With yet another major round of layoffs about to hit Hollywood, I am reminded of Ben Hecht’s explanation of how he made his peace with the town. “The key is to understand how to balance the misery with the money,” he wrote.
Arriving in Hollywood at the zenith of the studio system, Hecht wrote that everyone he met was working, but also complaining. Good-paying jobs were abundant — for grips, extras, even writers. Studio contracts kept the stars bejeweled but not wealthy. The dreaded studio chiefs were autocratic but also not rich by today’s billionaire standards. The Hollywood ecosystem worked in its own self-protective way with everyone doing well but wanting more.
If Hecht were around today, he’d wonder why it isn’t working very well anymore (he managed to become its highest-paid writer). He’d especially be fascinated by the melodrama surrounding AT&T and its Hollywood protectorate, WarnerMedia, which this week starts reducing costs by a further 20% at a moment when some 840,000 other Americans are seeking unemployment aid nationwide (some 600 studio workers were cut in August).
Analysts see layoffs looming at other studios as well, noting Disney’s new restructuring of its streaming services — some 28,000 Disney layoffs were recently announced after 100,000 furloughs worldwide in August — and potential investor unrest at other companies, such as MGM, stemming from the delayed release of major productions, especially the James Bond movie.
The studio chiefs no longer are the principal targets of complaint, with studios taking their subservient place in the new corporate structures. Indeed, at the moment when AT&T mandated its new round of cutbacks, the CEO who triggered the WarnerMedia acquisition, Randall Stephenson, announced his retirement at age 60. AT&T’S parting gift to him totaled nearly $100 million in pension and deferred earnings.
The phone company’s $85 billion acquisition of WarnerMedia reflected Wall Street’s belief in the long-term growth of the entertainment sector worldwide. Disney earlier had affirmed this doctrine with its acquisitions of Pixar and Lucasfilm, though some traders now question whether it overpaid for its biggest deal, Fox. Comcast, owning NBCUniversal, also had forged its commitment to acquisition, though some bankers now question whether it overpaid for SkyNews (the company was petulant about losing the Fox deal).
The second-guessing about AT&T’s initiatives, however, have gained the widest attention. Elliott Management, a hedge fund, claimed publicly that AT&T already was overinvested in problematic media assets, such as DirecTV, whose present $20 billion value totals less than half of what AT&T paid for it in 2015, according to some analysts.
With AT&T shares showing a 27% decline so far this year, John Stankey, its new CEO and a self-described “Bellhead,” declared that assets were not set in stone, adding, “There’s nothing sacred anywhere in the business, and WarnerMedia is no exception.” Stankey himself made $17.8 million in 2019 and has not revealed this year’s compensation.
None of this provides equanimity at WarnerMedia, which already eliminated some 500 jobs in August spread among HBO, TBS, TNT and the Warner Bros TV and film studio, which employed some 30,000 earlier this year.
If heads continue to roll at the executive level, to be sure, some of those displaced already have found new ventures in the financial arena. Two former Disney mavens, Tom Staggs and Kevin Mayer, disclosed this week they would join with Shaquille O’Neal to establish a media acquisitions venture that Wall Street calls a “blank-check company.” It’s designed to make deals, not content. According to the SEC filing, some $250 million will help write the initial “blank check.” Shaquille last week coincidentally put his mega mansion outside Orlando up for sale for $19.5 million but avers that he didn’t need the cash to write the blank checks.
Since the bankers at Goldman Sachs saw their earnings increase 95% this year, the ex-Disneyites seem to be asking, “Why mess around with Hollywood when Wall Street doesn’t even acknowledge the word ‘cutbacks’?”
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