Recovering from the Content Bubble: Hollywood’s Much-Needed 2024 Diet

2023 was an earth shattering year for the entertainment industry, but 2024 promises to be just as transformative. The trends leading to 2023's string of high-profile mega box office flops, the historic joint SAG-WGA strike, and a shift in audience behavior, did not happen overnight, or within a vacuum (Reuters; Deloitte). In the last decade, we have seen a “Content Bubble” form, driven by the relentless pursuit of streaming platforms, and the studios behind them, to outdo each other in a race for subscribers. The last 5 years in particular have been marked by an unprecedented surge in content production. The 2023 Content Bubble was fueled by the belief that more content equated to more viewership and, ultimately, greater revenue, i.e. “Content is King”.

However, this led to a media market oversaturated with content, much of which struggled to find a stable audience base (N. Andreeva; A. Beiswanger). The sheer volume of available media began to overwhelm consumers, leading to decision fatigue for both theatrical and streaming and even a noticeable dilution in the perceived quality of content. The economic viability of these massive content investments began to waver, reaching a tipping point in 2023 when the unsustainable nature of this bubble became glaringly apparent. (B. Contreras & A. Sakoui; L. Shaw).

In order to survive the 2023 Content Bubble and thrive in the years to come, Hollywood needs profound and revolutionary changes to its creative strategy, business models, and audience engagement, in effect a “New Year’s Diet”. As studio executives grapple with these deep issues, the industry may find an unlikely inspiration from a cost-efficient European supermarket chain that has redefined its industry, ALDI. This potential transformation, which could be termed the "ALDI-zation" of Hollywood, suggests a shift towards more economically sustainable practices, emphasizing streamlined processes, strategic cost-cutting, and a keen adaptation to evolving consumer preferences (B. Contreras & A. Sakoui; L. Shaw).

Let’s unpack Hollywood’s “opportunity in austerity” in a post Content Bubble media landscape, using ALDI’s innovative business model as a potential blueprint.

The 2023 Content Bubble, how did we get here?

The "Content Bubble" of 2023 marked a pivotal moment in Hollywood's history, characterized by an unprecedented surge in streaming services' investment in content creation. This phenomenon, fueled by the mantra "Content is King," saw platforms like Netflix, Amazon Prime, Disney+, and HBO Max in a fierce competition to outdo each other, investing billions in producing or acquiring a vast array of films and series (T. Spangler; A. Chitwood). This era, often referred to as the "Golden Age of Television" or "Peak TV," culminated in a remarkable increase in the number of original scripted shows, peaking at 532 in 2019. However, the subsequent market saturation and escalating production costs, combined with the challenges posed by the COVID-19 pandemic, have led to a significant shift in the industry (S. Whitten; R. Rubin).

The bursting of the Content Bubble in 2023 signaled a potential restructuring of the Hollywood landscape, which we continue to observe in 2024. The industry faces a need to adapt to challenging times, with a likely market consolidation, corporate acquisition and a reduction in original programming. This shift may mark the end of extravagant production budgets, as studios face pressure from Wall Street to cut costs and focus on financial stability. In this new era of austerity, we might see a paradigm shift where studios embrace a "less is more" approach, potentially cutting back on bloated budgets and becoming less reliant on legacy intellectual properties.

Looking ahead, the role of AI in Hollywood’s future cannot be overstated. The current debates over AI usage in content creation are defining moments for the industry. While there is rightly much apprehension about AI replacing human creativity, there's also the potential for AI to enhance human creativity. This integration could mirror the way the Internet revolutionized communication and business, not by replacing traditional methods but by expanding and creating new avenues for innovation and collaboration. As Hollywood continues to navigate these changes in the New Year, it stands at the threshold of a potential renaissance.

By reassessing its content and business strategies and setting ethical standards for successful AI use, Hollywood could emerge from this period of upheaval with a more sustainable, innovative, and diverse industry, potentially ushering in a new golden age of Hollywood. In the past, we have seen a similar transition from the top-heavy historical epics of the 1950s-1960s (think "Cleopatra") to the sleek and innovative films of the late 1960s New Hollywood movement (think "Bonnie and Clyde" or "The Graduate"). In a fascinating twist, this was also around the same time as the last WGA and SAG joint strike back in 1960. The future isn't about mimicking old formulas but daring to discover and deliver innovative narratives that won't break the bank, and that’s where the ALDI model comes in.

Welcome to ALDI

ALDI, a global discount supermarket chain founded in Germany in 1946, has revolutionized the retail sector with its unique business model (K. Mehta; G. Dean). ALDI stands out for its focus on simplicity, efficiency, and a no-frills shopping experience. Unlike conventional supermarkets, ALDI's stores are typically smaller, with a limited selection of items. This approach not only streamlines operations but also allows for significant cost savings, which are passed on to customers in the form of lower prices. ALDI's rise to prominence, particularly in Europe and more recently in the United States, is attributed to its ability to deliver quality goods at remarkably low prices, attracting a broad demographic of consumers.

Central to ALDI's success is its lean business model. The chain predominantly stocks private-label items, which makes up about 90% of its inventory. This strategy reduces overhead costs associated with national brands and enables ALDI to exert greater control over its supply chain (K. Mehta; G. Dean). Furthermore, ALDI's stores are designed for efficiency – from smaller floor plans and simple shelf stocking to a fast and straightforward checkout process. ALDI also minimizes labor costs by employing fewer staff members and requiring customers to bag their own groceries. These operational efficiencies are not only cost-effective but also contribute to a unique shopping experience, distinguished by its simplicity and speed.

ALDI's success is not just a result of cost-cutting measures; it's also about strategic adaptation to consumer needs. The company has shown an impressive ability to evolve without compromising its core value proposition of affordability. For example, in response to growing health and environmental concerns, ALDI has expanded its range of organic and sustainable products. Additionally, ALDI's special weekly deals on non-grocery items, from tools to toys, create an element of surprise that keeps customers returning. This balance of predictability in low prices and unpredictability in product specials fosters a unique customer loyalty, setting ALDI apart from other discount retailers (K. Mehta; G. Dean).

ALDI's approach, characterized by a blend of strategic cost-cutting, efficient operations, and keen consumer insight, offers a compelling blueprint for industries facing similar challenges, including Hollywood. In the wake of the 2023 Content Bubble, Hollywood now finds itself at a crossroads. The need for a sustainable, audience-focused approach in content creation has never been more apparent. As ALDI redefined retail by prioritizing efficiency and adaptability without compromising on quality, Hollywood stands on the brink of a potentially similar transformation.

“The 2024 Hollywood Diet”

Hollywood needs a “New Year’s Diet” in 2024. The "ALDI-zation" of Hollywood may be just what the doctor ordered, a shift towards more cost-effective, streamlined, and market-responsive operations, mirroring ALDI's successful approach in the retail sector. Just as ALDI revolutionized retail with its unique business model, Hollywood needs to undergo a similar transformation if it wants to survive, redefining how entertainment is produced, distributed, and consumed in the digital age.

Step 1: Embracing Cost-Efficiency with Quality

Just as ALDI focuses on high-turnover items to keep costs low, Hollywood will need to move towards more economical production methods. This includes reducing the number of TV shows/Films released, potentially shifting some productions overseas, and focusing on high-concept cost effective projects over bloated blockbuster sequels. Such strategies reflect a transition from extravagance to value-driven content, akin to ALDI's no-frills approach. This change is particularly evident in the contrast between last year’s high-budget films like "The Marvels" or “Indiana Jones 5” and more modestly budgeted, original films like "Barbie" and "Five Nights at Freddy's" (A. Beiswanger). This shift not only promises a more financially stable industry but also encourages the creation of diverse and original content.

A recent trend of high concept cost effective video game film/tv adaptations in the last year could serve as a roadmap for studios looking for fresh and unique IP to bring to the big screen (L. Wright). Take for example 2023’s The Super Mario Bros. Movie, which was produced for a relatively modest $100 million and in turn grossed $1.362 billion. The Five Nights at Freddy's film also released in 2023 mirrors this trend, having been produced for $20 million and earning $291 million (L. Wright). The risk mitigation of video game adaptations, with their tested narratives and built-in fanbases, could be a fast and easy way to stabilize declining profitability in streaming and theatrical as the industry embarks on its ALDI-zation phase.

Step 2: Adapting to Audience Taste

A critical aspect of the "ALDI-zation" of Hollywood is the industry's adaptability to changing market demands and consumer trends, mirroring ALDI's responsiveness to its customers. ALDI's strategy of offering a limited but well-curated product range should inspire Hollywood to focus more on select, lower-budget, high-concept projects. This approach allows for the exploration of diverse genres and narratives, catering to the evolving tastes of a global audience. For example, studios could leverage AI for tasks like data analysis and predictive modeling to help illuminate and then fill lucrative content gaps that are hitherto undiscovered (S. Shankland).

The detection of such untapped content gaps in the market, like the one "Barbie" capitalized on back in 2023, is surprisingly a job AI can help us do (S. Shankland). Utilizing advanced algorithms and machine learning, we can sift through enormous volumes of data to reveal unseen patterns, preferences, and trends to leverage previously unidentified content gaps and reach new audiences. In the case of "Barbie," the unlikely cross-section between a nostalgic adult audience and an enthusiastic Barbie fan base drove its surprising success. This market-responsive approach is likely to result in content that resonates more profoundly with viewers, fostering a stronger connection between Hollywood and its audience.

Step 3: Rethinking Marketing Strategies

We could also see Hollywood move towards a lower to the ground social media first marketing strategy. This shift reflects ALDI's minimal marketing approach, where the emphasis is on word-of-mouth and strong brand recognition. By adopting a lean marketing approach and leveraging technology effectively, Hollywood is positioning itself for greater efficiency and responsiveness to market changes, ensuring its relevance and sustainability in the digital age. The "Barbenheimer" phenomenon of Summer 2023, emerged from the combined marketing buzz of "Barbie" and "Oppenheimer," serves as a prime example of how Hollywood could benefit from a shift towards a social media-first marketing strategy, particularly by tapping into meme and internet digital culture (A. Beiswanger).

This phenomenon exemplifies the power of engaging with audiences directly where they are most active - on social media platforms - and utilizing the organic, viral nature of memes to amplify marketing messages (A. Beiswanger). By embracing meme culture, studios can foster a grassroots level of engagement and buzz, reminiscent of ALDI's minimal yet highly effective marketing approach which emphasizes word-of-mouth and strong brand recognition. In adopting this strategy, Hollywood would be positioning itself to leverage the spontaneous and often user-generated content that thrives on social media, harnessing its potential to create viral marketing moments. The success of the "Barbenheimer" phenomenon highlights the potential for studios to create a more interactive and engaging marketing experience, one that resonates with the digital-native audience and capitalizes on the organic spread of content.

Step 4: Prioritizing Transparency and Fairness

The agreements reached by the SAG and WGA late in 2023 to end their historic joint strike mark a pivotal shift in Hollywood, potentially accelerating its "ALDI-zation." These contracts introduce significant changes that align closely with ALDI's business philosophy, which prioritizes efficiency, fairness, and responsiveness to market and employee needs. For instance, the increased focus on ethical AI use, as stipulated by the WGA, mirrors ALDI's balanced approach to technology – using it to enhance efficiency without compromising the human touch (Shankland, S). Similarly, SAG's emphasis on fair compensation and transparent practices, such as streaming bonuses and residuals, reflects ALDI's transparent pricing strategy and its commitment to providing value to its customers.

These new contracts also underscore the industry's increasing commitment to equity and fair treatment, evident in provisions for more inclusive casting and improved working conditions, resonating with ALDI's approach to employee welfare and customer satisfaction (A Wilkinson, and S Emily). Collectively, these changes suggest a future where Hollywood not only adapts to the evolving digital landscape but also redefines its operational ethos, prioritizing sustainability, fairness, and adaptability, key tenets of ALDI's successful model in the retail sector. This could lead to a more resilient and audience-centric Hollywood, much like ALDI's position in the retail world.

Looking Forward: An Opportunity in Austerity

In the wake of the 2023 Content Bubble and the historic joint SAG-WGA strikes, Hollywood now stands at a pivotal crossroads in 2024. Could this mark the end of an era characterized by extravagance and bloat, heralding the onset of a new phase defined by pragmatism and adaptability? This current juncture, much like the aftermath of the last joint SAG-WGA strike back in 1960, presents such an opportunity for a significant "reset" and “reevaluation” in the industry. The parallel is striking; just as the late '50s and early '60s saw an oversaturation of content with runaway budgets of massive historical epics, today's Hollywood has reached a saturation point with its relentless production of high-cost content based on yesteryear’s hottest IP. Following the 1960 strike and shifting market demographics, the film industry experienced a Renaissance known as the New Hollywood Movement, where major studios granted more creative control to directors like Coppola and Spielberg. This era led to the creation of iconic, cost-effective films such as "Bonnie and Clyde" and "The Godfather," which garnered critical and commercial success. This era was characterized by a significant reevaluation of filmmaking approaches, prioritizing distinct yet cost effective auteur visions over lavish spectacle productions.

The concept of "ALDI-zation," drawing inspiration from the revolutionary approach of the ALDI retail model, offers a similar blueprint for Hollywood's current transformation. This model advocates for a shift towards efficiency, sustainability, and a deep understanding of audience preferences, moving away from extravagance and bloat towards pragmatism and adaptability. The industry, therefore, is poised to transition from a quantity-driven approach to one that emphasizes quality, relevance, and individuality in content. Additionally, the industry could collectively take this opportunity to set and reinforce ethical standards for the use of AI in content creation, ensuring that technology serves as an aid to human creativity rather than a threat to it. Recall that after the collapse of the 2008 US housing bubble, it was the reassessment and restructuring of industry best practices, along with improved regulatory oversight, that eventually restored stability and trust in the market (C. Silver). The “ALDI-zation” of Hollywood not only promises financial stability but also fosters a deeper connection with a global audience's evolving tastes.

The entertainment industry is poised to shift from a focus on quantity to an emphasis on quality and relevance, adopting a "less is more" philosophy. This approach is likely to encourage diversity and originality in content, resonating with a global audience's evolving tastes and preferences. The "ALDI-zation" of Hollywood is more than a mere cost-cutting exercise; it's a comprehensive transformation of the industry's creative, operational, and marketing philosophies. The coming period of austerity is ripe with opportunities for Hollywood to emerge as a more sustainable, innovative, and audience-centric industry. True creativity thrives not in the boundlessness of resources, but in the ingenuity sparked by constraint. Hollywood's potential “2024 Diet” much like ALDI's own rise through strategic simplicity and efficiency, could mark the beginning of an era where resourcefulness and creativity, born out of necessity and limitation, leading to a more vibrant and sustainable future for the entertainment industry.

References

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