Trouble in Paradise: What Hollywood Giants Can Learn from the Music Industry

By Charlie Glenister

3 mins read


Trouble in Paradise: What Hollywood Giants Can Learn from the Music Industry

By Charlie Glenister

3 mins read


You’ve seen them on the news. 

 

Perhaps you found solidarity with those on strike. Alternatively, you might not have given it much thought before moving on with your day. Or maybe you even dismissed it outright, thinking, “A bunch of overpaid stars demanding even more money.”

 

For the writers (and now actors too) at the centre of the saga, it’s a fight for their very own survival.

 

What’s been happening?

 

On May 2, 2023, the Writers Guild of America (WGA, representing 11,500 screenwriters) went on strike. Over an ongoing labour dispute with the Alliance of Motion Picture and Television Producers (AMPTP, the association representing production companies and studies, think Netflix, Disney and Paramount Pictures).

 

Tensions have since escalated further. 

 

On July 13th 2023, the Screen Actors Guild (SAG, representing 160,000 media professionals, including most Hollywood actors) also went on strike, creating the first concurrent work stoppage since 1960, effectively bringing Hollywood to a standstill.

 

Why are they striking?

 

Writers and actors are royally annoyed.

 

There are concerns across multiple issues, ranging from minimum basic pay and contract lengths, the role of AI in replacing writers and actors (by generating unapproved likenesses of actors – see the latest series of Black Mirror to really make your head hurt), and the role of residuals (royalties in the TV/Entertainment industry).

 

At the heart of the negotiations, however, is what many members have referred to as an existential question – “How can our current business model continue to survive in the golden age of streaming?”

The Golden Age of *Television* Streaming: From ‘Network’ Model to Subscription Revenue

 

In today’s world, multiple subscriptions to various streaming platforms have become the norm, with 78% of US households subscribing to one or more services for TV and entertainment.

 

However, it wasn’t always like this.

 

The golden age of television (1950’s to 2010’s) thrived on the ‘Network’ business model, producing long lasting series like CSI, Friends or Greys Anatomy generating revenue through advertising. With many shows lasting 10, 20 even 30+ seasons and writers getting paid per episode (on average 22 in a season).

 

In this model, the aim of the game is advertising revenue. The more episodes and series a show can generate, the more opportunities there are to draw eyeballs to the show and generate advertising income, leaving everyone a winner.

 

 

Streaming’s Revolution: How the Shift to Subscription Revenue Impacts the Entertainment Industry

 

The emergence of streaming changed everything. While content quality skyrocketed, the economics of the industry took a hit. In the streaming model, the aim of the game is engagement, retention and subscription revenue.With advertisers no longer in control, the focus has shifted to delivering precisely what consumers desire – high-quality, thought-provoking, shorter-form content, perfect for binge-watching and driving month-to-month renewals. Whilst great for the consumer, the streaming model has left writers with much less guaranteed work. Where previously writers had the job security of writing for a network series (40+ weeks of pay a year), they now have to battle it out for as little as 6-8 weeks of annual work.

 

It’s also created a race to the bottom amongst the giants of the entertainment world. Where previously companies like Disney licensed their content to Netflix for a healthy profit. The feeding frenzy of the streaming boom has seen every major player jump in for a piece of the pie and launch their own platform. Whilst initially successful, it turns out that creating masses of premium (and highly costly) content that people can get through in an afternoon is not commercially sustainable, especially when there are 10+ competitors all doing the same thing. Netflix’s stock price dropped by 74% in 2022 after announcing a loss in subscribers for the first time in its history. One particularly apt analogue for the impact of streaming in television is Uber – another investor-funded agent of chaos that upended an industry without plans for a sustainable future.

 

Chaos aside – these problems are not necessarily new. 

 

What can we learn from the music industry?

 

We’ve been here before.

 

The music industry has been grappling with the same business model challenges introduced by streaming since the early-2000’s. Whilst by no means ‘solved’, there are some tentative lessons to be learnt for the TV business:

 

Transparency is important: streaming platforms like Spotify and Apple Music have introduced artist dashboards and analytics tools to provide artists with more insights into their streaming and royalty data. The changes are important for empowering content creators to make more informed decisions about what they do, when, and where with their work (and what they get paid for it).

 

Recognise content creators for their work: in industries where there is significant co-dependency between actors, the health of the ecosystem is vital. Alienating your only source of new ‘products’ is a one-way ticket to an unsustainable future, so championing creativity, fostering collaboration and supporting ongoing communication is essential to ensure everyone’s a winner.

 

Introduce sustainable business models: implement revenue models that accurately reflect the usage and popularity of content on streaming platforms. This involves paying content creators higher flat rate fees and ensuring a fair distribution of revenue among all stakeholders based on their respective contributions and roles in creating and promoting the content (SoundCloud have recently moved some artists to a user-centric royalty plan, an alternative to the pro rata accounting that some in the industry, including many artist groups, see as an unfair and less transparent system).

 

You can’t all be like Netflix: recognise that it is not commercially viable to run individual streaming platforms based purely on subscription revenue. During its transition from CDs to digital downloads and streaming, the music industry saw an explosion of competition, leaving many companies struggling to turn a profit / going bankrupt. Focussing on how to bring your USP to the world of streaming should be the name of the game, not trying to master it all by yourself.

 

Where does it all end?

 

With revenues being squeezed and profit warnings left, right, and centre from TV streamlining platforms, the Hollywood strike saga shows little sign of slowing down. From a commercial perspective, TV streaming, and whatever it morphs into in the future (ads supported, modified content formats, re-introducing licensing agreements) is likely here to stay. However, the bigger question remains a more foundational one: without a sustainable business model that rewards writers and actors fairly, will they even have anything to stream?

 

How can Manifesto help?

 

Manifesto are experts in identifying and implementing new business models that drive sustainable long-term revenue growth and value. Contact us to find out more. 


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