Streaming is remaking the film and television industry’s delivery systems. AI might well upend its production function. That’s why actors and writers are out on strike together for the first time in more than 60 years. They believe that unless they do something drastic, these changes will leave many of them unable to make a middle-class living. And they can point to striking examples of how that’s already happening — the screenwriter surviving endless revisions on side gigs and student loans, the critically acclaimed series that paid its star a fraction of the residuals he once earned for guest appearances on a network show.
It’s easy to spin a classic Hollywood tale out of this, of Joe Ordinaries who just want to protect their families and homes against that stockest of stock villains, the Greedy Corporate Boss. And hey, that’s not all wrong. Studio bosses are greedy, not to mention notorious for using accounting tricks to avoid paying out their contracts.
But of course, the best movie villains aren’t just evil for the sake of being evil; they have a compelling motivation. Hollywood’s corporate bosses are playing hardball at least in part because they, too, are genuinely terrified of what all this technological change is doing to their industry.
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Streaming ate DVDs, which used to be a major revenue source, and now it’s threatening to eat cable, too. Disney’s Bob Iger has started publicly musing about ditching his television assets, and he’s probably not the only CEO who’s thinking along these lines. The anonymous (but reachable) author of an industry newsletter called the Entertainment Strategy Guy told me, “In the 2025-2030 period, when the cable decline really starts to bite, I think the pie across TV and film will be smaller than it was in 2015 or 2010.”
Which brings us back to Spotify Syndrome: the internet’s tendency to take big chunks of corporate revenue and transform them not into profits but into consumer surplus.
I call it Spotify Syndrome because the music industry provides the most vivid example. Adjusted for inflation, recording revenue has fallen by about one-third since it peaked in 1999. And that’s actually good news, because before streaming services like Spotify came along, piracy had the industry teetering on the brink of extinction. In 2015, total recording revenue was not quite one-third of what it had been in 1999.
Streaming stopped the bleeding by making music so cheap that piracy wasn’t worth the risk of legal complaints or virus-infected downloads. Unfortunately, it wasn’t such a good deal for many musicians, who complain that they can’t afford to live on the paltry payouts from streaming. It isn’t even a good deal for Spotify, which still hasn’t turned an annual profit since the company was founded in 2006.
So who got the money that used to support musicians? You. And I. And everyone else who no longer buys cassettes or CDs. All that value got transferred back to the pockets of consumers who pay peanuts for downloads or a streaming subscription, and have fiercely resisted all attempts to get them to pay more. With piracy always lurking as an alternative, there’s no real way for music sellers to make them.
Movies and television are vulnerable to the same forces. The internet clearly wants to compress the old distribution channels into a maximum of two: theatrical release and streaming. And as the Entertainment Strategy Guy told me, “There’s no way that is going to make as much money as the old system.”
That reality was temporarily softened by near-zero interest rates, which made it easy to finance a streaming land-grab without shorting more traditional productions. Now, however, interest rates are rising, and investors are getting real. Netflix is one of the few major streaming services turning a profit, yet its stock dropped sharply on Wednesday after a disappointing earnings release. Most of the others are losing vast sums.
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Many writers and actors understand the economic problem, of course. In fact, it’s one reason they’re so mad: They blame the executives for letting it happen. After all, bosses made the lousy streaming deals that taught customers to expect premium content at rock-bottom prices. Why should creative talent pay the price for their mistake?
Yet it’s hard to see what realistic plan could have vaccinated Hollywood against Spotify Syndrome. With money so cheap, a streamer or studio that tried to keep prices high would have found itself undercut by new competitors. Or by other emerging forms of on-demand entertainment, from PlayStation to TikTok. Especially after the pandemic drove everyone indoors.
Ultimately, recriminations are beside the point. No matter who the villain is, artists can’t recover what they’ve lost from producers if the producers don’t have it. It’s the consumers who are making out like bandits here, and they’re not giving the money back.