‘It’s unsustainable’: can Hollywood survive without transformation? | Film industry

It was a pink mushroom cloud that even enveloped the White House. “Did you see Barbie or Oppenheimer this weekend?” a reporter asked the press secretary, Karine Jean-Pierre. She replied: “I knew I was going to get that question. I did not. But heard that it did very well.”

Both films did very well: Barbie collected $162m in ticket sales while Oppenheimer, about the father of the atom bomb, earned $82.4m. It was comfortably the best weekend at the domestic box office since the coronavirus pandemic. But when future historians come to study the “Barbenheimer” phenomenon, they may still have a question: was this the dawn of a Hollywood renaissance or glorious last stand of an industry in decline?

Even with the weekend’s sugar rush, the box office is still down 20% from pre-pandemic levels. Actors and writers are on strike simultaneously for the first time in more than 60 years. Online streaming services and artificial intelligence, or AI, are upending the business model and exposing the wealth gap between studio bosses and anyone who is not a household name.

Barry Diller, former chief executive of Paramount Pictures and 20th Century Fox, told CBS’s Face the Nation programme: “You have almost a perfect storm here, which is, you had Covid, which sent people home to watch streaming and television, and killed theaters. You’ve had the results of huge investments in streaming, which have produced all these losses for all these companies.”

Urging a settlement to the strike by September, Diller added: “The truth is this is a huge business, both domestically and for world export. These conditions will potentially produce an absolute collapse of an entire industry.”

The celebrated Hollywood sign, which turned 100 this month, has witnessed a great depression and world war, various strikes (Ronald Reagan led the actors in 1960), technological disruptions and, in March 2020, the Covid-19 pandemic that made cinemas go dark, emptied TV studios and shut down all production.

The recovery is still in progress. There have been hits such as last year’s Top Gun: Maverick, which prompted Steven Spielberg to tell Tom Cruise: “You saved Hollywood’s ass and you might have saved theatrical distribution.” Another Cruise vehicle, Mission: Impossible – Dead Reckoning Part One, one of the first major productions shut down by the pandemic, was just released and performed solidly but not spectacularly.

Other recent films such as Big George Foreman, Dungeons & Dragons: Honor Among Thieves, Disney and Pixar’s Elemental, The Flash, 65 have proved disappointing at the box office (by one estimate, Disney has lost nearly $900m following its last eight studio releases). Barbie and Oppenheimer, benefiting from smart marketing and memes, could be exceptions that prove the rule.

David Scarpa, who is on the picket line daily, says: “The movie business has been moving more towards something that resembles the amusement park business; people turn out to go on rides. They don’t necessarily come out to see what a movie would have been in 1940. They go to have experiences and so everything is weighted more towards what is called the tentpole business, the big $300m movie to the exclusion of almost everything else.

“That’s a process that’s been going on for at least 20 years but the big accelerant in all of this was Covid. There was a point at which it wasn’t clear that the movies would ever come back, that people would come back to the theatres at all. You had a lot of distressed companies and there’s a sort of Darwinian phase and so now basically the feature business is almost entirely these juggernauts.”

The pandemic may have got some people out of the cinema-going habit. With wages struggling to keep pace with inflation, some may feel that money is tight or better spent elsewhere. Some may have become hooked on streaming and decide to wait for cinema releases to turn up there a few months later.

Scarpa adds: “Netflix is part of a larger technological shift towards increasing competition for people’s attention, be it video games, be it apps, be it YouTube, et cetera. There’s just a much greater competition for people’s attention and so for what it takes to get people to show up and pay $15 to go to a movie, the threshold has been raised.”

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’s flagship streaming service lost 4 million subscribers in the first three months of the year and made a loss of $659m.

Phil Alden Robinson, a writer and director whose credits include Field of Dreams, says: “The legacy companies panicked and imitated the tech companies who truly don’t understand this 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.”

Even streaming could be dwarfed by another tech threat: AI. It has already been deployed in films such as Indiana Jones and the Dial of Destiny to “de-age” its star Harrison Ford. Some fear that, while it may never be able to match a script by Aaron Sorkin for psychological insights, AI could replace an entire “commodity tier” of writers – including on relatively formulaic superhero movies.

As these issues converge, some 11,000 Writers Guild of America screenwriters, who went on strike in May, have now been joined by tens of thousands of members of the Screen Actors Guild-American Federation of Television and Radio Artists (Sag-Aftra).

One of their biggest concerns is residuals, the payments that performers receive for repeat showings of films or TV shows – often crucial money to get them through lean times. Sag-Aftra negotiators want residuals partly based on viewership levels on streaming services but the studios keep such information secret.

The Alliance of Motion Picture and Television Producers, which negotiates on behalf of the studios, says the studios have offered actors “historic pay and residual increases”, along with pension contributions and other protections.

But Robinson adds: “Unregulated, the companies will do away with residuals. Under their formula, a big-budget flop will generate more residuals than a low-budget hit because it has nothing to do with the success or failure of the series; it just has to do with the budget and the size of the streaming service’s subscription base. So it’s not really a residual; it’s just a payoff.”

Some observers draw parallels with Silicon Valley’s disruption of other sectors such as music and newspapers, both of which had to rapidly reinvent their business models with varying degrees of success. But this time the “move fast and break things” tech companies are running into the wall of strong unions.

Laura Sydell, a screenwriter and longtime public radio journalist who studies the intersection of culture and technology, says: “This may be one of the most important strikes in decades. These companies devastated musicians. Yes, we have big stars, but if you look what they’re making through Spotify and talk to people about the money they’re making, it kind of devastated the middle class of musicians.

“You have your upper class, your Adeles, your Beyoncés, and then you’ve got some younger people maybe who figured that they can make money if they’re also selling T-shirts and going on tour a lot. But there were a lot of musicians who were doing well off of a combination of royalties and performance and they were devastated and still are.”

Sydell continues: “Let’s go look at what happened with newspapers. Now, I’m not going to begin to argue that local news wasn’t struggling already but I think the tech companies pretty much put the nail in the coffin. We can also look at what happened with taxis and argue about why it happened. But this is the first time that I know of that these tech companies had come up against a real union.”

There is much at stake. The actors’ and writers’ unions are determined to avoid the mistakes seen in other sectors and draw lines that stop the tech giants trampling other parts of the economy. Joe Biden has voiced support for their efforts.

Jared Butler, a screenwriter and voice actor, says: “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.

“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. I don’t think I’m going to pay $25 to go see on a big screen content that was AI-generated or generated by someone who doesn’t make any money and is just a hobbyist. I also don’t want to go back to a Renaissance system where we had to have wealthy patrons of the arts to keep anything going.”

He adds: “The great entertainment that we’ve made over the last hundred years was made by people who could make an honest living doing it as a career. You had people who did really well but you had people that were basically blue-collar, punch-the-clock workers, and I don’t just mean below the line crew, I mean also writers and actors.”

Tech giants such as Amazon, Apple and Netflix have muscled their way into the film production business. Netflix alone has earned 132 Oscar nominations and 22 Oscar wins over the past decade, including 16 nominations and six wins this year. This is a sore point for some because Netflix has not fully embraced cinema releases.

Combined with vast quantities of dramas and documentaries, viewers have never had it so good. But there is also a danger that gluttony will kill the golden goose.

Rahul Telang, a Carnegie Mellon University professor and co-author of the book Streaming, Sharing, Stealing: Big Data and the Future of Entertainment, says: “There’s just too much content being produced. A lot doesn’t actually get watched by a whole lot of people so there’s this whole question of what is the optimum content library and what should be in there, what should not be in there.”

He adds: “That goes back to a bigger question, which I think a lot of people are trying to answer, including myself: what exactly is the value of the content? How do you decide that the content you’re producing is actually generating value? That goes back to the question that we have about how to get the residual because if you can’t figure out what the value is going be, then how do you decide how to distribute the value downstream?”

Some still view Hollywood through candy-coloured spectacles, however. They point to the way it has survived past technological revolutions, such as the invention of television and home video. They suggest that the big weekend of Barbie and Oppenheimer represents a new beginning, not a cue for closing credits.

Greg Marcus, chief executive of the Marcus Corporation, which owns the fourth-biggest cinema chain in the country, says: “Weren’t we just sitting around two years ago talking that nobody ever is going to go to the movie theatre again, that they’re all just going to sit at home and bolt their rear ends to a couch and watch everything on a streaming service?

“I remember saying then, no, people want to be together, they want to be entertained, they want to laugh together. And today we’re sitting here talking about Barbenheimer. It’s the only thing anybody can talk about and it’s expressing the value of the theatrical piece of the ecosystem many times over.”

The strikers and studios will “get through it and figure it out”, Marcus believes. “Mom and Dad are fighting. But they have no choice but to live in the same house.”

It was a pink mushroom cloud that even enveloped the White House. “Did you see Barbie or Oppenheimer this weekend?” a reporter asked the press secretary, Karine Jean-Pierre. She replied: “I knew I was going to get that question. I did not. But heard that it did very well.”

Both films did very well: Barbie collected $162m in ticket sales while Oppenheimer, about the father of the atom bomb, earned $82.4m. It was comfortably the best weekend at the domestic box office since the coronavirus pandemic. But when future historians come to study the “Barbenheimer” phenomenon, they may still have a question: was this the dawn of a Hollywood renaissance or glorious last stand of an industry in decline?

Even with the weekend’s sugar rush, the box office is still down 20% from pre-pandemic levels. Actors and writers are on strike simultaneously for the first time in more than 60 years. Online streaming services and artificial intelligence, or AI, are upending the business model and exposing the wealth gap between studio bosses and anyone who is not a household name.

Barry Diller, former chief executive of Paramount Pictures and 20th Century Fox, told CBS’s Face the Nation programme: “You have almost a perfect storm here, which is, you had Covid, which sent people home to watch streaming and television, and killed theaters. You’ve had the results of huge investments in streaming, which have produced all these losses for all these companies.”

Urging a settlement to the strike by September, Diller added: “The truth is this is a huge business, both domestically and for world export. These conditions will potentially produce an absolute collapse of an entire industry.”

The celebrated Hollywood sign, which turned 100 this month, has witnessed a great depression and world war, various strikes (Ronald Reagan led the actors in 1960), technological disruptions and, in March 2020, the Covid-19 pandemic that made cinemas go dark, emptied TV studios and shut down all production.

The recovery is still in progress. There have been hits such as last year’s Top Gun: Maverick, which prompted Steven Spielberg to tell Tom Cruise: “You saved Hollywood’s ass and you might have saved theatrical distribution.” Another Cruise vehicle, Mission: Impossible – Dead Reckoning Part One, one of the first major productions shut down by the pandemic, was just released and performed solidly but not spectacularly.

Other recent films such as Big George Foreman, Dungeons & Dragons: Honor Among Thieves, Disney and Pixar’s Elemental, The Flash, 65 have proved disappointing at the box office (by one estimate, Disney has lost nearly $900m following its last eight studio releases). Barbie and Oppenheimer, benefiting from smart marketing and memes, could be exceptions that prove the rule.

David Scarpa, who is on the picket line daily, says: “The movie business has been moving more towards something that resembles the amusement park business; people turn out to go on rides. They don’t necessarily come out to see what a movie would have been in 1940. They go to have experiences and so everything is weighted more towards what is called the tentpole business, the big $300m movie to the exclusion of almost everything else.

“That’s a process that’s been going on for at least 20 years but the big accelerant in all of this was Covid. There was a point at which it wasn’t clear that the movies would ever come back, that people would come back to the theatres at all. You had a lot of distressed companies and there’s a sort of Darwinian phase and so now basically the feature business is almost entirely these juggernauts.”

The pandemic may have got some people out of the cinema-going habit. With wages struggling to keep pace with inflation, some may feel that money is tight or better spent elsewhere. Some may have become hooked on streaming and decide to wait for cinema releases to turn up there a few months later.

Scarpa adds: “Netflix is part of a larger technological shift towards increasing competition for people’s attention, be it video games, be it apps, be it YouTube, et cetera. There’s just a much greater competition for people’s attention and so for what it takes to get people to show up and pay $15 to go to a movie, the threshold has been raised.”

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’s flagship streaming service lost 4 million subscribers in the first three months of the year and made a loss of $659m.

Phil Alden Robinson, a writer and director whose credits include Field of Dreams, says: “The legacy companies panicked and imitated the tech companies who truly don’t understand this 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.”

Even streaming could be dwarfed by another tech threat: AI. It has already been deployed in films such as Indiana Jones and the Dial of Destiny to “de-age” its star Harrison Ford. Some fear that, while it may never be able to match a script by Aaron Sorkin for psychological insights, AI could replace an entire “commodity tier” of writers – including on relatively formulaic superhero movies.

As these issues converge, some 11,000 Writers Guild of America screenwriters, who went on strike in May, have now been joined by tens of thousands of members of the Screen Actors Guild-American Federation of Television and Radio Artists (Sag-Aftra).

One of their biggest concerns is residuals, the payments that performers receive for repeat showings of films or TV shows – often crucial money to get them through lean times. Sag-Aftra negotiators want residuals partly based on viewership levels on streaming services but the studios keep such information secret.

The Alliance of Motion Picture and Television Producers, which negotiates on behalf of the studios, says the studios have offered actors “historic pay and residual increases”, along with pension contributions and other protections.

But Robinson adds: “Unregulated, the companies will do away with residuals. Under their formula, a big-budget flop will generate more residuals than a low-budget hit because it has nothing to do with the success or failure of the series; it just has to do with the budget and the size of the streaming service’s subscription base. So it’s not really a residual; it’s just a payoff.”

Some observers draw parallels with Silicon Valley’s disruption of other sectors such as music and newspapers, both of which had to rapidly reinvent their business models with varying degrees of success. But this time the “move fast and break things” tech companies are running into the wall of strong unions.

Laura Sydell, a screenwriter and longtime public radio journalist who studies the intersection of culture and technology, says: “This may be one of the most important strikes in decades. These companies devastated musicians. Yes, we have big stars, but if you look what they’re making through Spotify and talk to people about the money they’re making, it kind of devastated the middle class of musicians.

“You have your upper class, your Adeles, your Beyoncés, and then you’ve got some younger people maybe who figured that they can make money if they’re also selling T-shirts and going on tour a lot. But there were a lot of musicians who were doing well off of a combination of royalties and performance and they were devastated and still are.”

Sydell continues: “Let’s go look at what happened with newspapers. Now, I’m not going to begin to argue that local news wasn’t struggling already but I think the tech companies pretty much put the nail in the coffin. We can also look at what happened with taxis and argue about why it happened. But this is the first time that I know of that these tech companies had come up against a real union.”

There is much at stake. The actors’ and writers’ unions are determined to avoid the mistakes seen in other sectors and draw lines that stop the tech giants trampling other parts of the economy. Joe Biden has voiced support for their efforts.

Jared Butler, a screenwriter and voice actor, says: “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.

“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. I don’t think I’m going to pay $25 to go see on a big screen content that was AI-generated or generated by someone who doesn’t make any money and is just a hobbyist. I also don’t want to go back to a Renaissance system where we had to have wealthy patrons of the arts to keep anything going.”

He adds: “The great entertainment that we’ve made over the last hundred years was made by people who could make an honest living doing it as a career. You had people who did really well but you had people that were basically blue-collar, punch-the-clock workers, and I don’t just mean below the line crew, I mean also writers and actors.”

Tech giants such as Amazon, Apple and Netflix have muscled their way into the film production business. Netflix alone has earned 132 Oscar nominations and 22 Oscar wins over the past decade, including 16 nominations and six wins this year. This is a sore point for some because Netflix has not fully embraced cinema releases.

Combined with vast quantities of dramas and documentaries, viewers have never had it so good. But there is also a danger that gluttony will kill the golden goose.

Rahul Telang, a Carnegie Mellon University professor and co-author of the book Streaming, Sharing, Stealing: Big Data and the Future of Entertainment, says: “There’s just too much content being produced. A lot doesn’t actually get watched by a whole lot of people so there’s this whole question of what is the optimum content library and what should be in there, what should not be in there.”

He adds: “That goes back to a bigger question, which I think a lot of people are trying to answer, including myself: what exactly is the value of the content? How do you decide that the content you’re producing is actually generating value? That goes back to the question that we have about how to get the residual because if you can’t figure out what the value is going be, then how do you decide how to distribute the value downstream?”

Some still view Hollywood through candy-coloured spectacles, however. They point to the way it has survived past technological revolutions, such as the invention of television and home video. They suggest that the big weekend of Barbie and Oppenheimer represents a new beginning, not a cue for closing credits.

Greg Marcus, chief executive of the Marcus Corporation, which owns the fourth-biggest cinema chain in the country, says: “Weren’t we just sitting around two years ago talking that nobody ever is going to go to the movie theatre again, that they’re all just going to sit at home and bolt their rear ends to a couch and watch everything on a streaming service?

“I remember saying then, no, people want to be together, they want to be entertained, they want to laugh together. And today we’re sitting here talking about Barbenheimer. It’s the only thing anybody can talk about and it’s expressing the value of the theatrical piece of the ecosystem many times over.”

The strikers and studios will “get through it and figure it out”, Marcus believes. “Mom and Dad are fighting. But they have no choice but to live in the same house.”