Fear and loathing are on the rise in Hollywood as top execs and rank-and-file employees grapple with growing uncertainty about their place in a rapidly changing entertainment industry. One pervasive concern: that the streaming-fueled content bubble has finally burst, with more consolidation on the way.
Wall Street darling Netflix lost $54 billion in market value in one day last month amid concerns about a slide in subscriber numbers and promptly reorganized its marketing department once again, axing writers on its fledgling Tudum fan site five months after launch. And the fallout from the Warner Bros. Discovery merger and Amazon’s acquisition of MGM has just gotten underway, with top exec Michael De Luca exiting the latter April 27 and squashed initiatives at the former. Neither the disrupted nor the disruptors are feeling too good these days.
“We’re all waiting on pins and needles for someone to pull the figurative trigger on the inevitable restructuring,” says a Warner Bros. Discovery staffer, no doubt aware that the $3 billion in cost-saving synergies CEO David Zaslav has promised is really just corporate code for layoffs. The exec pulled the plug on CNN+ less than a month after it launched and the company has since begun pulling back TNT and TBS’ unscripted content, moves that will likely lead to job losses.
“2022 will undoubtedly be a messy year,” Warner Bros. Discovery Chief Financial Officer Gunnar Wiedenfels told Wall Street analysts April 26 while discussing the company’s most recent quarterly earnings.
Abrupt strategy pivots such as the CNN+ closure have added to the growing unease around town. Netflix, known for its “Hunger Games” ethos, didn’t waste time on niceties while killing writer contracts April 28.
“My manager explained the layoff to me via text after she’d already been let go,” says an axed worker, one of the many who preferred to remain anonymous. “We realized something was wrong when her Slack appeared deactivated.”
In the agency world, two of the biggest outfits — CAA and ICM — are merging, with one insider saying that the level of nervousness among those agents who “don’t have a strong book of business” is at fever pitch.
“It’s inevitable when you have consolidation that people are feeling vulnerable,” says a top entertainment lawyer.
Netflix’s swoon is being greeted with some schadenfreude, particularly among executives at legacy studios who had grown tired of hearing about how algorithms had made the traditional greenlight process, built on gut instincts, obsolete. However, the reality is that the fundamental problems bedeviling the streaming service, namely a maturing business and increased competition, spell trouble for nearly every other Hollywood player. Disney, Comcast, Paramount Global and Warners have all moved aggressively into the streaming space to stave off cord-cutting declines and demonstrate their ability to evolve.
Now Wall Street has serious questions about Hollywood’s long-term financial viability.“We think the industry is facing a point of no return in which the economics of the old models look increasingly frail while the potential of the brave new world now appears overly hyped,” wrote Robert Fishman, an analyst with MoffettNathanson, on May 2.
Ramped-up streaming initiatives have been a boon for creators in recent years: Every week, it seems, some new showrunner has been lured to Netflix, HBO Max, Apple TV+ or any other service with a mathematical symbol in its moniker, with the promise of a megadeal or a multi-episode order. Film and TV writers are worried that they’re going to see a slowdown in work amid rumblings of significant Netflix belt-tightening and questions about the future of DC Entertainment under new corporate ownership.
“Netflix couldn’t keep growing forever, so now it seems like they finally hit their limit and they will have to be more careful in how they do things,” one agent says.
In a sign of just how serious Netflix is about trimming content expenditures, on May 1 news broke that “Pearl,” an animated series developed by none other than Meghan Markle and Prince Harry’s Archewell Prods., had been canned. Not even the Duchess of Sussex is immune to the pressures of economizing.
Many economists fear that a recession is on the horizon if inflation proves to be intractable. To make matters worse, geopolitical tensions are making major international markets such as China nearly impossible to access. And COVID has turned into a franchise that won’t stop cycling through reboots and sequels.
Last week, Discovery informed staff at recently acquired brands that they had to work in the office at least two days a week beginning in May. The short notice rattled many staffers.
Says one insider: “A lot of WarnerMedia people think they’re just going back into the office for the first time in two years to be fired by someone they have never met.”
Claudia Eller, Jennifer Maas, Joe Otterson, Todd Spangler and Brian Steinberg contributed to this report.
From Variety US