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Hollywood writers returned to work this week feeling pleased about their new contract after five sweltering months on the picket lines. If the striking actors can reach an agreement with the studios in the next week or two, as many hope, the floodlights will soon be shining over Tinseltown again.
But any celebration in Hollywood is likely to be shortlived. Disney and other traditional studios still have yet to turn a profit in their streaming services, and their once-mighty TV businesses are in a steep decline.
For the writers and actors, cost-cutting by the studios means that while they will be earning more from their new contracts, there will probably be fewer shows getting the green light than during “peak TV”, a period that started around 2009 and appears to have ended this year.
“The writers did really, really well” in the contract negotiations, said one senior Hollywood executive. But he added that there will be “repercussions” from the deal.
“The streamers are going to be more conservative” with their budgets, the executive said. “They’re going to be more cost-conscious . . . They’re going to develop less content.”
The writers secured higher pay across the board in their new three-year deal, plus the potential to earn royalties from hit streaming shows. In all, the new package will cost an additional $233mn a year — less than the $429mn they were seeking but well above the initial offer from the studios. The new contract for actors is certain to add more costs for studios.
Members of both unions insist that the studios can afford the pay rises despite industry headwinds. They point to high executive salaries and the companies’ long-term records of profitability as evidence that they can afford to pay up.
Yet after pumping billions into streaming, the studios are under pressure to hold the line on content spending. Even Netflix has been keeping its budget steady at around $17bn since 2021.
The difference is that Netflix makes money, unlike the streaming services launched by studios such as Walt Disney, Comcast’s NBCUniversal, and Paramount. Warner Bros Discovery said its streaming business turned a profit this year, but Disney’s streaming operation has lost more than $11bn since it launched in 2019. It does not expect the business to break even until next year.
In the rush to reach profitability, most streaming services have been raising prices and have even introduced advertising, an idea that was once taboo in a business that was supposed to be propelled by ever-increasing subscriptions. But suddenly old ideas about how to make money from TV seem to be back on the table.
The retro strategies that are coming back into fashion include streamers licensing shows to each other, allowing the original network to keep making money from a programme after its initial run. Further price rises are also likely for some of the streaming services, including Netflix.
Then there is cancelling expensive or underperforming shows. Streamers seem to have been especially ruthless about cutting shows in recent months, with Hulu axing The Great and Warner’s Max service ending Winning Time after just two seasons.
There has also been discussion about a far more radical step, one that would reduce options for indulging a habit that is almost synonymous with streaming: binge watching. HBO was a pioneer in this regard, releasing regular weekly episodes of popular shows such as White Lotus, Succession and Winning Time.
“Will some of these streamers say: Hey, we’re wasting all our bullets at the same time,” the executive said. “Will some start to [release] their shows in a different way, and will that mean they don’t have to make as many shows?”
With belt-tightening back in vogue in Hollywood, it seems like an idea that has a chance of getting the green light.
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