Fear and hatred are growing in Hollywood as top executives and rank-and-file employees grapple with growing uncertainty about their place in a rapidly changing entertainment industry. A pervasive concern: that the streaming-fueled content bubble has finally burst, with more consolidation underway.
Wall Street darling Netflix lost $54 billion in market value in one day last month due to concerns over a drop in subscribers and quickly revamped its marketing department once again, cutting writers of its brand new fan site Tudum five months after its launch. And the fallout from the Warner Bros. merger. Discovery and Amazon’s acquisition of MGM have just begun, with top executive Michael De Luca leaving the latter on April 27 and crushing initiatives at the former. Neither the disturbed nor the disruptive feel 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. staffer. Discovery, no doubt aware that the $3 billion in cost-cutting synergies that CEO David Zaslav has promised is really just corporate code for layoffs. The executive unplugged CNN+ less than a month after its launch and the company has since begun pulling unscripted content from TNT and TBS, moves that will likely lead to job losses.
“2022 will undoubtedly be a complicated year,” said Gunnar Wiedenfels, chief financial officer of Warner Bros. Discovery, to Wall Street analysts on April 26, while discussing the company’s latest quarterly results.
Abrupt strategic pivots such as the shutdown of CNN+ have added to growing unease around town. Netflix, known for its “Hunger Games” ethos, wasted no time on the niceties while killing writer deals on April 28.
“My manager explained the dismissal to me by text message when she had already been fired,” said a dismissed worker, one of many who preferred to remain anonymous. “We realized something was wrong when his Slack appeared disabled.”
In the agency world, two of the biggest outfits – CAA and ICM – are merging, with one insider saying the level of nervousness among agents who “don’t have a solid volume of business” is at an all-time high.
“It’s inevitable that when you have a consolidation, people feel vulnerable,” says a leading entertainment lawyer.
Netflix’s swoon is being greeted with a certain schadenfreude, especially among legacy studio executives who were tired of hearing how algorithms had rendered the traditional, instinct-based green light process obsolete. However, the reality is that the fundamental issues plaguing the streaming service, namely a maturing business and increased competition, are causing problems for almost every other Hollywood player. Disney, Comcast, Paramount Global, and Warners have all moved aggressively into the streaming space to stave off cord-cutting decline and demonstrate their ability to scale.
Now Wall Street has serious questions about Hollywood’s long-term financial viability. “We believe the industry is facing a tipping point in which the economics of old models seem increasingly fragile while the potential of the new world now seems overhyped,” wrote Robert Fishman, analyst at MoffettNathanson, May 2.
Accelerated streaming initiatives have been a boon for creators in recent years: every week, it seems, a new showrunner has been lured to Netflix, HBO Max, Apple TV+, or any other service with a mathematical symbol in its nickname, with the promise of a megadeal or multi-episode order. Film and TV writers fear a slowdown in work amid rumblings of a major Netflix belt-tightening and questions about DC Entertainment’s future under the company’s new ownership.
“Netflix couldn’t keep growing forever, so now it looks like they’ve finally hit their limit and they’ll have to be more careful about how they do things,” an agent said.
In a sign of how seriously Netflix wants to cut content spending, 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. Even the Duchess of Sussex is not immune to the pressures of the economy.
Many economists fear that a recession could be on the horizon if inflation proves intractable. To make matters worse, geopolitical tensions make access to major international markets like China nearly impossible. And COVID has become a franchise that won’t stop crawling through reboots and sequels.
Last week, Discovery informed staff at recently acquired brands that they must work in the office at least two days a week starting in May. The short notice rattled many staff members.
An insider says, “A lot of people at WarnerMedia think they’re going back to the office for the first time in two years to be fired by someone they’ve never met.”
Claudia Eller, Jennifer Maas, Joe Otterson, Todd Spangler and Brian Steinberg contributed to this report.