The scene was emblematic: Appearing this week before assembled TV critics, the programming boss of HBO set aside his customary vows to dominate the awards landscape, promising instead that HBO would defeat any pressures to “change our culture.” His aim: to respond to reports that HBO’s new proprietor, AT&T, was urgently prodding the network to ratchet up its programming pipeline.
Renowned for its swagger, Hollywood is sending forth a defensive, if not downbeat, vibe these days. A visit to its bars and boites will testify that drinks are flowing but faces are glum.
“The Future Ain’t What It Used to Be” is the appropriate title of an incisive new article written by a man who has little personal reason to fear the future – Bruce Ramer, whose legal practice involves the likes of Steven Spielberg and Clint Eastwood. The changes at every level of the entertainment business are so vast, the corporate cross-currents so unpredictable, he argues, that it is all but impossible to chart the future. The moment of truth has finally arrived when truly “nobody knows anything,” Ramer writes in Spotlight, the entertainment journal, echoing the famous plaint of writer William Goldman.
Dispatches from the annual Allen & Co media conference in Sun Valley reinforce fears of what the Wall Street Journal predicts will be “an existential onslaught from the tech giants.” With traditional media companies facing a projected profit decline of 40% over the next seven years (cord cutting and fading ad revenue are mainly responsible), the wave of mergers and consolidations will likely disrupt career paths and potentially erode the quality of product.
Consistent with tradition, Hollywood is responding to the looming changes with a display of “short-termism” – strategy tied obsessively to quarterly earnings, massive stock buybacks and an unwillingness to reward it workforce, argues Steven Brill in Tailspin, a forceful new book whose title reflects what he foresees as the future of the economy, particularly Hollywood’s. The issue of stock buybacks presents an intriguing, if technical, microcosm of the economic malaise facing Hollywood companies — especially Viacom, which has been an aggressive practitioner. “In acquiring massive amounts of their own shares, buybacks systematically transfer value from shareholders to executives, triggering bonuses tied to earnings per share,” points out Prof. Jesse M. Fried of the Harvard Law School. Not that CEOs, with their out-of-control pay packages, need further incentives (even McDonalds bought back shares totaling $1.6 billion in the first quarter alone). The ever expanding level of CEO pay claims headlines at a time when worker compensation is lagging overall, even as interest rates climb — a reality that will inevitably hit Hollywood.
The issues facing the entertainment industry are not unique, but Hollywood’s increasingly idiosyncratic product will underscore impact. “Innovations in technology continue to create new platforms, with a ripple effect that leads to new forms of content as well as new consumer preferences and demands,” notes Ramer. “The process has accelerated as the relevant technology has changed from tubes and celluloid to chips and bits, and from movie palaces and busy TVs to cellphones and the Internet.”
In movies alone, while box office is at record or near-record levels, and admissions exceed those of theme parks and the four major U.S. sports, the number of tickets sold was down from 4.3 billion in 1946 to 1.3 billion last year, even though the population more than doubled. Hence Ramer figures that moviegoing per capita is about one-sixth of what it was in its peak years 70 years ago. Meanwhile, the number of feature films has been declining overall — studio-made films actually declined from 403 in 1937 to 176 in 2016.
Equally relevant, Ramer points out, is “who” is watching overall Hollywood product (a younger demo), “how” they’re watching (digital), and “where” (tablets and laptops). With new forms of entertainment emerging — VR to AR — the portable, on-demand platform drive may bring creation of a new and different customized content. Ramer reminds us that the largest domestic film opening of Star Wars: The Force Awakens in 2015 was dwarfed by opening day of the latest Grand Theft Auto video game (between $800 million-$2 billion in its first three days).
Concludes Ramer: ”With evolving platforms and shifting audiences, nobody can predict what the entertainment industry will look like with any precision in ten years.” He adds: “It will be interesting to watch” — but it might also be traumatizing to live through for those denizens of Hollywood who are accustomed to a smoother ride.