Roll Up The Red Carpets… Is Hollywood Shrinking?
As Hollywood luminaries graced the red carpet in early January, post two challenging strikes, to honor the achievements of “Oppenheimer” and “Succession,” a looming existential crisis was on everyone’s mind: the significant downscaling within the entertainment industry.
The golden age of television is now behind us, according to 17 leading executives, agents, and bankers in the entertainment industry. They revealed to Reuters that both the film and TV industries are adapting to harsh economic circumstances, with fewer original series and films, increased budget scrutiny, and dwindling profits in the cinema sector.
“The significant retrenchment is here,” confessed an experienced television executive, preferring to stay anonymous. He predicts a considerable decrease in content quantity and expenditure.
This shrinkage narrative will feature prominently in the latest quarterly results from Walt Disney (DIS), Warner Bros Discovery (WBD), and Fox (FOX). It also serves as a backdrop for potential media mergers, with recent sale talks taking place between Paramount Global’s owner (PARA) and Skydance Media CEO David Ellison, who co-produced “Top Gun: Maverick.”
The analyst from TD Cowen predicted a decrease of 7% in broadcast and cable television advertising by the end of 2023 compared to the previous year, with total advertising declines of 11.7% at Disney as per LSEG reports. This is despite the ongoing expansion of digital ad businesses by media companies, which still heavily rely on traditional TV advertising revenue – accounting for 80% of it.
Streaming services, once touted as the industry’s future, are also struggling to break even following years of lavish expenditure. As the “third act of the streaming wars” commences, as termed by MoffettNathanson, production spending will drop below figures from 2022, when intense competition triggered unsustainable investments.
A sharp decline is predicted in the number of scripted series from the peak of 633 shows released in 2022 due to the effects of Hollywood strikes and budget constraints. Even the market leader, Netflix (NFLX.O), reduced its number of scripted series by over a third from 2022 to 2023, reports Ampere. Industry executives anticipate a further reduction in scripted series, perhaps down to the 300-shows range.
In 2024, the US box office is expected to experience the aftereffects of the actors and writers strikes, with just 90 films scheduled for wide release this year, a decrease from around 100 in 2023, reports MoffettNathanson. Expectations for box office sales will be low at $8 billion in 2024, a 10% decrease from 2023 and a 30% drop from 2019.
Hollywood is slowing down, with production budgets contracting and shows failing to attract audiences getting canceled sooner. This has led to a “new world order,” with shorter seasons and fewer episodes per season.
The film industry is having a crisis of its own as previously popular formats have disappointed at the box office, signaling what could be termed as “superhero fatigue”. As a response, studios are planning to focus on fewer, but more substantial endeavors, targeting cultural and box-office impact.
The future of cinema halls is also uncertain, with a lack of sufficient film releases to justify the existence of 39,000 screens in the US, leading to predictions of impending disaster.
