WHY HOLLYWOOD STRIKERS’ WORST ENEMY IS WALL STREET
Do the CEOs of today’s media companies even like movies and television?
Hollywood writers and actors have been wondering this aloud and it’s a fair question. Because if we’re talking about perceptions? It seems like these highly paid executives could be selling furniture or cars, for all they care.
But even CEOs of furniture and car companies understand you have to actually make a product. Hollywood’s head honchos have been betting otherwise, which is why the work stoppage resulting from the writers and actors strike is nearing sixth months. Earlier this week, Warner Bros. Discovery CEO David Zaslav said the company is taking a $300 million to $500 million hit in 2023 as a result. Seems like a compelling reason for the studios to negotiate to a contract that gets everyone back to work. And yet …
Shall we note that Zaslav’s performance-based bonus package (and that of other executives at the company) was tweaked back in March, tying it to free cash flow? Cash that would have — should have — been spent on making TV and film. Week after week, when CEOs fail to resolve the strikes, it’s hard not to be cynical about all of this.
But then, these are the same Hollywood decision makers who embraced the dreaded IP doom loop — rehashing intellectual property and serving it up on an endless conveyor belt. It is a hedge against risk, and it is shaped by a near-obsessive focus on Wall Street. Which is why there’s little appetite among studios to greenlight the once-respectable
mid-budget film. Meanwhile, network TV has become a wasteland of cop shows, while streaming has become a race to the middle.
The TV critic Maureen Ryan, the author of “Burn It Down: Power, Complicity, and a Call for Change in Hollywood,” recently made this observation: “If I were a shareholder or board member of one of these companies, I would have questions about paying these dudes tens of millions (if not billions) to drive the whole industry into a ditch and then set the ditch on fire.”
But CEOs aren’t rogue actors here. The boards they answer to are just as complicit in this obsession with the short term; driving the industry into a ditch and setting it on fire is a future
problem for someone else to worry about. All they care about is the stock price going up next quarter, even if it means no one is actually making any TV and film in the near future.
Andrew A. Rosen writes a newsletter called The Medium, which covers media companies from an investor’s point of view. “We’re at a crossroads,” he told me. “On one hand you have to manage one to two quarters ahead to keep shareholders happy. But on the other side, the guys who are really good at that are really bad at building streaming business models that are profitable. Everybody’s losing money. But they also don’t understand how to build a product. I’m talking about a piece of
software that people engage with that creates delight and is personalized to each subscriber. That’s really hard to do.”
Here’s what he means: With so many titles to choose from on any streaming app, how do you discover anything? Figuring that out is the brass ring for streamers. Specifically, predicting what each viewer might be drawn to and getting those titles in front of them. It could potentially cut down on churn. But not enough streamers have figured out how to personalize the algorithm to quite that extent, Rosen said.
“And none of these guys” — the CEOs — “have built software products before. And they don’t really want to learn, they just want to
get the right story out to make the shareholders happy.”
So, chaos reigns. That was underscored last week when a conflict erupted between Disney and Spectrum, the second largest cable company in the U.S. It’s a battle between the old model (pay TV) and the new model (streaming). The latter has seen Disney funnel its marquee efforts away from linear TV and that shift has helped accelerate cord-cutting. You can see why the two companies are at loggerheads.
Spectrum is owned by Charter Communications, which was paying Disney $2.2 billion a year in carriage fees. Disney wants more. Charter says it would have to pass that cost to customers, so it wants something in return: Make the ad-supported tiers of Hulu and Disney+ available to cable subscribers for free. Disney balked and pulled its linear channels off Spectrum, which means ABC, ESPN and FX are currently blacked out to subscribers. Neither conglomerate inspires sympathy. Meanwhile, it’s the viewer who suffers.
Even Wall Street seems unimpressed. Finance reporter Joel Baglole singled out three media stocks to sell as the Hollywood strike drags on: Disney (trading at its lowest in nine years), Paramount Global (which is reducing the dividend it pays out to shareholders) and Warner Bros. Discovery (its share price is down 50 percent from what it was last year).
“There’s a lot of headscratching going on at these media corporations, trying to figure out how to get out of the hole they dug themselves in,” Tom Fontana, the TV writer and creator of HBO’s “Oz,” told the Washington Post last week. “Part of the way they want to get out of the hole is to make us pay for it.
“They made mistakes, and they want us to pay for them.”
What would Irving Berlin make of all of this? Hollywood was no less dastardly a place when he wrote the lyrics for “There’s No Business Like Show Business” almost 80 years ago. But “let’s go on with the show” takes on a different sort of resonance when media CEOs seem willing to do just the opposite.