Hollywood Unplugged: Streaming Companies Get a Reality Check but No Money

The Dark Hour of Hollywood Television

In today’s Hollywood, if you reach out to an array of power players, from showrunners to studio heads and agents, they might have some fairly bleak insights to share about the state of the television industry:

  • “It’s the darkest era in the history of television.”
  • “A downright disaster.”
  • “The entire system is crumbling.”
  • “The shift from a prosperous economic model to an uncertain one could be the industry’s undoing.”
  • “The aspiration for perpetual growth has led to billions wasted on a speculative return.”
  • “Opening the books would lead to a Wall Street meltdown.”

These sentiments reflect the turbulent and uncertain transition as traditional television makes way for the rise of streaming services, leaving many questioning, “Where’s the next ‘West Wing’ or ’24’?”. The pivot to tech has left many in the industry feeling as though they’re part of the world’s biggest Ponzi scheme.

The Illusion of Success: Streaming Services and the Broken Business Model

It’s been over a year since the ‘Great Netflix Freak-out’, triggered by Netflix’s first-ever loss of subscribers. This sparked exaggerated declarations that traditional television was finished. Now, it’s evident that while the new business model is flawed, it’s not vanishing anytime soon.

Despite the creative destruction and despair, there are still streamers ready to spend fortunes to satiate audiences spoiled for choice. Netflix has recovered somewhat, but there’s a broad consensus that significant hurdles lie ahead. The industry-wide scramble towards a more functional economic framework is still fraught with trouble.

A Painful Paradox: Big Hits but No Money in the Bank

The saga of Shawn Ryan, the TV producer behind Netflix’s fifth most-watched English-language original series, “The Night Agent”, highlights a key issue in the streaming industry. Despite generating 627 million viewing hours in its first four weeks, Ryan found that such success had minimal impact on his earnings.

The age-old correlation between ratings and rewards has been severed in the streaming era. Successful shows like “The Night Agent” aren’t making their creators or the streaming services rich. Many streaming platforms have plunged themselves into debt while building content libraries, and the rise in subscription fees hasn’t been enough to bridge this gap.

The director Steven Soderbergh equates the situation to moving from a world of Newtonian economics to one of quantum economics. It’s a world where a massive hit on your platform might not necessarily boost its revenue.

Unraveling the Streaming Economy: A Journey too Good to be True?

Much like the cryptocurrency trend, streaming TV seemed too good to be true but managed to captivate many industry heavyweights. Hollywood restructured itself around this new digital model, abandoning traditional income sources in the hope of finding more lucrative ones.

The industry churned out content, hired Oscar winners, and staffed writers’ rooms to their limits, flooding viewers with an overabundance of content. But as predicted, it didn’t last. Amid talk of financial responsibility, there are indications of plans to reduce the number of shows. For viewers used to an endless supply of critically acclaimed content, this signifies the end of an era known as Peak TV.

The Role of Netflix in TV’s Predicament

The restructuring of the TV industry was primarily led by Netflix. In 2013, it upended the television industry’s schedule by releasing the entire first season of “House of Cards” on the same day, leading to a viewing binge-fest. This move, combined with a spending spree like no other in entertainment history, catapulted Netflix into the stratosphere.

As Netflix’s market value skyrocketed, other entertainment giants followed suit. Disney, AT&T, and Comcast ended lucrative licensing deals with Netflix to start their own streaming services. These moves came at a huge cost, as they gave up millions in revenue and spent billions more on new content.

However, the first signs of trouble surfaced when Netflix’s subscriber growth began to dwindle, causing investors to pull out. The company made drastic changes and laid off hundreds of employees, painting a picture of a fallen titan.

Streamers’ Reality Check: The Unforeseen Consequences of Pursuing Subscriber Numbers

Rise and Fall of Streaming Titans

At the beginning, the struggles of Netflix brought both mockery and relief to its competitors, suggesting a potential return to sanity. But as time unfolded, it wasn’t just a Netflix crisis, but a broader streaming sector setback. Investors began penalizing Disney, Warner Bros. Discovery, and other Netflix copycats. As one top executive at a major streamer notes, “Wall Street woke up and said, ‘Actually, profitability is the only metric.’” Suddenly, the allure of rapid subscriber growth and inflated valuations vanished, marking the return of Bob Iger from retirement to reclaim the Disney CEO position.

Hollywood in Retrenchment

Layoffs and budget cuts started making rounds in Hollywood. The era of unrestricted show approvals was over. In a bid to cut costs, platforms like HBO Max, Disney+, Paramount+, and Hulu started removing whole series from their libraries. Some even axed shows that had wrapped up production on full, unaired seasons. Even high-profile projects weren’t immune. In June 2022, HBO axed J. J. Abrams’s $200 million sci-fi drama “Demimonde,” which had been in development for four years. This move sent shockwaves across Hollywood, underlining that no one was invulnerable.

Abrupt Ends and Unfulfilled Potential

Peacock also made headlines a few weeks later when it canceled Schur’s TV adaptation of “Field of Dreams,” despite significant progress in pre-production. The only remnant of the project, Schur notes, is a baseball stadium in an Iowa cornfield. A symbol of Peak TV’s unrealized potential: “We built it, and nobody came.”

Writers Guild Grievances

The Writers Guild’s grievances are now a public affair, especially for those living near a picket line. Their concerns revolve around declining residuals, shrinking writing staffs, and the risk of being replaced by AI solutions like ChatGPT. They’re also critical of the pay disparity between the top executives and writers at streaming platforms, which they see as a result of a decade-long deception.

Lost Opportunities and Unkept Promises

Initially, the advent of streaming brought promising prospects for writers. The boom in series led to a surge in writing jobs, allowing more people to participate in the dream of making TV. However, the promise of easy riches soon started to sour. Streamers initially promised performance-based incentives, but these often evaporated as successful series began to vanish after just a couple of seasons. The general sentiment among writers is a feeling of betrayal. Now, Schur says, “if you get to 20 episodes, it’s a miracle.”

Overhyped Complaints or Ground Reality?

While some insiders dismiss these grievances as overblown, many writers feel discontented. The consensus is that the industry has lost the charm of unpredictability and big wins. The current scenario is akin to a baseball game where everyone can only hit singles, even if they knock the ball over the fence.

The Downside of Overall Deals

The discussions around overall deals have intensified. These are contracts where writer-producers are paid — sometimes extravagantly — for exclusive rights to their creative labor. However, aside from a few superstars, the market for these long-term pacts has cooled down. Many expect this trend to continue due to the new profit-first economics of streaming.

Challenges for Entry-Level Writers

Writers at the lower end of the industry spectrum are facing the most challenges. With TV seasons now typically only six-to-ten episodes long and residual checks shrinking for streaming shows, even writers of successful series often find themselves jobless for the larger part of the year. Some are taking up retail jobs or driving for Lyft to make ends meet.

Training and Development Gaps

One of the long-term effects of these changes is the reduced opportunities for entry-level writers to learn and advance. Many are not getting exposure to key skills needed to eventually create their own series. As Schur puts it, “Television has turned into a hyperspecialized Model T assembly line where everyone does one particular tiny job,” leaving nobody learning how to make a whole car.

Quantity Over Quality?

The last decade of Peak TV has produced a mix of exceptional and subpar content. Despite the scarcity of genius showrunners, streaming services have leaned heavily towards prestige TV, perhaps as a result of their inability to profit straightforwardly from popular hits. However, the surge of competition among platforms has led to an overflow of serious, cinematically embellished shows, leaving even tastemakers with little time to watch them all.

As Damon Lindelof, co-creator of Lost and The Leftovers, mentions, “The number of people that really know how to make something great is small, and those people are busy. There aren’t a lot of secret genius showrunners out there.” Even in the midst of a genius shortage, not all content that sees the light of day is worth the watch. The true essence of Peak TV seems to have gotten lost in the pursuit of subscriber numbers, leaving an unpredictable future for creators, writers, and the entire streaming industry.

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