Streaming Revolution Changing Hollywood
LOS ANGELES — 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 cable boom of the 1980s.
It is happening again. The long-promised streaming revolution is finally here.
Streaming services, of course, have been challenging the Hollywood status quo for years. Netflix began streaming 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.
While this was happening, however, the three biggest old-line media companies — Disney, NBCUniversal and WarnerMedia — largely stayed on the sidelines. Charging into streaming would mean putting billions of dollars in profit from cable networks at risk. Building platforms would be expensive. And mastering the technology would require a learning curve. When it became clear that protecting their existing business model was more perilous than embracing the future, they would act.
That time is now.
“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 now allows anyone with a high-speed internet connection to instantly watch Disney, Pixar, “Star Wars” and Marvel movies, along with other series and films.
In May, WarnerMedia will introduce HBO Max, which will offer 10,000 hours of instant entertainment. Peacock, an NBCUniversal streaming service also scheduled for a spring debut, will offer 15,000 hours of content.
Streaming competition is also mounting from Silicon Valley. Apple rolled out Apple TV Plus on November 1. Facebook and Snapchat are determined to become bigger video forces. And never count out YouTube, part of the Google family.
The onslaught is upending how Hollywood does business in almost every way.
Instead of relying 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.
So much change is happening so quickly that viewers are becoming overwhelmed.
“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.”
Without question, analysts say, the flood of new streaming services will cause more people to cancel their cable subscriptions. 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.”
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.
Under the old model, show creators were paid 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.
Revolutions are not known for their tranquillity.