The Death Of The Movie Studio

I asked myself a question a couple of weeks ago and it has been haunting me ever since. The question was brought on by the careless renaming of 20th Century Fox to 20th Century by the good people at Disney. The was “Do movie studios still exist?” I thought about this question and thought about it hard. And for better or worse I came to the conclusion that I found shocking, movie studios do not exist, and they have ceased to exist for the past ten or twelve years. I was surprised but at the same time not surprised by my answer. I knew something had changed and changed significantly but I had trouble defining the source of the initial change. The engine that created the movie studio had been taken off its track and sold for scrap.

This is the way I see it, much like Eisenhower and his efforts to develop the interstate highway system, the rollout and expansion of digital services offerings have initially left a wake of carnage much like the decline forced on the towns that were not in the path of the interstate. Towns began to diminish, gas stations closed, grocery stores closed, and downtowns fell into disrepair. We are in a similar cycle now, the digital superhighway has placed traditional entertainment industries in deep jeopardy.

Movies studios were conceived to serve movie theaters. They made products to be shown on the movie screen, and in later years made shows to be shown on television. Then something changed. The streamers arrived, coasting down this shiny new digital highway. They began to acquire baskets of movies, then baskets of old television shows. It was a symbiotic relationship. Then something terrible happened.

Netflix began to think and think hard, why should they rely on Hollywood when it became apparent Hollywood needed Netflix more than Netflix needed Hollywood. Enter a Norwegian Television Company, which sustained itself on a marketplace of six million people. They had an idea of a fish out of water series, starring American Actor/Musician Steven Van Zandt. A mafioso turned informant hides out in Lillehammer Norway and turns the town on its ear. Netflix bit and bit hard. It would soon follow with the very well produced House of Cards. Netflix was now producing content.

With that deal, the tables turned on the studios. The studios had been devolving for awhile now. They knew full well as they tried to grab market share that they did not have the culture nor aptitude to work in the digital world. The internet and all its seductive promises shined brightly for bright people in Hollywood. Terry Semel, the brilliant head of Warner Brother leaped Yahoo only to soon discover that he was about fifteen years too early. A year earlier AOL merged with Time Warner and optimism abounded. This marriage would be troubled and soon was evidenced to be going nowhere.

Fast forward today. Netflix, Amazon, Apples and Hulu’s budget for original programming is in the many billions of dollars. Netflix has committed fifteen billion to programming. That’s a ton of money by any measure. It is an all-out war for streaming dominance. It’s a brutal and bloody war amongst the streaming giants that shows no signs of ending soon. The streaming giants Netflix, Amazon Prime Video, Hulu, Disney+, and Apple TV+ are constant now mud wrestling for the biggest and meanest content around. Entering the fray is Comcast/NBCUniversal’s upcoming Peacock and AT&T’s soon-to-launch HBO Max. These companies’ sole goal is to create and feed their ecosystem. Unlike studios which feed a diverse series of product outlets, the fifteen billion Netflix is going to spend is going to support the Netflix subscription base. All the content has an internal purpose and is produced in essentially a closed market.

What I predict firmly is that within ten years, Netflix, HBO, and Comcast will greatly reduce in value. Amazon and Apple will rule the day. They have the money and they know a couple of things that Netflix does not realize. The programming on Amazon and Apple will not only sustain itself but it will also be used to sell clothing, cashews, and deodorant. Only Disney stands in their way and frankly given its cash reserves and shareholder base Apple could probably take a run at the House of The Mouse.

The problem is that many streamers understand all too well they need movie libraries to wrap around the new content they are producing. There are deep rumblings that MGM, Lionsgate, and even Sony are currently in play.

The sheer volume of people on Amazon (82% of households in the United States) makes the platform more appealing to advertisers. Amazon Media Group is now a $15 billion business, the third-largest advertising platform in the world behind Facebook and Google. What has happened as a result of Amazon’s dominance going to bring a collapse in entertainment, very much in a way that will be like what is occurring in retail at present. Amazon Prime is a huge club that sells both movies and toilet paper.

The majority of the talent base in Hollywood are now rushing to cash in on the streaming gold rush. This takes away resources and talent who in past years thought that the highest part of the entertainment food chain was a theatrical release. This has changed. The studios sit, full of libraries and in the case of Lionsgate, Sony, Paramount and MGM have either tried and failed at launching their own streaming service or never even tried. They are in many ways dead men walking, caught in a world where their very viability is in constant doubt.

The studios are vanishing and being replaced by juggernauts who are only intent on serving their own base. It will be interesting to see if by acquiring large libraries will these companies be able to effectively restrict access. I personally think this is one of the motivations to remove the Paramount ruling. Makan Delrahim the man wielding the ax at the Department of Justice, in a past life used to be a movie producer, and after he leaves the hallowed halls of Washington, I would keep an eye on which streaming company snatches this little gem up. My deep worry is that he full well knows that by removing the Paramount Decree, provides the mechanism for denial of access to movie libraries to community and repertory theaters.

In a real sense when Netflix began to produce content, it was game over for the studios. The studios served markets, theatrical, television, streaming, and physical media. The streamers only serve themselves. This year they will collectively spend 40 billion dollars on content to be used only by them. The studios can really only blame themselves, they are a victim of their own scheming and the purposeful neglect of its most stable market. Hollywood is dying, it is time to find a replacement. Remember, the first large amount of movies were made in New Jersey of all places.

The Historic Artcraft did bang-up business with their Women and Wine Night, screening Pretty Woman. As a result of the magic this downtown theatre weaves, the restaurants all had lines, the bars were packed and traffic jams were created. It was good.

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