Behind the scenes, Hollywood is looking at a tough road ahead in 2023. With fears of an economic recession looming, a potential writers’ strike and dwindling viewership in streaming and the traditional film industry, executives and analysts are expressing concern about the new year, according to the Financial times. The prospects of a CEO of a major media group are:[2023] will be bad, some companies will have a very, very hard time.”
This less rosy outlook comes after a financially tumultuous year in 2022, when investors grew tired of the streaming era that previously rocketed Netflix to the top and the biggest entertainment groups lost more than half a trillion dollars in the stock market. Morgan Stanley’s Benjamin Swinburn estimates that the continued streaming boom in 2022 by Disney, Paramount, NBCUniversal and Warner Bros Discovery, which owns HBO, will collectively cost the entertainment companies more than $10 billion in operating revenue.
With investors turning their backs and the media industry bearing the brunt of the financial blows, Steve Kram, former chief operating officer of William Morris Agency and current chief executive of investment group Content Partners, LLC, echoes the fear his peers feel: “People You make concerns across the board, you’re seeing cost cutting across the entertainment industry, you’re seeing pressure from the financial institutions to reduce debt levels and not provide additional leverage. [2023] going to be a tough year.”
Industry-wide decline in viewership remains a core issue in Hollywood’s financial woes, and a would-be writer’s strike adds to uncertainty
Falling viewership in cinema and streaming has forced companies to cut costs by any means necessary. Disney replaced its CEO shortly after announcing a $1.5 billion loss for its streaming platform Disney+ in the last quarter of 2022, which appears large compared to the $630 million loss reported for the same quarter in 2021. And Disney isn’t alone; Warner Bros. Discovery has pulled dozens of shows from HBO Max and laid off hundreds of staff as it faces a massive $50 billion net debt.
Do not expect light at the end of the tunnel anytime soon, according to Morgan Stanley analysts. The analysts expect that 2023 will bring only half the number of streaming subscribers to the industry as in 2021. They attribute the decline to the “new phase” the streaming industry is entering: slower growth combined with higher costs.
The viewership also remains difficult for traditional cinema chains. They are grappling with the aftermath of the pandemic as audiences have not returned to their pre-2020 theater going habits. The problem forced the second largest cinema owner, Cineworld, to file for bankruptcy in September last year. In addition, it has led other movie theater chains to adopt an extremely risk-averse mindset about releasing movies in theaters.
As if to sprinkle salt on the wound, the potential for the first writers’ strike in 15 years is taking shape as the Writers Guild, Director’s Guild and Screen Actors Guild all set up contract negotiations for early this year. If the writers’ strike continues, work at Hollywood’s biggest studios would come to a standstill.
David Zaslav, who is the president and CEO of Warner Bros. Discovery and is known for his firm hand in budgetary matters, discussed the company’s current “messy” restructuring at an investor conference last November. He warned of the difficulty of meeting his 2023 profit target, while underlining that “the advertising market is very weak”.
Zaslav used an analogy to wrap up the situation: “We’re doing a mural. We’re painting a mural on the side of a building and everything is falling off. And it looks messy, and it’s messy. And it’s really hard. And it’s really challenging.” He elaborated on his point, but ended on an optimistic note by reiterating that clutter is necessary for growth.As Hollywood faces a terrifying year, only time will tell how flexible it really is.