A Blog by Jonathan Low


Nov 22, 2019

The Many Ways Streaming Is Changing Hollywood

The entertainment industry is undergoing a seismic shift in how content is being bought, produced and sold. But consumers are not necessarily thrilled with the fragmentation or the pricing.

The question is who will blink first: the customer or the supplier? JL

Brooks Barnes reports in the New York Times:

The onslaught is upending how Hollywood does business in almost every way. Instead of relying exclusively on middlemen (cable system operators, multiplex chains) to get to viewers, entertainment companies are selling content directly to consumers. Studios are releasing fewer films in theaters. There is a shift with employment contracts. “They will own your intellectual property outright and forever.” The line between TV and film is blurring.There has even been muttering about whether the Emmys and the Oscars should merge. (But) the cable bundle is starting to seem downright manageable in comparison.
Every three decades, or roughly once a generation, Hollywood experiences a seismic shift. The transition from silent films to talkies in the 1920s. The rise of broadcast television in the 1950s. The raucous “I Want My MTV” cable boom of the 1980s.
It is happening again. The long-promised streaming revolution — the next great leap in how the world gets its entertainment — is finally here.
Streaming services, of course, have been challenging the Hollywood status quo for years. Netflix began streaming movies and television shows in 2007 and has grown into a giant, spending $12 billion on programming this year to entertain more than 158 million subscribers worldwide. There are 271 online video services available in the United States, according to the research firm Parks Associates, one for seemingly every predilection — Pongalo for telenovelas, AeroCinema for aviation documentaries, Shudder for horror movies, Horse Lifestyle for equine-themed content. (Offerings include a series called “Marvin the Tap Dancing Horse.”)
While all this was happening, however, the three biggest old-line media companies — Disney, NBCUniversal and WarnerMedia — largely stayed on the sidelines. Charging into the streaming fray would mean putting billions of dollars in profit from existing cable networks like USA, Disney Channel and TBS at risk. Building video platforms of the size needed to compete with Netflix and Amazon would be frightfully expensive. And mastering the underlying technology would require a sharp learning curve. Better to bide their time. When it became clear that protecting their existing business model was more perilous than embracing the future, no matter now disruptive in the near term, they would act.
That time is now. And everything is changing.
“I get asked all the time, ‘Where does this stop? When does it stop?’” said Brett Sappington, a senior Parks Associates analyst and researcher. “The truth is that it is only getting started.”
Disney Plus arrived on Tuesday and costs less ($6.99 a month) than a single tub of popcorn at big-city movie theaters. It allows anyone with a high-speed internet connection to instantly watch Disney, Pixar, “Star Wars” and Marvel movies, along with original series and films, 30 seasons of “The Simpsons” and 7,500 episodes of old Disney-branded TV shows. “We’re all in,” Robert A. Iger, Disney’s chief executive, said in April at an event unveiling the service.
Disney said on Wednesday that more than 10 million people had already signed up for the service. Analysts had been hoping for eight million by the end of the year.
In May, WarnerMedia will introduce HBO Max ($14.99 a month), which will offer 10,000 hours of instant entertainment, including the entirety of “Friends” and “South Park,” hundreds of Warner Bros. movies, everything Batman, the HBO library, 50 years’ worth of “Sesame Street” episodes, and CNN documentaries. “We’re all in,” John Stankey, WarnerMedia’s chief executive, said at an HBO Max promotional event on Oct. 29.
Peacock, an NBCUniversal streaming service also scheduled for a spring debut, will offer 15,000 hours of content: complete seasons of “The Office” and “Frasier,” Universal films like “The Fast and the Furious” and “Despicable Me,” Telemundo shows, every episode of “Saturday Night Live,” a new reboot of “Battlestar Galactica.” Peacock, unlike Disney Plus and HBO Max, will carry advertising. NBCUniversal is expected to disclose pricing details (and presumably declare that it is “all in”) at an event of its own in the coming months.
As the Big Three entertainment companies launch their video platforms, streaming competition is mounting from Silicon Valley. Apple rolled out Apple TV Plus on Nov. 1. Facebook and Snapchat are determined to become bigger video forces. And never count out YouTube, part of the Google family. Feeling the need for more “quick bite” videos while standing in line at the grocery store? Quibi, a streaming start-up led by Meg Whitman and Jeffrey Katzenberg, is due in April.
The onslaught is upending how Hollywood does business in almost every way.
Instead of relying exclusively on middlemen (cable system operators, multiplex chains) to get shows and movies to viewers, traditional entertainment companies are for the first time selling content directly to consumers. As a result, studios are releasing fewer films in theaters; WarnerMedia said recently that “Superintelligence,” a Melissa McCarthy comedy scheduled for theatrical release in December, would instead debut in the spring — directly on HBO Max.
With more original movies bypassing big screens, the line between TV and film is blurring, prompting once-unthinkable operating questions. Studios, for instance, employ separate executive teams to oversee the development and production of movies and television series. Should that siloed approach end?
There has even been some muttering about whether the Emmys and the Oscars should merge.
So much change is suddenly happening so quickly that viewers are becoming overwhelmed and, studies suggest, not in a good way. For some people, the cable bundle is starting to seem downright manageable in comparison.
“Consumers are upset about the imminent changes in the media landscape,” consumer behavior researchers at the Langston Company, a Colorado consultancy, concluded in a September report. “These negative feelings are driven by fears of fragmentation, erosion of perceived value and the friction-cost of having multiple streaming accounts.”
Nearly 50 percent of consumers are frustrated by the growing number of subscription services required to see the content they want to watch, according to an August white paper by Fluent, a digital marketing company.
Without question, analysts say, the flood of new streaming services will cause more people to cancel traditional cable subscriptions. Cable television is still the entertainment industry’s cash cow, but millions of customers in the United States have already cut the cord. The annual pace of subscriber decline hit 5.4 percent in the second quarter, a statistic Craig Moffett, a senior analyst at MoffettNathanson, referred to in a recent report as “freaking ugly.”
For traditional companies like Disney and NBCUniversal, each of which run vast cable networks, that means reduced ad sales and harder negotiations with distributors over fees. “All signs point to subscriber losses continuing to accelerate,” Richard Greenfield, a founder of the LightShed Partners research firm, wrote in a client note. “Virtually every ambitious, must-see TV show is headed for a direct-to-consumer platform, with TV/basic cable taking the proverbial leftovers.”
Big cable channels like ESPN, Fox News, Bravo and HGTV aren’t going anywhere, but channels that are already poorly rated — BabyFirst, Ovation, Viceland — will have a harder time staying in business, analysts say. The culling of the herd has already started, with cable outlets like Cloo, Esquire, Pivot and Al Jazeera America calling it quits in recent years. Glenn Beck will pull the plug on his Blaze cable channel next month.
Even so, some of the biggest changes involve talent.
Netflix and other tech companies, including Apple and Amazon, have been steadily poaching writer-producers from established studios and television networks by offering eye-popping pay packages. Kenya Barris (“black-ish”), Ryan Murphy (“American Horror Story”), Shonda Rhimes (“Grey’s Anatomy”) and David Benioff and D.B. Weiss (“Game of Thrones”) have all high-tailed it to Netflix, following stars like Adam Sandler and David Letterman. The establishment has recently been punching back. To keep Greg Berlanti, the TV whiz behind shows like “The Flash” and “Riverdale,” Warner Bros. dug deep into its pockets. Warner completed a similar deal with J.J. Abrams in September.
“There is money being thrown at people and ideas and scripts at a level that has never happened before in Hollywood,” said Mr. Sappington, the Parks Associates analyst.
Even Netflix is starting to experience sticker shock. Ted Sarandos, the company’s chief content officer, told analysts on an October conference call that new bidders were driving up prices for “elite” content. “On a very competitive show, there has probably been 30 percent price escalation since last year,” Mr. Sarandos said.
Most definitely, streaming money is sloshing through the Hollywood economy. Producers in backwaters like children’s television are now in hot demand. Midlevel publicists are driving new luxury cars. Florists, caterers, set decorators, chauffeurs, hair stylists, headhunters — it’s gravy train time.
But fewer Hollywood people are turning cartwheels than outsiders might think. To keep their content assembly lines speeding (495 scripted original series aired in 2018, an 85 percent increase from 2011) companies are stretching some employees to a breaking point. Because streaming services order fewer episodes and cancel series after shorter runs, rank-and-file writers are having to switch jobs more frequently.
There is also a fundamental shift with employment contracts underway. Disney, for instance, has adopted new terms for TV shows. Under the old model, in place for decades, show creators were paid handsome fees from the beginning. But the big money came in success: a slice of profits from rerun sales. Disney, following a model popularized by Netflix, now offers higher upfront payments but little or no “back end.” Other traditional companies are doing the same; they say it allows for distribution flexibility inside their corporate ecosystems (broadcast, cable, streaming).
The shift has rankled members of the Writers Guild of America, which represents about 13,000 screenwriters and has been whispering about a potential strike. The W.G.A.’s contract with studios expires on May 1. Studio contracts with two additional Hollywood unions, SAG-AFTRA (actors) and the Directors Guild of America, expire on June 30.
Courtney Kemp, creator of the Starz drama “Power,” campaigned on the topic during September elections for the writers’ guild’s West Coast board. “The companies are looking actively to ‘buy us out’ up front, so they don’t have to share profits with us, and they don’t have to pay us for reuse — and they will never have to tell us the truth about the value of our content,” Ms. Kemp wrote in her campaign statement.
“They will own your intellectual property outright and forever,” Ms. Kemp continued. “As my 8-year-old daughter would say — no backsies. And that’s an issue worth striking over.”
Revolutions are not known for their tranquillity.


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