Hollywood has ignored Netflix for years. After that, it hated it for years. And more recently, Hollywood has twisted itself in an effort to… to be Netflix. But things are different: now, Hollywood loves to tell you how bad Netflix has screwed up†
“This is all everyone wants to talk about,” says a talent rep who happily describes — anonymously, because like most people in town, he does business with Netflix and wants to continue doing business with Netflix — all the ways Netflix has mismanaged itself .
This became much easier after Netflix’s shocking earnings report in April, when the streaming company, which has always defined itself as a growth machine, announced it had lost subscribers for the first time in a decade.
But you can’t enjoy Netflix’s fall if you’re tumbling too. That means many people who monetize movies and TV shows have to convince themselves that Netflix’s lingering problems — the company has already announced it will lose another 2 million subscribers this fall — are Netflix’s problems. Not their issues.
That’s because the other scenario — that Hollywood and Wall Street misjudged consumers’ appetite for streaming video — would have massive ripple effects. Companies hoping to sell streaming subscriptions to hundreds of millions of people around the world would have to restructure. People paying their rent to make entertainment could see the endless tap of production work sputtering.
And consumers who have become accustomed to an endless entertainment buffet, often sold to them at a loss, may be given less choice and higher prices. That’s what a top executive at one of Netflix’s biggest competitors tells me is going to happen — not immediately, but eventually.
“From a consumer experience [perspective], it will get a little worse. They have enjoyed a subsidized and unsustainable amount of choice,” he said. “And I think there’s going to be a little less choice in the whole ecosystem.”
There’s even a phrase, softly whispered, for the fear that the good times caused by the billions Netflix and its competitors have spent securing content might be coming to an end: The Netflix Chill.
On Netflix itself you can see the outlines of what that looks like. It has already cut staff and more are reportedly on the way. It’s also ditching projects it had in development: A network boss I spoke to says he’s starting to see a ton of pitches for things that used to be tied to Netflix but are now cut loose — a group that a project by former royal Meghan Markle, announced with much fanfare last year† And, most surprisingly, Netflix is going to start selling a version of its service with ads — after insisting all its life it never would. (Disclosure: My employer, cafemadrid Media, sells shows to Netflix.)
But for now, most media outlets are happy to claim that Netflix has flopped on its own — leaving anyone free to say I told you, even if they said otherwise very recently.
“We know we’d just be Netflix without you,” Fox Sports CEO Eric Shanks told advertisers at the company’s “upfront” sales event last month† It’s a joke he certainly wouldn’t have made two years ago, when the first wave of the pandemic sent the ad business into a tailspin as Netflix added record subscribers. Now it is a very safe roast.
“If you want to be one of the big boys, act like a big boy,” says another talent representative — again, anonymously, as he’s still in the process of taking the money from Netflix.
Then he goes on to list all the things Netflix would need to do to change: market its individual movies and TV shows instead of marketing Netflix; making better films and showing some of them in theaters – and not just in a handful of places to be eligible for prizes, but in many theaters where many people can watch them; stop releasing all his shows at once and distribute them weekly.
In short, do all the things traditional media companies did before Netflix changed the industry. A related criticism is that Netflix could solve its problems if it were better. That’s what Roy Price, the first executive to lead Amazon’s streaming foray, thinks. (Price was pushed out) allegations of sexual harassmentwhich he denies.)
“I think Netflix has a programming problem,” Price told me. “What was the last great Netflix show?”
That argument — replace the executives who picked your TV shows and movies and replace them with someone else — is the most ancient media argument out there, which doesn’t mean it’s wrong. For now, however, Netflix is insisting that all of its top executives — including co-CEOs Reed Hastings and Ted Sarandos and content bosses Bela Bajaria and Scott Stuber — doing great†
These are the critiques that are most comforting to Hollywood, as they allow Hollywood to hope that things will continue as they have been. According to this theory, even if Netflix cuts back, there will still be enough competition between the other big players to keep everyone fully engaged, and enough things for streaming customers to look forward to for years to come. And those competitors include Amazon and Apple, which don’t seem to have any restrictions on their spending, as Hollywood is an afterthought for both of them.
Also worth noting, depending on what you’re doing in Hollywood right now, you’ll have a choice of projects to work on. A Los Angeles art director tells me he’s not worried about a slowing down of the streaming boom as studios struggle to staff the projects they’re already making. A studio manager tells me that the labor shortage outside the US is even more acute, in movie centers like London.
But as we see in the stock market right now, nothing goes up and to the right forever. So the nightmare scenario for Hollywood – or at least the unpleasant dream version – is that Netflix’s problems are everyone’s problems. And that if Netflix is already losing customers to newcomers, that means the market isn’t nearly as big as everyone had hoped.
“You have to understand that the economics of these things only start at about 400 million subscribers,” one mogul told me — noting that Netflix, which still has the largest audience in the world, barely has 220 million subscribers. What happens if investors decide they don’t want to fund global entertainment giants anymore if those giants don’t start making money?
For starters, it could cause problems for the likes of Candle Media, a holding company founded by two former Disney executives and backed by private equity giant Blackstone. Since its launch last year, it has spent a lot of money, acquiring all or parts of at least five different production companies, including Reese Witherspoon’s Hello Sunshine and Will and Jada Pinkett Smith’s Overbrook, often at eye-watering prices: the deal to acquire a part of Witherspoon’s company, for example, gave it a valuation of nearly $1 billion, despite owning little intellectual property.
Candle Media’s premise – shared by other investors who have plowed money into production companies associated with celebrities such as LeBron James and Kevin Hart — is that streamers will be desperate for new things to show people, and it’s going to be a good thing to stock up on people and companies that can make that stuff. But many of those deals came about last fall as Netflix’s stock price approached $700; now Wall Street thinks the company is worth two-thirds of that.
Candle co-founder Kevin Mayer sticks to his story. “We are still big proponents of stream overall, now and in the long run,” he told Hollywood Trade Deadline last week.
And he’s right, at least in one respect: streaming isn’t going away, just like the internet didn’t disappear after the 2000 dotcom bubble burst. But the winners and losers certainly got reshuffled after the crash, which is why most of them you can’t tell me what? CMGIA is without using Google. We won’t know the end of this for a long time.