For the past few years, the entertainment industry inhabited a strange world in which massive amounts of streaming programming were unleashed on an unprecedented level. Led by Netflix, Amazon and followed by tradiitional industry competitors like Disney and HBO Max, the sheer amount of money being spent was astronomical, in the billions, and the hours of programming, the number of shows made it Peak TV.
And then Netflix and its business model crashed.
In the familiar Dot Com pattern, a whole lot of money was chasing the promise of endless growth that would usher in its own business model. Now the crash has ended Peak TV.
The sudden decline in Netflix’s share price and the growing fear of a recession have forced Hollywood into a new period of fiscal austerity. This manifests in ways big and small. A TV director who made $4 million a year is now getting $750,000. Mid-budget movies are being shelved. Broadcast TV budgets have dropped more than 30%…
This is a significant departure from the last few years when media companies tripped over themselves to produce any halfway decent idea. The industry made 559 scripted shows last year, up more than 200 since 2013, the year “House of Cards” debuted…
But the age of peak TV is coming to a close, and that will impact almost every sector of an industry where budgets, valuations and strategic plans were predicated on a booming market for new programming.
Just a few months ago, any production company with a few credits to its name was suddenly worth hundreds of millions of dollars. (It helped if you were aligned with a celebrity like Reese Witherspoon or LeBron James.) Now many of the companies looking to raise capital or sell themselves are having a harder time.
Did Hollywood nuke its own business model?
Streaming was supposed to be the future. Hollywood cannibalized its theatrical business for streaming. Every studio either tried to become Netflix or market to it. Or both.
What’s the future now? The plan to have every studio sell membership to its gated subscription service looks increasingly shaky especially in a troubled economy. Amazon and Netflix still want to be the dominant platform. Hollywood tried to compete with them and the result broke everyone.
The entertainment industry can’t grow further without China. And China wants to grow its own industry. And investors will now be skeptical of dot com promises of infinite growth.