A Change Will Do You Good

Demand vacuum is a term usually used with the market theories surrounding supply and demand. It refers to a certain set of economic situations in a market when a product's demand is not met due to a lack of product. In our case, the idea that Hollywood and its bloated studios seem to be incapable of making a product that engages the audience. It is increasingly becoming obvious that the current structure of detachment from the audience surrounding Hollywood puts the studios under siege and there is rising doubt on the ability of those business units to re-invent themselves.

The studios' latest earnings report shows that a major part of their traditional business, linear television, has become a revenue desert. Studio after studio has been forced by accounting laws to show a write-down or write-off of linear entertainment assets.

We are nearing the end of the life of cable television. Like movies, cable television has suffered from a lack of attention in favor of streaming efforts. In a real sense of the word, streaming has truly evolved from cable television. Most streaming offerings now have a mixture of live on-demand and linear programming. The studios have been forced to impact their financial health because of mismanagement and placing assets in the wrong business units. Streaming pure and simple is Cable 2.0. What used to be cable TV companies will soon finally evolve into digital utilities.

Other harsh realities have hit this business. Ill-conceived and poorly-timed strikes following a pandemic were certainly not very thoughtful actions. The two strikes in Hollywood cratered much of the new production from April to early November 2023.

These actions pushed the movie into a new reality and began to move filmmakers and theater owners away from a dependence on a centralized area of product creation. The Los Angeles economy took a $1.5 billion hit because of the strike. Coupled with the $6 billion hit from Covid, this action shows the system's deep cracks and the current model's cumbersomeness. The streaming bubble burst and admittedly was hyper inflated by the studios' greed. The direction they are going might even be their demise.

Now what’s interesting is that there is a conception that there is still gold in the Hollywood Hills, it's just that the miners no longer know what they are doing.? Paramount, one of Hollywood’s founding studios, has received an offer from an investor group led by Edgar Bronfman, a scion from the Seagram Liquor fortune. They are now prepared to offer $6 billion. Paramount confirmed in a statement that it had received an offer from Bronfman but did not disclose any details.

The entry of the Bronfman group threatens to sink the proposed merger with Ellison-controlled Skydance. In the end, the acquisition process will itself reshape Paramount as either a petri dish for new technology or a re-invention of a weary model. Time will eventually tell.

The landscape is changing and changing rapidly. I get call after call from movie professionals who tell me they know scores of people getting out of the business and attempting to re-invent themselves. I had a fascinating call with a filmmaker last week who told me he made a horror film and was driving from theater to theater to show his movie. I found that compelling. I knew former employees of Roger Corman who, because Corman was so cheap, were forced to shuttle reels of 35mm film between theaters.? So this filmmaker was in his car crossing the USA and showing his movie to local audiences that, on average, numbered a couple of hundred folks. Considering that the screening was on an off night, this was miraculous.

The movie-going gene within the human animal is woven deeply into us. It is not going anywhere. When audiences deem something worthy of watching, they show up. Here is something interesting: according to the Economist, “Imax had worldwide box-office takings of $1.1B last year and its biggest-ever haul in America and Canada," They also said, "As cinemagoing changes from a regular habit into an occasional treat, the fanciest theaters are prospering." I argue that the prospering theaters offer experiential environments,? uniqueness, and diversity.

We are entering a deep time of reinvention and experimentation. It is going to be a more than interesting ride. As we strive to be smaller in our economic re-imagining, we will be far more reactive to our audience, and they, in turn, will become far more reactive to the emerging cinema economy. It has happened before in regional film exchanges, Southern drive-in circuits, and with more thoughtful release patterns, such as bicycled release patterns. As it has been said in many ways, “past is prologue.”

It's going to be both fun and interesting. John Sullivan Rob Arthur Ellen Zavian Tony Franks Steve Winn Laura Peralta-Jones Gianluca Chakra Domenico Del Priore Patrick von Sychowski