Peak Hollywood
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Audio Recording by George Hahn
You are where you spend time. And my boys, like the rest of America’s youth, are TikTok. When asked whether they’d prefer TikTok or all other streaming platforms, tomorrow’s business/civic/military leaders pick the former. TikTok is the most consequential Asian import since … Datsun. Datsun was the first Japanese car to register success in the United States. Initially derided as “small” and “cheap,” Datsun, and then Honda and Toyota, did to America economically what the Empire of the Sun could not do militarily.
Detroit’s Big Three automakers, arguably the most formidable manufacturing troika in history, had their backs broken, and toggled in and out of bankruptcy for the next few decades, becoming symbols of American decline. Today a similar shit-kicking is taking place. Hollywood’s dominance over film and TV is at risk from another Asian marauder. ByteDance is the Datsun/Honda of the era. Will Hollywood be the next Detroit, an abandoned shell of its former glory? Probably not. In-N-Out Burger, the Hollywood Bowl, and the weather are formidable moats. However, it’s beginning to smell like teen spirit. If teen spirit is an industry that’s coming off a sugar high of cheap capital. The coming withdrawal will feel more like trying to kick an opioid addiction.
1903
The “modern” world began in 1903. The Wright brothers flew the Wright Flyer on December 17, 1903. Henry Ford founded the Ford Motor Company in Detroit on June 16, and the city of Hollywood was incorporated just north of Los Angeles on November 14. The airplane industry expanded slowly, but autos and movies exploded culturally and economically. Both were, for a time, dominated by a small number of companies based in Detroit and Hollywood.
Detroit’s Highland Park, with its own power plant, steel mill, and integrated executive offices, was the model for manufacturing in the 20th century. “Fordism” spread everywhere, in buildings designed by the Highland Park draftsman, Albert Kahn. In the 1920s the USSR hired Kahn to train the country’s industrial architect corps, and the Soviets maintained a formal office at Ford from 1929 to 1935 to learn the ways of Fordism.
By 1930, Detroit was the 4th-largest city in America and its fastest-growing metropolis. After World War II, the Big Three benefitted from years of pent-up demand and massive government investment in the middle class and roads/highways. Also, Detroit had an effective global monopoly, as we had carpet-bombed any German or Japanese region that possessed modern manufacturing capabilities.
Through the 1950s, Detroit was the wealthiest city in the U.S., likely the world. The Big Three (Ford, Chrysler, and GM, all headquartered there) dominated the global auto industry, with over 90% share. They erected one huge plant after another in the Detroit area, surrounding them with suburban developments housing auto workers and their families.
By the 1970s, however, the Big Three, and Detroit, were flailing. American cars had become bloated, dangerous, and unreliable. The Japanese turned rice into sake: Their decimated infrastructure let them start over, build modern facilities, and experiment with new methods. The Big Three, once innovators, had no catalyst for creativity. Industry analysts refer to this as the “Malaise Era.” Think Chevy Citation or Ford Pinto. Japanese cars weren’t just smaller, but faster, safer, and cooler. Five decades of decline followed: Chrysler is now a subsidiary of Stellantis, GM declared bankruptcy in 2009, and the combined market cap of the Big Three ($163B) is half of Toyota ($316B), and a quarter of Tesla’s ($733B).
Golden Age
The first chapters of Hollywood’s story parallel Detroit’s. The City of Angels was Detroit West in many ways. Alongside automobiles, movies were icons of cultural and economic relevance through the 1930s. The industry pivoted to support the war effort in the 1940s, producing propaganda films and newsreels and selling war bonds. The industry reaped the benefits of the Allied victory, as Baywatch and Iron Man are essentially selling the American dream, built on the premier victory of the twentieth century.
Hollywood also faced challenges at midcentury. Again, a smaller car showed up. Television was more accessible, more varied, and cheaper. By the 1960s, Hollywood films were increasingly out of step with the culture — projecting 1950s imagery of white people as biblical characters or shooting savage Native Americans onto a world of race riots and sexual revolution. Audiences turned to James Bond, the Beatles, French New Wave cinema, and anything Brigitte Bardot.
Studios faced economic troubles, and many were taken over by financial buyers and conglomerates. Hollywood was on the precipice of the same foreign dismantling the Detroit automakers were about to experience. Sidenote: I bought my first stocks, 12 shares of Columbia Pictures (NYSE: CPS) at $16/share, when I was 13 years old living in Westwood, CA. I thought Close Encounters of The Third Kind was AWESOME (#truth). Ironically, Columbia was sold to Sony 12 years later. CPS didn’t get me to economic security, but four decades of investing in stocks have. But I digress.
Fork in the Road
This is where the stories diverge. Unlike the Big Three, Hollywood did not experience a generation of collapse. What did it do differently? In a word: quality. The industry adapted and started making better movies. They turned the keys of the kingdom over to young filmmakers and actors who weren’t squeamish about sex or violence and had something to say about the crises and traumas of the time. Midnight Cowboy, The Godfather, and Jaws were the Datsun 240Zs of their time, but produced by American studios. In the 1980s the studios discovered the power of the “blockbuster,” the special-effects-driven dramatic film tied into fast food marketing campaigns and action figures. These film-based enterprises were the first zero-to-a-billion-dollars businesses to be built in 24 months, or less. The Hollywood ecosystem didn’t just survive, it thrived.
Hollywood remains the economic and cultural capital of entertainment, and the “Hollywood” studios are still the major players. In 2023 the top eight studios by U.S. box office receipts were all based in L.A. (though several are owned by out-of-state companies), and enjoy a combined 86% market share.
Sequel
Storm clouds are gathering, again. The most obvious issue is the movie theater, which, despite analyst predictions of an explosive post-pandemic rebound, has underwhelmed. One out of every five moviegoers has disappeared since the pandemic, and, last year, U.S. box office revenue amounted to just $9 billion. Hollywood was happy to report that number was up 20% from 2022. The fine print: It’s down 20% from 2019. As in the 1960s, the battle in entertainment is between screens — the big screen is struggling to fight off challenges from TVs and now, phones.
Of that $9 billion, Greta Gerwig and Christopher Nolan accounted for 10%. Barbenheimer’s success has been widely recognized as the saving grace of Hollywood, scooping up 17 nominations and seven awards at the Golden Globes. People think this is a good thing. In reality, the industry is becoming more concentrated as the big-budget, high-production-value projects collect an increasingly greater share of dollars and the rest of Hollywood is left behind. In 2003 the highest-grossing movie (Finding Nemo) made up 3.5% of domestic box office revenue — this year that number doubled, to 7%. Put another way, movie inequality is mimicking income inequality … getting worse.
The apparent strength of the Hollywood “studios” masks the international nature of their operations and the decreasing importance of the L.A. basin to moviemaking. Netflix has led the way. The company is based in California’s other industrial crèche, Silicon Valley. But it’s part of the Hollywood ecosystem nonetheless, with a quarter of its employees in L.A. and a flagship office on Sunset Blvd. It also understands the future is not in California, but everywhere else. The company will spend $2.5 billion on Korean content over the next four years, and it’s increasing investment in Brazil, Spain, Italy, and other countries, while “pulling back” on overall spend. (Translation: It’s reducing budgets for U.S. content.) There are now five Netflix offices in the U.S. and 24 internationally. Of its subscriber base, 69% resides abroad, up from 45% in 2016. The ecosystem is evolving to accommodate this shift. A third major film studio is opening in New York City this year, Wildflower Studios, but with a twist. The brainchild of Hollywood royalty and NYC native Robert De Niro, Wildflower plans to offer the entire production ecosystem under one roof, a “Hollywood in box” that can be replicated globally. Globalization means fewer jobs in L.A., not just for actors, but also for prop masters, makeup artists, and film editors.
Bangkok-based directors aren’t the only ones coming for Hollywood’s jobs — so is AI. The industry is a cornucopia of AI use cases. You could spend $80,000 on a good sound designer, or you could spend $1,000 for an annual subscription to an AI tool that does slightly inferior work. Slightly. With production budgets tightening, producers will select the latter, not because they want to but because they have to. Six months ago we thought it was the writers who’d be affected by AI. We now know it’s everyone. Even the National Association of Voice Actors is bracing for impact.
Who’s the Boss?
Hollywood’s real boss, however, is Big Tech. Apple and Amazon have become studios themselves, but the bigger threat is from substitution, not competition. While Warner Bros. Discovery reported a net loss of 700,000 subscribers across its streaming platforms in its latest earnings report, Mark Zuckerberg casually dropped that Reels has increased Instagram usage more than 40% since launch. Forty percent engagement growth in less than three years on a platform with more than 2 billion users. This would be headline news for WBD or Disney — for Meta it’s a footnote. The ascendance of Instagram, TikTok, YouTube, and the talent pools they’ve inspired, is hard evidence that the future of entertainment will be user-generated. YouTuber MrBeast collected 4 billion views from his videos in 2023. At an average video length of 16 minutes, that’s 1 billion hours of viewing time generated by one man — 30% more than what Netflix captured this year on its most watched show, The Night Agent — filmed in Vancouver.
The ROI on entertainment investment is increasingly the inverse of the screen size it’s produced for. Theaters are dying, streaming to televisions is maturing, and user-produced 45-second videos on phones are crowning new royalty. This week’s Golden Globes felt like a retirement dinner for Pan Am pilots in the seventies, basking in their fading relevance.
Bite-size content has inherent advantages: It’s cheap to produce and easy to consume, with platforms such as TikTok offering a frictionless lack of choice. Netflix watchers spend 78 hours per year just deciding what to watch — TikTok lets you spend that time watching. And its staggering signal liquidity makes it better than you are at deciding what you want to watch.
Survival
The species that survive are not the smartest, strongest, or fastest … but the most adaptable. Hollywood and its biggest players will survive, because they’re demonstrating remarkable agility. In sum, there are too many players spending too much money, and their business is under attack from players that better foot to a younger consumer’s tastes. However, in just 24 months, we may witness a historic consolidation that halves the number of streaming options. The industry used the strike(s) as an armistice to cease the arms race of spending. Amazon’s streaming group announced layoffs, and Netflix, for the first time, has not increased its content budget in two years.
Look for Warner Brothers Discovery (WBD) and Disney (DIS) stocks to outperform the market. The champagne and cocaine of cost-cutting and pricing power, as a function of consolidation and cloud cover from NFLX, which raised prices earlier in the year, will result in long-absent earnings growth. Both equities, priced at decade-long lows, are springs wound tightly from a stream of bad news that will jump on any signs of renewed growth.
NetVibe
The most agile player is the company that used to mail DVDs and pulled off one of business history’s great pivots to become the most valuable studio in history. I don’t know Ted Sarandos well, but I do know he reads this, so …
Ted,
I hope this message finds you well.
NFLX should partner with a deep-pocketed AI firm (e.g., Anthropic), horny to demonstrate differentiation in an increasingly crowded field, and launch a TikTok competitor (e.g., NetVibe, NetBeat, NetReal). When you acquire content, negotiate the rights to parse it into bite-size clips. Your business has the largest block of cheese (i.e., content) in history. Slice it more thinly and charge 10x for it. The deft use of your technology and capital could create a viable competitor to TikTok that has tangible differentiation. I want to watch The Crown, just not all of it. You tried this before but were too early and too timid. Think remixes, not highlights. TikTok is an evolutionary platypus of snippets and retakes — Netflix should be the king of that jungle. This is, in my view, the ripest opportunity in media, and tech.
Ties That Bond
I bond with my boys (13 and 16) over Premier League Football and original scripted television. We just finished Squid Game (I know … late) and are on the first season of The Last of Us. Zombie apocalypses are not my cup of tea, but I think Pedro Pascal is a movie star (Narcos … trust me), and my sons were excited about it. Episode 3 of Season 1 is a formidable piece of content that accomplishes what all media attempts: It made us feel something. The episode, telling the story of a survivalist/prepper who takes in a wanderer, depicts (powerfully) their unexpected romantic relationship. Nick Offerman (Parks and Recreation) and Murray Bartlett (The White Lotus) are outstanding. The prepper (Offerman) is incredibly talented, assembling a compound that not only electrocutes wayward zombies, but also has running water and a working farm that provides the foodstuffs for the gourmet meals he prepares.
Stay with me here.
Author Richard Reeves introduced me to the concept of surplus value. In sum, a boy becomes a man when he provides more value than he consumes. I love this. Young men who are experiencing suicidal ideation repeatedly use the word “useless” when describing themselves. Offerman’s character is the definition of surplus value. But here’s the thing, that’s just half of what it means to be a man. Offerman, in a powerful scene, says he is finally satisfied because his partnership, and caring for his partner, gave him purpose. I’m writing a book on masculinity and have struggled with a decent definition that’s aspirational and doesn’t present gender roles and stereotypes as a zero-sum game. And this helped. I’d offer that being a man is acquiring the skills and strength so we can take care of, and advocate for, others. Our purpose is to protect and love others. That’s what men do.
Life is so rich,
P.S. I kick off 2024 on the Prof G Pod with my Yoda and a true-blue-flame thinker, Ian Bremmer. Listen here.
P.P.S. Section just launched a new Essential Mini-MBA — sign up if you want to be indispensable at work this year. Early-bird pricing ends next week. Enroll for 20% off.
The last paragraph. Wow. Thank you. In trying to raise a young boy that is getting old enough to start to understand the distinction, this is such an elegant and solid summary. I look forward to your book.
might be worth checking out the latest Netflix data dump on most watched shows in 2023. only one foreign movie made it into the top 10 … American movies score way higher than local movies. in the US and abroad. also, looking a theater data from 2023 men between 15 and 30 were primary audience at the movies, boomers and Gen X were less likely to go. so maybe we shouldn’t dig the grave just yet.
Thank you for introducing me to the concept of “surplus value.”
Way to wrap it up Scott!
‘Our purpose is to protect and love others. That’s what men do.’
It’s what functioning adults do, regardless of gender – or sex!
Me encantó todo
You (or rather, your sons) are behind the curve re. TikTok. It’s on its way down already. Engagement is down, users are frustrated now that it has become a platform with 80% advertising and some irrelevant clips in between. It’s going the way of Facebook. No clear successor yet, so Netflix better move quickly.
Netvibes exist already.I created 14 years ago 🙂
Hmmm…”being a man is acquiring the skills and strength so we can take care of, and advocate for, others. Our purpose is to protect and love others.“ Careful, you may be accused of plagiarizing not just JC, but all the religions…
I don’t know why people who have no ability to judge the merits of a work of art beyond the amount of money it can generate feel that they should write articles telling everybody how they think art should be exhibited. No one who actually creates something for a living will or should ever listen to bottom-line-obsessed, number crunching vampires like yourself. Your entire thesis is flawed from the beginning because of the false equivalency you draw between cars, which are a sellable commodity, and Art, whose value cannot be captured on a spreadsheet. Films created by artists that are meant to bear witness to anxieties and emotions human beings experience as they try and fail to communicate with one another, told through the language of the most sensitive and nuanced art form ever conceived by man, bear no resemblance to “user generated” “content” farted out onto platforms like TikTok and YouTube and you should be ashamed of trying to make the former more closely resemble the latter. You are a financial advisor, not a cultural critic, nor an art connoisseur, and you would do well not to embarrass yourself by trying to apply your cold, rigid logic of numbers and profits to a subject that you clearly do not understand.
Did you perhaps consider he was indeed offering financial advice? Last time I checked, Netflix was a for-profit company with investors that care about profit. I am actually bewildered at how off base your angry comment is.
Coincidentally, I also watched the first few episodes of The Last of Us on a recent flight to Mexico to visit my family and I found that episode 3 to be engaging and moving. Your analysis of it puts in a new light I hadn’t considered. I agree, our job is to protect and love! Thank you for the post and look forward to that next book!
What was that boondoggle that Geffen and others pissed away gazillions on shorts for phones? Tubi?
Katzenberg and Meg Whitman.
Sony wants to move to las vegas in 3 years sw side of Summerlin waiting for approval
“This week’s Golden Globes felt like a retirement dinner for Pan Am pilots in the seventies, basking in their fading relevance.”… priceless writing!
Kurt Cobain would be proud!
Hi Scott – Is there any way to view these columns on a Kindle? With all the noise and distraction of notifications on other smart devices, the Kindle has become the only safe space for quiet concentration when reading. Am sure your other readers would appreciate finding you there as well.
Best,
Us
Scott,
Excellent & insightful column today… especially the ending. It was well worth my time! Thank you!
As a dedicated listener, I appreciate your podcast, especially the insightful blend of history and contemporary topics. The quote resonates, highlighting that survival favors adaptability over mere fierceness, strength, or intelligence.
Thoughtful definition of masculinity.. I hope your book becomes a best seller!
If you haven’t already, check out the Jesuit – “be a man for others” principle
Love the take on masculinity. Similar quote that I have appreciated: “You become a man when you care more about others than you care about yourself.” Isn’t that the truth!
I can’t begin to describe how much I loved my Datsun 240Z.
My souped-up Datsun 510 could beat your 240Z any day of the week! 🙂
If one is SERIOUS about the issues with boys, then they should RAIL against feminist dominated Teachers Unions and the gay-women driven University systems. Read up on how boys are railroaded in any ‘harassment’ case at a University.
As a father of boys, I saw this daily. But, men in media and Hollywood likely turned in their physical manhood for a shot at fame and fortune. No one stands up to the loud/obese women on MSM. The rest of the world will not respect a country run by the likes of Prof Gay at Harvard. For the sake of the US, we must fix our country and save our boys.
19.2B hours — Put THAT number in your streamer pipe and smoke it!
THAT is the number of hours spent by Netflix subscribers in “Thumbnail Hell” each year.
19.2 Billion MF’in Hours.
What if I told you I could cut that in half AND covert them into WATCHED hours?? What would that be worth?? Ted would rename the Hollywood Sunset office “TonyTown” ( or not)
My producing partner and I pitched a concept to Netflix, (unfortunately thru the agent-to-Netflix bureaucracy sted Ted), that would have converted, at minimal expense and with insane ROI, at minimum, 50% of those lost hours looking for ‘something’ to watch.
How did we know it would work?
Our formula has been perfected over 20yrs on the Hollywood frontlines reaching (and grabbing) a combined audience of more than 2.1B — essentially millions on a daily basis.
Not only would “TH” be converted, there was an aspect which would open up additional revenue streams, too.
For some reason, we figured a ‘streamer’ would understand (and give us a “Holy Shit, we love additional revenue stream and no cost!” response), but, alas, even at Netflix, there are people whose default is dip-shitted-ness. It happens.
Clearly Galloway you, like us, are fans of a good remix, as that was one aspect our plan, too. Who better than Netflix to take an old school idea, the Mixtape, and pivot into a hybrid digital version?
Netflix is one badass boombox.
Episode 3 of Season 1 (Last of Us) was the most perfect, shattering hour of television I can remember seeing. Totally destroyed me.
you may want to explore the etymological meaning of Patrimony with regard to the book you are writing. happy new year.
Thanks for your newsletter.Always a pleasure 🙂 As for the last paragraph, I would add that “ real” men of all generations always demonstrated a genuine caring for others along with feeling responsible as a breadwinner for his family. Strong individuals don’t let the influence of society’s propaganda rule who they are. They stand out without trying to.
Another fuckin’ awesome post. THANK YOU. On many levels. And that last para is the cherry on the cake. One of the demographics I often work with is that of older (wiser) men, and I believe this principle applies to our reinvention of ourselves. Especially as we battle ageism. It’s a great proof-point for ourselves and for others who view us critically. VERY valuable, Prof. – thanks again.
This particularization of media content (snippets, not movies) is a reflection of the broader phenomenon of our social media & our world at large. ‘Shallow epistemology’ is burgeoning. Not thought pieces, but tweets. Not political dialogue, but memes. Galloway’s exegesis of the biz argument for “bite-size content” is valid, but I disagree on what’s next. Bite-size content engenders an ephemeral rush that, ultimately, leaves us wanting. *It’s too short to be complex & satisfying*.
That is why stories were created thousands of years ago around campfires…
I think we are, instead, on the cusp of the golden age of the ‘Limited Series’? Think the S1E3 of “The Last of Us”
Another great read (insight on steroids!). Suggestion for your upcoming book: consider crafting a notion one might call “Taskculinity” — as a prospective level-up on masculinity. I find it’s those of us (females as well as males) that have the resolve to “Get ‘R Done” that is the foundation for ‘found family’, life-long friendships and bullet-proof resilience. We don’t have the time for depressing thoughts — we’re too busy doing what others (including the planet) need. Thus (I submit) Taskculinity could be a flagship philosophy for all, especially the youngest of next gens— and thereby be just the antidote to the now-rampant quiet-quitter, professional victims cult thinking now ensnaring many into a tar pit from which they will never emerge for the rest of their natural lives.
Waiting with eagerness for your book on masculinity.
Consider this for your definitional search – being a man is a subset of masculinity but I think you shortchange your PoV by equating them below. With respect to your search for definitions, Richard Reeves definition of becoming a man once one contributes more than one consumes seems to be complete/sufficient. What you want to define is not being a man, but rather the broader impact zone of masculinity. So, to (suggest an) edit for your words – ‘Being masculine is acquiring (and fostering?) the skills and strength so we can take care of and advocate for others. The purpose is to protect and love others. That’s what masculinity is. (Not that what men do, as women can do it too, but that would be a well received masculine trait for any gender.)
But that raises the inevitable question: What do women do? I know that Scott and by extension Reeves are skittish about going there, but they have to if they’re going to be honest – as a proud Black Manospherian, this the, to use Scott’s phrasing, “chocolate and peanut butter” of it all here: Gender roles. I LOVED “The Last of Us” and really liked the episode Scott riffed on, and can even go along with what he said and fusing it with Reeves’ points – but does it really have meaning without women also clearly defining what their roles are? Let’s really take “The Last of Us” a step further: If indeed women can do the exact same thing as the gay prepper guy, are women even necessary at that point? With talk of “birthing persons”, with Supreme Court nominees unable to define what a woman even is (WTF?!?), at some point we are going to have to button exactly what essential, elemental role women play in this here thing if we’re ever to bring balance to the Force. I’m just saying…
“I’d offer that being a man is acquiring the skills and strength so we can take care of, and advocate for, others. Our purpose is to protect and love others.” Absolutely, yes. It is also how I define my purpose, as a woman.
Fabulous article as usual! (Especially the last part.)
Well done Prof G and gang!
Love the Netbyte idea. Would also add should be government support to keep the kids away from China (Tok).
Concerning boys and surplus value, would also consider eudaimonia, from Zareysky’s book of Simone Weil, summarized:
For both Aristotle and Weil, the core concern is what the former called eudaimonia. The word is often translated as”happiness” . For the classically grounded Jefferson, it had everything to do with the work-pleasurable, but disciplined work—of becoming who you are.
Eudaimonia is thus best translated as “human flourishing” – the ongoing and never-ending activity of fulfilling our poten-tial, or capabilities, as human beings. For this reason, Aristotle (and Jefferson) insisted it is an ultimate good that we pursue as an end, not a means.
Aristotle makes clear that a human being, if isolated from or indifferent toward others, will never achieve this ultimate good, one that can be reached only in the company of others.
Ease of access does not connote quality. Just because your kids (and you?) prefer bite-size content, doesn’t mean the rest of the world does. Kids will always choose candy over a healthy meal; it’s your job to make sure they acquire a taste for the latter and enjoy the former sparingly. Easily consumable everything is what is leading to the downfall of Western society. Everyone wants everything easier, faster and at no cost. That’s how populism gains a foothold. Promise them they can have whatever they want, promise them that they’ll build a wall and Mexico will pay for it, promise them that they’ll fix health care in the first 2 weeks, promise them that Covid will go away ‘just like that’.
Please stop plugged In-n-Out, they’re way too crowded already!
Excelent Prof G! Adding value with your content, as always! God bless!
Hollywood’s theatrical grosses are $9.1B (Domestic; in 2019 (before Covid) it was about $40B). However, in 2022, the revenue from the worldwide gaming market was estimated to be $187.7 billion; it dwarfs Hollywood theatrical.
“I’d offer that being a man is acquiring the skills and strength so we can take care of, and advocate for, others. Our purpose is to protect and love others. That’s what men do.”
This has to be one of the best statements I have read in years. Thank you!
quick copywriting suggestion: …are TikTok.
should be
…are on TikTok.
If your intent was do write it that way, that works too.
I need to read it again- more slowly- however, I wanted to double check your first point re TikTok – my children have never downloaded it- not interested- UK Oxbridge, a bit older…is it really that everywhere? They did a bot of high school in the US and did not get into it.
I was at an event for students applying to Oxbridge and someone (a parent) asked- is it OK my child is interested in playing online games? The answer was- I have never met someone who plays online games so I am not sure what to answer. Wondering your thoughts on this Prof G?