From The Economist:
“Why do we have to grow up?” Walt Disney once wondered. As it launches its centenary celebrations on January 27th, the Walt Disney Company has sustained its appeal to the young and young-at-heart. This year Hollywood’s biggest studio will invest more in original content than any other firm. It dominates the global box office, with four of last year’s ten biggest hits, and has more streaming subscriptions than anyone else. Its intellectual property (ip) is turned into merchandise ranging from lunchboxes to lightsabers, and exploited in theme parks that are churning out healthy profits even as covid-19 lingers. More than just a business, Disney is perhaps the most successful culture factory the world has ever known.
So the upheaval rocking the company today has relevance far beyond its empire. Uncertainty about the future profitability of Disney’s enormous entertainment portfolio has caused a rollercoaster ride in its share price. It threw out its chief executive in November and will soon replace its chairman. It also faces a rebellion from an activist investment firm that wants a board seat in what could turn into the biggest face-off since Michael Eisner, a previous ceo, was forced out in 2005. Disney’s trials are not just a boardroom drama. Similar crises are unfolding at other leading culture factories, from Warner Bros to Netflix. The reason is a technological revolution that is turning Hollywood upside down.
The continuing pre-eminence of a centenarian like Disney has confounded many predictions. Since the days of “Steamboat Willie”, Mickey Mouse’s first outing in 1928, there has been an explosion in the supply of video entertainment. Television, cable, home video and then the internet have offered increasing amounts of choice. Anyone with a phone can record video and make it accessible to billions of people, free of charge. More content is uploaded to YouTube every hour than Disney+ holds in its entire streaming catalogue.
Many predicted that this surge of niche content would bring down mainstream hit-makers. They were mostly wrong. Infinite choice in entertainment has ruined the companies which produced middling content that people watched because there was nothing else on—witness the collapse in broadcast-television ratings. But those at the very top of the business have thrived. When anyone can watch anything, people flock to the best. Global streamers like Netflix and Amazon have more than 200m direct subscribers, once an unimaginable number.
Those who have fared best at a shrinking box office are the owners of ip that is already popular. As people visit cinemas less often and competition intensifies, studios have pumped money into films people will turn out to see even when they go only three or four times a year. America’s ten biggest films last year were all sequels or parts of a franchise; Disney’s upcoming slate includes an 80-year-old Harrison Ford returning for a fifth outing as Indiana Jones. It has not been a golden age for cinema, but for those at the top it has been a profitable one.
Now technology is shaking things up again. Online distribution has enticed tech firms that make the hardware and software used for streaming. Silicon Valley is of a different scale from Tinseltown (Amazon’s growing advertising business is already three times bigger than Disney’s) and its moguls have no need to make money from streaming, which they see as an add-on to their main business. Hollywood initially wrote off the nerds. But the nerds have enough money to take creative risks. Last year Apple won the best-picture Oscar with “coda”, a comedy-drama partly in sign language, less than three years after it entered the film business. The more fine content these new producers make and sell below cost, the greater the risk that older studios will fall from the top tier of media into the perilous middle.
Link to the rest at The Economist and thanks to C. for the tip.
PG says all the traditional media companies are having their worlds rocked. And the rocking is far from over.