 2022 study from EPI, CEO pay increase 1,460 percent from 1978 to 2021.

In those intervening years, Reich notes, there was an increase in executive pay coming in the form of stocks and stock options. That created an incentive for CEOs to increase the price of shares through things like stock buybacks, which not only made the executives money but also made them seem more valuable to the business.

“If they have a record of being able to push stock prices up, that makes them somebody who their directors want to pay more,” says Reich. “No set of directors in any corporation is going to want to tell shareholders that they held back and didn’t get the best top executive they could.”

Steven Kaplan, a professor at the University of Chicago Booth School of Business, notes that now the median salary for CEOs at S&P 500 companies is about $15 million. “People have complained about [those salaries] for decades, and it doesn’t change because that’s the market,” Kaplan says. “They’re very rare, it’s a very hard job and that’s why they get paid. The entertainment CEOs are paid, in many cases, a lot more than that.”

…In addition to the scrutiny on executive compensation, the strikes are also correcting some misconceptions about what life in Hollywood looks like for most people.

“Most of America thinks that writers and actors in Hollywood are all famous and bathed in money and glory,” Reich says. “But the typical writer is one of many people trying to get into the business of writing, and therefore is competing like mad with other writers – and soon to be competing with artificial intelligence – and that’s pushing down the writer’s salaries. In fact, there’s been something like a 23 percent drop over the decade. At the same time, most actors are not stars.”

According to the U.S. Bureau of Labor Statistics’ July 18 report, the median U.S. worker’s weekly pay is $1,100 – the equivalent of $57,200 per year or $31.43 per hour.

As of May 2022, the BLS estimated the median actor pay was $17.94 per hour. According to SAG-AFTRA members who have spoken out amid the strike, many working actors struggle to make the minimum of $26,470 per year that’s required to qualify for the union’s health plan.

Indie Films Are the Latest Casualty of the Streaming Wars

By Lucas Shaw Bloomberg 6.4.23

While studios have lured movie fans back to theaters with blockbusters like Top Gun: Maverick and Avatar: The Way of Water, independent distributors and art-house cinemas are having no such luck. Most of the prestige titles from last year were box-office flops, and no art-house movie has cracked $20 million in the US this year. 

Smaller movies are struggling to attract viewers at the same time Hollywood is cutting spending and taking fewer risks, all of which has frightened the world of independent film. Sales agents, producers and financiers at this years Cannes Film Festival all bemoaned how hard it is to raise money for new movies.

“Award-winning films out of Sundance or out of Berlin are selling for $0,” producer Shant Joshi said during a panel I moderated at the festival. By this he means buyers are unwilling to provide an advance against future earnings.

Tens of thousands of people come to Cannes every year to participate in the world’s most global film market. If you are an independent producer or studio, you fund your film by raising money from financiers, selling distribution rights in certain territories and convincing streaming services to buy the rights to show your movie after it leaves theaters.

Producers hire sales agents who spend hours every day meeting with potential financiers and distributors to piece together the $5 million — or $25 million – needed to fund production.

The poor performance of art-house movies in theaters has made this job much, much harder.

Major studios are less interested in art-house movies because they are cutting costs and focused on franchises. Smaller distributors won’t spend as much money upfront when they don’t expect to make as much in theaters. And while foreign-film financiers are happy to invest in a commercial concept like the Rebel Wilson comedy Bride Hard – think Bridesmaids meets Die Hard – they are less willing to take a chance on a title with no stars or a more esoteric plot.

The big question looming over festivals like Cannes and Sundance is whether this market will ever come back. Or, more optimistically, in what form. 

Ticket sales for these movies have been declining for years, and the pandemic accelerated that trend. The audience tends to be older and wealthier, a demographic that’s been less willing to return to crowded theaters.

“When the pandemic came and people stopped going to theaters, distributors went into a medically induced coma,” John Sloss, who runs the management and sales outfit Cinetic Media, told me after the Sundance Film Festival.

While optimists believe this audience will return in time, there is a chance that most people would rather just watch these kinds of movies at home. Theaters are for spectacle.

Producers coped with the shift to home viewing by selling their wares to streaming services. Netflix, Amazon and Hulu were at first happy to spend money on challenging films that contended for awards.

Netflix spent about $40 million in one year at Sundance, which was topped by Amazon’s $56 million two years later. (Not to be outdone, Hulu took part in a $22 million deal for Palm Springs in 2020 and Apple dropped $25 million on CODA in 2021.)

Streaming services bought festival movies because they needed product and they wanted awards to validate them in the eyes of talent and viewers. “It was a feeding frenzy,” Brian Beckmann, chief financial officer of Arclight Films, said on our panel.

But streaming services are pulling back on independent film as well.

Netflix and Amazon are focused on a mass audience that prefers action to intimate drama. They still buy titles at festivals — at Cannes Netflix bought the US rights to a new movie from Carol director Todd Haynes – but not like they once did. Netflix is cutting back on its movie slate and just scrapped the division focused on movies with budgets under $30 million.

Hulu and Showtime, which had been reliable sources of cash for independent producers and studios, are far less reliable. Showtime is being absorbed into Paramount+, while Hulu is caught up in Disney’s aggressive cost cutting. 

One thing to watch: Showtime has the rights to show A24 movies after they leave theaters. That deal is expiring soon, and it’s not staying at Showtime. Who is going to step up to take the rights? A24 is coming off a great year that includes its highest-grossing movie ever and the Oscar for best picture (Everything Everywhere All At Once). It’s a ray of sunshine in an another otherwise gloomy sky.

Audiences Are Getting What They Wanted, Good and Hard

By Sonny Brunch The Ankler 5.12.23

Writing in Paste, Jacob Oller argues that the venture capital-style pursuit of billions has ruined movies, specifically in the way studios have tried to ruthlessly capitalize on intellectual property to generate mega franchises.

“Tidy, consistent, sustainable profits—the kind of thing generated by movie studios that once offered a diverse slate of reasonably budgeted adult dramas, teen-date rom-coms, family films, and fence-swinging art movies—are a thing of the past for those in charge of the industry,” Oller writes. However, “There must be growth. There must be domination. There must be Shared Universes.”

Thus, the rise of IP-driven blockbusters. The Marvel Cinematic Universe is the most notable iteration of this; you also have a similar DC Comics version, an effort to make Fast and Furious movies and spinoff titles, Jurassic Parks as far as the eye can see, Harry Potter prequels and video games and amusement parks, oh my. Making a million bucks on an Oscar contender isn’t cool. You know what’s cool? Making a billion bucks on a Mario Bros. movie. This, to Oller’s mind, is what has killed the mid-budget movie for adults.

The argument is half-right, or maybe a third-wrong, or just somewhat misguided altogether. There is, undoubtedly, a venture capital mind virus, to borrow a dumb phrase that has captured the conversation in a different context, but it doesn’t really have that much to do with IP. The real problem is that every studio saw that Netflix was generating tens of billions of dollars in revenue a year via streaming and shareholders were like “Wait, why can’t Warner Bros. and Paramount and Universal and Disney all do that as well?”

If you want to blame venture capital for anything, blame it for the push to get every studio to think that streaming should serve as every source of revenue combined and multiplied by five instead of how they should have been thinking of streaming: as a way to replace the lost DVD revenue that actually paid for the mid-budget movie for adults we all love so dearly.

But one thing this mindset isn’t to blame for is the studio pursuit of the mega-franchise. The studios are pursuing mega-franchises because audiences have reliably demonstrated time and again that mega-franchises are the only thing they will show up for in theaters at a level commensurate with the cost of opening a mid-to-large-budget feature on 3,000 screens. Or, really, at all.

Look, I wish The Last Duel had made $100M domestically just as I wish Dunkirk had outgrossed The Dark Knight Rises. I would love for Air’s theatrical campaignto have been more than an extended advertisement for its debut today on Prime Video (though I do like what Amazon did with this movie). And it would’ve been nice if more people had been willing to take a chance on the oddball indie Beau Is Afraid (even if I did not much like Beau Is Afraid, I like the idea of Beau Is Afraid). The reason 20th Century Studios spent so much money on Avatar 2 that they’d have to gross two billion dollars to make it back is that they knew they could gross two billion dollars on it and they would never gross two billion dollars on the 20 to 30 lower-budget films they could have made with what they gave James Cameron.

William Goldman’s truism—“nobody knows anything”—wasn’t ideal for studios, who had to spend enormous amounts of money on movies that might or might not resonate with audiences. It was, oddly, ideal for the art of filmmaking, at least in the sense that it caused a wider net to be cast around what could potentially make money. Uncertainty is exciting, and movie houses are where we go to be excited. But Oscar puffery aside, the movie business is only nominally interested in the art of filmmaking. The movie business is about making money and, well, we all know what makes money. Goldman’s line hasn’t been proven false, exactly—we still get the occasional surprise hit like Everything Everywhere All at Once and the surprise flop like Ant-Man and the Wasp: Quantumania—but studios have a better bead than ever before on what audiences are willing to spend money on, and they’re giving it to us good and hard.

Anyway, it doesn’t make any sense to blame the studios for turning wholeheartedly to preexisting IP. If we want to identify a culprit, we need to take a look in the mirror.

The WGA’s Demands Are All Reasonable, Which Is Why This Will Be a Long Strike

By Sonny Bunch The Bulwark Goes to Hollywood 5.5.23

The Writers Guild of America has officially gone on strike as many guests on The Bulwark Goes to Hollywood over the last year have assumed they would. I wouldn’t say I was surprised by this development, given the tenor of the conversation surrounding the strike for a while, but I had held out a little hope an agreement might be reached because the WGA wasn’t demanding what I thought they would be demanding, and that was radical data transparency. Data transparency is a thing I could see the streamers who dominate TV burning down the system to protect; spending a little more on writers’ rooms feels like a penny-wise/pound-foolish sort of stance.

And, sure enough, the writers’ demands are all, honestly, pretty reasonable. The WGA handed out a sheet with a list of demands and counters, and the most striking element of it are the number of demands that weren’t even met with a counter. Among these items were requests for larger writers’ rooms and a request for a new residual structure that reflected how well a show performed on streaming. The rejection-without-a-counter that jumped out at me, however, was the one related to how agreed-upon pay is parceled out.

Here was the WGA’s ask: “WEEKLY PAY: 50% pay upon commencement, and remaining 50% to be paid out weekly over the writing period. Applies if writer is paid less than 250% of minimum; writers above this threshold have the right to opt-in to weekly pay.” Basically, the way it works now is that writers, after they are hired, get half up front and half when they deliver a draft acceptable to the studio. This seems fair enough, except for the fact that the studios will stretch out what is considered acceptable for as long as possible, asking for rewrite after rewrite, itself a questionable ask since most contracts stipulate a specific number of drafts. This means that writers end up doing lots of free work for extended periods.

And, you know, the world’s smallest violin and all that. Oh no, how dare they complain about having to do a little extra work to collect their six-figure checks, boo hoo. But I feel like it’s kind of important to understand that writers are doing free work all the time. Most of a working writer’s life in Hollywood is spent doing free work in the form of pitches, writing spec scripts, etc. I always find Colby Day’s year-end roundups eye-opening (2022 here, 2021 here), because it’s so often a series of fruitless meetings, Zooms with producers that go nowhere, sizzle reels that wind up flaming out, etc. I don’t think it’s unreasonable for writers, having finally found paying work instead of being forced to do the free work needed to acquire the pay, to ask to be paid for it in a timely fashion. But it did come across to the AMPTP as so unreasonable they didn’t even bother to come back with a better idea. And that’s why this is destined to be a long, and potentially destructive, strike.

U.S. Lost 2,000-Plus Movie Theatre Screens Amid Pandemic

By Pamela McClintock Hollywood Reporter 3.9.23

The average movie ticket price hit a record $10.53 in 2022, according to the Cinema Foundation’s inaugural state of the industry report released Thursday. The foundation is a non-profit arm of the National Association of Theatre Owners.

…The general tone of the report was upbeat as the exhibition industry emerges from the Covid-19 crisis, even as it revealed that the number of movie screens in the U.S. shrunk from 41,172 in 2019 to 39,007 in 2022, a 5.3% dip.

…The loss was offset by growth overseas. The number of movie screens grew from 200,949 to 212,590, a 5.8% jump.

The Cinema Foundation report says there are 107 movies set to be released in 2,000 or more theatres this year, up dramatically from 71 in 2022 and down only somewhat from 112 in 2019.

The report also detailed the importance of theatrical over streaming, the dangers of piracy when a movie goes to the home early, consumer sentiment about the theatrical experience, and industry innovations and opportunities going forward.

“Data and research are the essential tools we use to drive forward cinema innovations,” said Jackie Brennerman, president of the Cinema Foundation. “What we found from our multiple research partners is that the future of the moviegoing experience looks brights and that a number of new opportunities exist for both exhibitors and studios.”

…Among other key findings, the Cinema Foundation also discovered that viewers place a higher value on movies that they know were first released theatrically. They also want to see more diverse genres on the marquee, with comedy, action/thriller, horror, drama, and romance ranking as the top five most requested. And the report noted how both Top Gun: Maverick and Elvis owe a large part of their success to older moviegoers.

Streaming is an important part of a film’s distribution plan, but it does not replace theaters which remain primary in the film ecosystem. We learned there cannot be billion-dollar movies without movie theatres. Without billion-dollar movies there cannot be $200 million budgets.

Films just are not as majestic or compelling if they have not opened in a movie theatre. This is why, after the failure of day and date releases (which cannibalized both theatrical and streaming revenues), the studios, including those which sent their entire slates (Warner Bros.) into simultaneous release, quickly shifted and announced their films would open ‘only in theatres.’

“There still are significant problems with theatres that need to be addressed, particularly with the poor performance of major dramas in late 2022, but an increase in the supply of films should help” the report concluded.

2023: The Year of Churn Baby Churn, and…

…5 more industry challenges as streaming costs accelerate all risks.

By Entertainment Strategy Guy The Ankler 1.5.23

Early last year, I came up with a conceit to predict every entertainment company’s Worst Case Scenario. I covered Apple TV+, Amazon, Disney, Comcast and Warner Bros. Discovery. As I built those out, I realized that a few risks weren’t just specific to each player, but rather industry wide. For example, it’s a big risk for Disney if folks keep cutting the cord, because of how much it makes from ESPN but that’s a risk for NBCUniversal and Paramount Global too. Here’s a quick list of the biggest macro risks facing both traditional entertainment companies and Big Tech:

• Streaming never makes money
• Theaters “die”.
• The linear bundle collapses
• China cracks down on Western media
• Piracy grows
• “Aggregeddon” as digital devices and operating systems take profits from streamers
• Big Tech gets broken up/renewed antitrust sentiment

A few weeks back, I reviewed this list and realized all the risk factors but one actually became more profound last year, with 2023 continuing and in some cases set to amplify the trend lines. (The only exception being “aggregeddon” because it didn’t get worse for streamers last year.)

Wall Street noticed, hence the grim state of five of the biggest entertainment/tech stocks in 2022.

The good news for 2023 is that now entertainment companies can realize what went wrong. And fix it. Maybe this means bringing more films back to theaters. (Amazon and Warner Bros have already said they will.) Maybe the entertainment companies offer customers better priced bundles to decrease churn. Maybe they’ll be more cost conscious, as Warner Bros CFO Gunnar Weidenfels said just this morning. Maybe it means enacting one of Richard’s solutions from Tuesday. Or something we haven’t thought of yet. Either way, 2023 will be the year to reevaluate based on the lessons of 2022.

Hawkins + Lennon/Tampa Bay, Florida/hawkinslennon@gmail.com/727-741-6144

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