Big Trouble in Little Hollywood

Over the past year, the gap between Hollywood and its customers has widened to a degree that should send shivers down the spines of every entertainment exec.

The industry has routinely used a fairly reliable gauge to measure the size of this gap. It’s called profit.

Sadly, 2022 was a disaster for the once-golden city. Media companies saw the loss of half a trillion dollars in equity.

A town that for a century had been recognized as the entertainment capital of the world has seemingly been reduced to a shadow of its former self.

How could this have happened?

In my opinion, somewhere along the road a decision was made to have entertainment take a bow so that a one-sided agenda could take center stage.

“Especially this past year, ideology has become more important than art,” Quentin Tarantino recently told the host of HBO’s “Reel Time with Bill Maher.” “It’s like ideology trumps art. Ideology trumps individual effort. Ideology trumps good.”

From the youngest of age, our primal need makes itself known with the simplest of words: Tell me a story.

It’s universal. Human beings crave stories, ones with characters, plots, and themes that reflect life’s truths. This is how Hollywood initially came to be. And how it grew to be an industry like no other, all entwined within our minds, hearts and imaginations.

We were happy when Hollywood profited. It meant more entertainment fare would be forthcoming, maybe even greater than that already experienced.

It’s hard to believe the once-great ocean of entertainment that existed steadily devolved into a digital stream of woke stories.

Evidently, the public doesn’t have the appetite for what the industry has been serving up of late. There are definite consequences when audiences’ wishes are ignored.

Movie theater attendees are now a fraction of what they used to be. Despite the solid successes of Tom Cruise’s “Top Gun: Maverick” and James Cameron’s “Avatar: The Way of Water,” the 2022 multiplexes saw their audiences essentially cut in half, when compared to four years ago.

Of course, movie theater companies experienced record losses in their share prices. AMC’s value dropped almost 80 percent, and Cineworld, owner of Regal, headed for bankruptcy court.

Likely hampered by projects that were saturated with woke ideology, Disney experienced its worst yearly stock-drop since 1974. Disney is the largest, most influential and sole media company that is listed in the Dow Jones Industrial Average, and it saw its shares drop a whopping 44 percent? Unbelievable.

The board of directors suddenly terminated CEO Bob Chapek and brought back former CEO Bob Iger, ostensibly to rescue the Mouse House.

Warner Bros., Discovery and Lionsgate also saw their stock prices take a plunge of over 60 percent.

With regard to television, traditional broadcast and cable TV (aka linear television) saw a significant ratings dip. Similar to what happened earlier to the music business, Hollywood executives discovered that streaming media does not yet provide sufficient revenue to offset the losses incurred in linear television and theatrical film releases.

However, a bright spot appeared on an otherwise dismal media landscape. “Yellowstone,” which is a modern perspective on the classic Western, garnered a huge audience hungry for retro-drama. Consequently, the series is continuing to enjoy stellar ratings.

Another media company that actually saw its investment value rise is the sports entertainment powerhouse WWE, which ended 2022 with a gain of 38 percent. It could be that this increase has to do with the moral sensibilities of a huge segment of viewers that find the clear distinctions between heroes and villains quite appealing.

The studios spent money galore on streaming content in 2022, and the cash layout just never panned out. Executive chairman James Dolan of AMC Networks explained Hollywood’s quandary in a memo that he recently wrote.

“It was our belief that cord-cutting losses would be offset by gains in streaming. This has not been the case. We are primarily a content company and the mechanisms for the monetization of content are in disarray,” he stated.

The AMC executive pointed out a reality that most of Hollywood is facing in 2023 and warned of “a large-scale layoff as well as cuts to every operating area.”

Netflix was first out of the gate to layoff employees, following a substantial loss of subscribers. Other major entertainment companies have also announced or have already started their layoffs, hiring freezes, and/or cost-cutting measures, including Disney, Warner Brothers, Paramount and CBS.

Warner chief David Zaslav actually stunned the entertainment world last summer, when he decided to shelve and write off the costs of “Batgirl,” a funded and completed film that was in post-production and had been approved by previous leadership at the company.

At an investor conference in November of 2022, he noted that in the past few months, things had gotten “a lot worse.”

The road that Hollywood will take going forward is yet to be mapped.

With a hope and a prayer, it will be one where entertainment takes center stage once again.

Disney Rules Over a Declining Box Office

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Despite some blockbuster hits, Hollywood’s box office continues on its downward trend as 2019 comes to a close.

Domestic revenues are expected to fall nearly 4 percent by year’s end; this according to The Hollywood Reporter. The box-office total of this past fall not only constitutes the sharpest decline in five years, it is also the fifth downturn this decade.

Executives in Hollywood are assuming that the decline is mostly due to new home entertainment technology and the rise of streaming services, including Netflix, Hulu, and Disney+. However, the content of much of the entertainment product that is being produced these days simply does not seem to be connecting with American filmgoers.

Disney is proving to be the major exception to this rule. The company’s product is not only resonating with the movie-going public, it is stamping out the competition in a big way.

The top 10 films of the year brought to the industry 38% of domestic ticket sales (up from 33% in 2018). Disney contributed an unprecedented 80 percent of the product, meaning eight out of the top 10 biggest revenue generators in the domestic box office were brought to you courtesy of the Mouse House.

The growth of the company that Walt Disney founded continues on an upward trajectory. Disney had a record-breaking year in 2016 and during that time period accounted for 6 of the top 10 highest grossing domestic films. The company made 4 out of the top 10 in 2017, 5 in 2018, and then jumped to 8 in 2019.

The Disney releases “Avengers: Endgame,” “The Lion King,” “Captain Marvel,” “Toy Story 4,” “Frozen II,” “Spider-Man: Far from Home” (shared by Disney and Sony), “Aladdin,” and “Star Wars: Episode IX – The Rise of Skywalker” have propelled the company to $3.8 billion domestically and over $10 billion in global box-office revenue, a record breaking number for Disney or for any other Hollywood studio.

Although some have criticized the cost of acquiring Lucasfilm and Marvel, in hindsight the purchases were bargains. But even with Disney’s blockbuster year, including the highest grossing movie of all time “Avengers: Endgame,” Hollywood is watching the overall domestic gross for movies head south.

No doubt the introduction of elaborate home theaters equipped with big screens, high definition technology, surround sound audio, and streaming of content directly into homes has been a factor in the overall impact that is being felt in the entertainment industry and beyond.

However, the effect has not been great enough to alter content creators’ perception, or for that matter to make them even question the themes that are being shoehorned into a whole lot of the entertainment product.

Because streaming is being used more as a distribution alternative, especially for smaller budgeted studio films, the big budget blockbuster has become the stock-in-trade for movie theater owners.

Some in the entertainment world are concerned by a new approach, which is that streaming services, with the acquiescence of producers, are debuting new films online rather than in brick and mortar movie theaters. This is causing a drop in traditional movie theater ticket sales.

Ironically, Disney has embraced the direct to streaming approach with “Noelle,” a Christmas comedy starring Anna Kendrick, and the “Lady and the Tramp” remake, both of which bypassed the multiplex and went straight to Disney+, the studio’s new streaming service.

“The Irishman,” an Oscar buzz offering from Martin Scorsese, was streamed by Netflix after less than a month had passed. The streaming giant similarly started to stream “Marriage Story” after only one month. Both films are getting the awards talk that Netflix undoubtedly wanted. Nevertheless, the impact at the box office has been underwhelming.

Because the overall ticket revenue outside of the United States will likely be the same or greater than last year’s $41.1 billion, Hollywood will pay even more attention next year to the global consumers of entertainment, particularly the biggest overseas film market. For all those who are keeping tabs, that would be China.

Netflix Gets a Hollywood Makeover

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Netflix has just turned its back on the Silicon Valley tech firms in a move that signals a seismic shift in the entertainment business.

The streaming video giant pulled out of the Internet Association, which is the lobbying entity for web-based businesses, and locked arms with Silicon Valley’s nemesis, the Motion Picture Association of America (MPAA), Hollywood’s preeminent lobbying organization.

The Internet Association is a highly influential trade group that represents the biggest technology companies in the world, including Google, Facebook, and Amazon. The MPAA members are the six studio giants of Hollywood: Disney, Paramount, Sony, 21st Century Fox, Universal, and Warner Bros.

Although the tech firms of Silicon Valley and the entertainment companies of Hollywood have some common interests, they are on opposite sides when it comes to copyright protection and statutory immunities that are of benefit to Internet intermediaries.

Because of recent data scandals and charges of censorship by the largest tech firms, U.S. lawmakers are raising questions about two existing statutes: 1) Section 230 of the Communications Decency Act, which shields Internet concerns from liability for content published by their users; and 2) The safe harbor provision of the Digital Millennium Copyright Act, which helps to protect such firms from copyright claims.

Hollywood, via the MPAA, has been pursuing more severe anti-piracy measures in an effort to prod Internet intermediaries into taking steps to prevent and remove illegal content that has been uploaded by users.

Immediately after Facebook CEO Mark Zuckerberg made an appearance in Washington, D.C. before a congressional committee, MPAA head Charles Rivkin requested that Congress begin looking into the possibility of holding Internet platforms accountable, which, of course, raised the specter of government regulation.

Rivken’s rhetoric infuriated Internet Association’s Michael Beckerman, who characterized the MPAA leader’s calls to regulate Internet companies as “shameless rent-seeking.”

Netflix is looking to the MPAA to assist in helping the streaming company expand into markets that in the past have proven to be difficult, if not impossible, to penetrate, which has been especially true with regard to China and India.

Netflix gradually morphed into a different entity from what it was at its onset. In the beginning, Netflix was a streaming platform that hosted third-party content and served as an alternative to Blockbuster and other video rental stores. The Netflix of today, though, is a full blown mega-studio, having reportedly spent about $13 billion on content just last year. Its service seeks to actively pair up content with needs and preferences of its subscribers.

In a recent letter to investors, Netflix CEO Reed Hastings indicated that because of the company’s success in producing original content, it plans to move away from outside programming and make content production the company’s primary objective.

Once dismissed by the industry as an entertainment flash in the pan and a mere rerun platform, Netflix has reshaped the way in which the public consumes entertainment. The industry realized that Netflix had become a threat to traditional entertainment business models, so CEOs sought comfort in mega-mergers and the establishment of new streaming services.

AT&T acquired Time Warner, and the newly formed entity presently has plans to launch a streaming service later in the year. Disney is also set to launch a streaming service, following its pending acquisition of 21st Century Fox. And Comcast will reportedly get into the streaming service business as well, after its acquisition of NBCUniversal is completed.

Netflix recently shocked its subscribers with its biggest price increase ever. A recent survey by Streaming Observer and Mindnet Analytics reveals that Netflix might lose up to 27% of its subscribers due to the price hike.

Another factor that poses a threat to Netflix’s bottom line is that major streaming service competitor Hulu reportedly has plans to lower its monthly charge from $7.99 to $5.99, starting at the end of February 2019.

Netflix is likely to lose much of its licensed third-party content at approximately the same time that Disney’s much-anticipated streamer is launched, complete with entertainment fare from its “Star Wars,” Marvel, and Pixar catalogues.

The current corporate model of Netflix is predicated on rapid growth. However, it now looks as though Netflix will have the brakes applied as emerging competition from Hollywood causes the streaming business to go through a remake.

Box Office Down Again in 2017

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As 2017 draws to a close, the entertainment industry is discovering it has to deal with the reality that this year turns out to be the worst ever for the Hollywood brand.

The sex scandals surrounding movie mogul Harvey Weinstein and other major Hollywood players certainly did not help matters. Neither did the vitriolic politics that routinely spewed from left-wing celebrities’ mouths and wound up alienating folks from coast to coast.

This year the movie box office, once the primary gauge of the entertainment business, suffered yet another decline. Despite the fact that over the last twenty years or so gross box-office revenues saw an increase, for the last decade and a half actual ticket sales have consistently taken a dive.

The final 2017 tally for the North American box office appears as if it will be in the range of 2 to 4 percent less than the previous year, somewhere slightly above $11.1 billion.

It is only the third year that the domestic box office has ever made it over the $11 billion level; however, the number of tickets sold turns out to be the lowest amount since 1995.

Basically, a smaller audience is paying a higher price to see movies at the multiplex, and although the price increase is somewhat tied to inflation, it is a combination of factors that is responsible for a shrinking theater-going audience.

Big studios have been relying on existing franchises, and the creation of new ones, to fill the seats. However, the annual revenue performance was down, in part because of some underperforming sequels and remakes.

Additionally, some of the old film franchises are beginning to fade, as seen in the following examples:

— “Alien: Covenant,” Ridley Scott’s installment in the “Alien” series, came in far below expectations.

–“Transformers: The Last Knight” produced the lowest revenue of the franchise so far.

— The attempt to create a DC version of Marvel’s “Avengers” with “Justice League” essentially fizzled.

— Universal released “The Mummy” in order to launch a new “Dark Universe” franchise, but it was dead on arrival.

— “King Arthur: Legend of the Sword,” “Valerian,” and “The Dark Tower” were all produced and released with the hopes that they would each result in a stream of sequel progenies, but the hopes failed to materialize.

The sequels that fared well created new variations on the super-hero theme. “Spider-Man: Homecoming,” yet another in a series of reboots in the franchise, used a high school setting to insert universal teen angst into the storyline. Similarly, “Thor: Ragnarok” surprised fans of the god of thunder, involving him in a comedic romp.

The horror and comedy genres still have the power to pack the traditional movie setting, thanks to a reliance on the shared audience experience. Unfortunately, the current comedy formula of potty humor laced with profanity produced a series of bombs in “Baywatch,” “The House,” and “ChiPs.”

On the other hand, it is a safe bet that Hollywood will release more films in the horror genre. “It” was a blockbuster, and the box office successes of “Split,” “Get Out,” and “Annabelle: Creation” produced large profit margins due to relatively inexpensive production costs.

Just prior to the start of the summer season, studio heads were taking heart in the early releases that did do well, including “Beauty and the Beast” and “The Fate of The Furious.” In June, the singular DC success “Wonder Woman” ended up scoring well enough at the box office to create a valuable new franchise.

Still, by summer’s end it was clear that the movie business would have to overcome a season splattered with non-performing releases. The summer of 2017 produced the lowest box-office totals in a quarter of a century, placing studio executives under a deep dark cloud.

It was clear that executives were in a box-office hole as a result of the disappointing performances of installments that were previously proven franchises, including “The Mummy,” “Pirates of the Caribbean: Dead Men Tell No Tales,” and “Transformers: The Last Knight.”

There was, however, a pleasant summer surprise that arrived in the form of “Dunkirk,” a World War II epic and one of the best films of the year. Director Christopher Nolan demonstrated how one can create a film experience that is exquisitely dependent on theater attendance. He used IMAX cameras in the filming of the movie and promoted the need for filmgoers to view the movie on wide screens as opposed to streaming it on a device.

Hollywood insiders were waiting for the anticipated galactic revenue flow from “Star Wars: The Last Jedi” to rescue the year, but here, too, the numbers did not hit the high mark.

No doubt Hollywood’s image has taken a beating in fly-over country and beyond, due to the sexual harassment and assault allegations, outrageous celebrity political posturing, late-night’s unfunny agenda-ridden routines, and the like.

Perhaps the movie business, like the NFL, is simply reaping what it sows.