Hollywood Faces the Impact of “The Great Contraction”

Hollywood Faces Shrinking Industry as Streaming Services Struggle and Box Office Sales Decline

In early January, as stars returned to the red carpet to celebrate the success of “Oppenheimer” and “Succession,” one looming threat dominated conversations: Hollywood is experiencing a significant contraction. According to 17 entertainment business executives, agents, and bankers who spoke with Reuters, the era of “peak TV” is officially over. The television and film industries are grappling with sober economic realities, from a decrease in original series and movies to tighter budget scrutiny and dwindling profits for movie theaters.

One veteran television executive, speaking anonymously, stated, “The great contraction is upon us. I anticipate a significant decrease in the quantity of content produced and the amount spent on content.” This narrative will be prominently featured as media giants such as Walt Disney, Warner Bros Discovery, and Fox report their quarterly results this month. It also sets the stage for ongoing discussions regarding media mergers, including recent sale talks between the owner of Paramount Global and Skydance Media CEO David Ellison.

The impact of this contraction is evident in advertising trends. Analyst TD Cowen estimated that broadcast and cable television advertising will decline by 7% in 2023 compared to the previous year, with Disney experiencing an 11.7% drop in total advertising. Warner Bros Discovery reported a 13% advertising decline in the first nine months of 2023. Traditional TV, along with print and radio, has been significantly affected by the rise of digital advertising.

Furthermore, streaming services, which were once seen as the future of the industry, are also struggling to achieve profitability after years of extravagant spending. As the industry enters what MoffettNathanson describes as the “third act of the streaming wars,” production spending is projected to decrease below 2022 levels, when competition led to unsustainable investments.

Most streaming services are now charging higher fees while offering less new content, leading to skepticism about their long-term strategies. According to TD Cowen, the overall number of scripted series is expected to shrink dramatically from the peak of 633 shows released in 2022. The Hollywood strikes and budget constraints resulted in only 481 U.S. series being released in 2023. Even Netflix, the leading streaming service, reduced the number of scripted series it released by over one-third from 2022 to 2023.

The impact of these changes is also felt in the film industry. The domestic box office continues to suffer from the effects of actors and writers strikes, with only 90 films expected to receive wide releases in 2024, down from around 100 in 2023. Consequently, U.S. box office sales are projected to decline by 10% compared to 2023 and 30% compared to 2019, reaching $8 billion in 2024.

The industry is undeniably slowing down, with development executives taking longer to greenlight shows, even from established showrunners. Production budgets are shrinking across the board, including at cash-flush streaming service Apple TV+, which operates under the corporate parent Apple with a market capitalization of $3 trillion.

The new reality of the industry is evident in the cancellation of shows that fail to attract audiences, such as the Disney+ series “American Born Chinese,” featuring two Oscar winners. Shorter seasons and fewer episodes per season have become part of the “new world order,” according to a senior television agent.

Studios, faced with declining box office revenues, are expected to focus on fewer but more ambitious projects capable of making a cultural and financial impact, similar to “Oppenheimer” and “Barbie.” These films served as a lifeline for the 2023 box office, where well-established franchises fell short.

However, industry insiders caution that such films must offer a spectacle that demands a theater experience. Audiences are increasingly gravitating toward streaming services for all but the biggest and loudest films. In 2022, just 19 action/adventure films accounted for 56% of the total box office for the top 100 films. The long-term prospects for a sustained recovery beyond this type of high-adrenaline flick remain uncertain.

These changes will further constrain cinemas, as fewer films are released, potentially rendering the maintenance of 39,000 screens in the U.S. unjustifiable. According to industry experts, the theater business is currently teetering on disaster.

In conclusion, Hollywood is grappling with a shrinking industry as streaming services face profitability challenges and box office sales decline. The contraction is affecting the quantity and budgets of content produced, as well as advertising revenues. Studios are adapting by focusing on fewer, more impactful projects, while theaters face an uncertain future.

Hollywood is facing significant challenges as the entertainment industry adjusts to economic realities. The era of “peak TV” is over, with fewer original series and movies being produced due to budget constraints. Streaming services, once seen as the future, are struggling to reach profitability. The overall number of scripted series is expected to shrink dramatically, and the domestic box office is also feeling the impact. Development executives are taking longer to greenlight shows, and production budgets are contracting. Studios are focusing on fewer but more ambitious projects to deliver cultural and box office impact. However, the theater business is teetering on disaster as there may not be enough films released to justify maintaining screens. The industry is undergoing a significant contraction, and the future remains uncertain.

Disclaimer: Only the headline and content of this report may have been reworked by Newsearay, staff; the rest of the content is auto-generated from a syndicated feed. The Article was originally published on Source link

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