How a Black Hole of Content is Crushing TV Into Oblivion

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If COVID accelerated latent trends in the entertainment business, the WGA and SAG strikes are tipping the scales into a wholesale restructuring of its economics.

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Netflix, Amazon or Apple won’t suffer while production is grounded, but legacy media with arms in both digital and linear may be irrevocably lost in the shake-up.

As Drew Harwell and Taylor Lorenz at The Washington Post report, “Hollywood’s business model has rarely looked so precarious, with box office sales, streamer subscriptions and advertising revenue all trending down.”

For broadcast networks the strikes represent “apocalypse now,” according to Josef Adalian at Vulture,  which has canvassed largely off-the-record opinion of industry players.

“Network TV was already in a bad place, and this is really going to kick it in the nuts,” one broadcast exec told the publication. The biggest danger is that the audiences who have stayed loyal to the broadcast ecosystem may finally give up and give in to the streaming dark side. The broadcast exec said they expected ratings to plunge by 30-40% as a result of the de facto cancellation of the fall season.

Pandemic lockdowns accelerated a headlong rush to streaming as studios tried to compete with Netflix and made subscriber growth their top priority. The result was content saturation and a seemingly futile quest to find a sustainable business model. Disney+, for example, lost four million subscribers in the first three months of the year and made a loss of $659 million.

By letting the strike drag on, legacy companies such as Disney, NBCUniversal, and Paramount Global are risking real damage to both their linear and digital businesses.

Shock: They may even be complicit in making this happen. “It’s like Stockholm syndrome,” Law & Order: SVU showrunner Warren Leight told Vulture.

Privately, some corporate execs told Vulture that they don’t disagree that a protracted strike could be devastating to the network model. But they also argue that striking workers — particularly those in the WGA — should be just as worried. Even if the guilds achieve most of their goals, if the result is a dramatically weakened network TV ecosystem, that will mean far fewer of the good-paying, residual-producing, back-end-yielding broadcast jobs.

“The moment the strike was announced, ABC announced an all-reality schedule,” another “network insider” confesses to Vulture. “There’s no going back to a majority of the schedule being scripted. It’s not going to happen. I think the writers have a lot of legit grievances. But some of the best jobs they’ve ever had are going to be gone after this… This feels to me like we’re going to come out of this strike and everybody’s going to lose.”

Disney boss Bog Iger has even put the for sale sign up over legacy TV assets like ABC. Iger’s own multi-million dollar pay packet is a lightning rod for striker ire this is a sideshow according to one business report: Cut Iger’s pay by 75% and you do not fill the $1.8 billion hole in the Disney balance sheet from just the past two quarters of Disney+ streaming losses or do much to alleviate its bloated debt.

The rock-bottom pricing strategy, which Iger put in place along with piling on debt, won’t work, but there’s only so much Disney can hike rates in a crowded market, even with what Iger confidently calls “pricing leverage.”

Netflix is not as exposed as the networks because it has a catalogue of content stockpiled for over a year, including international content, it has embraced ads and cracked down on password outlaws.

Indeed, one of the ways that Netflix is managing to still make a profit in spite of all the instability and change in the industry is that it derives a healthy share of profit outside of the US.

“One of Netflix’s innovations is that it has connected the world from a programming perspective,” Lucas Shaw, MD for media and entertainment at Bloomberg, told NPR. “And so it has invested a lot of money in South Korea and in popularizing Korean dramas not just across Asia but around the world.”

 

Every day the strikes continue, the networks get weaker and Netflix gets stronger.

“I’ve gotta believe that Netflix is very happy to just sit back and let the networks burn,” another unnamed insider told Vulture. “Whether that’s by design or happy accident, I don’t know. But even if they don’t see the broadcasters as their main competition, everyone is competition in the video space. Now you’re gonna knock three or four of your competitors off who represent 20 percent of viewing.”

David Smith in The Guardian poses a bigger question, which is what exactly is the value of the content? And specifically, what is the value of content in an age of content saturation and pending AI script domination?

Screenwriter and voice actor Jared Butler tells the paper: “It starts with giving creative people a way to create well. A lot of the great content that people celebrate now, whether it’s from the 70s or 80s or 90s, those things that people go back to, those things that built libraries on streaming, that spawned all the sequels, was created when people could earn a living doing it.”

He adds, “There was a financial incentive to do great work and, if you take all that away, I don’t know what’s going to happen.”

Phil Alden Robinson, a writer and director whose credits include Field of Dreams, blames the tech companies for not understanding the industry. “They pride themselves on entering new industries and disrupting. They’re doing it here to the point where young writers who are not from well-to-do families can’t afford a career. Writers are no longer on the set learning how to become a showrunner. It’s unsustainable.”

 

Could the network’s pain be the creator economy’s gain? Already in demand, top influencers are now being courted by producers and studios hungry for content to fill depleted pipelines, writes Paula Parisi at ETC. Meanwhile, striking actors and writers are taking their ideas to YouTube, Instagram, TikTok and Twitch, where they can forge a direct relationship with viewers — albeit not one that will result in direct-deposit paychecks.

 

The online creator market will “likely double in size over the next five years,” from $250 billion today to half a trillion dollars by 2027, according to Goldman Sachs Research. With YouTube outperforming all services for June viewership, “‘there’s less incentive for people to stay on to see old libraries of content,’ and the industry ‘may start to realize that the creators are the only ones left to do business with,’” suggests The Washington Post.