0:05

Amol Sharma is our media and entertainment

0:08

editor, and over the years, he's

0:10

seen a lot go down in the industry,

0:13

but nothing quite like this. When

0:16

I say union, you say power union.

0:27

Writers and writers are on strike.

0:31

It's the biggest for the industry in 60 years,

0:34

and Hollywood is at a standstill.

0:37

It's a ghost town.

0:40

I mean, all the places that should be producing

0:42

stuff are shut down, so

0:45

every lot is basically very

0:48

quiet. You'd normally see a lot of hustle and bustle

0:50

for producing broadcast shows

0:52

for the fall season, for example. That's

0:54

not happening.

0:56

To understand what brought Hollywood to this

0:58

point, Amol says one way

1:01

to think about it is like an Agatha

1:03

Christie mystery, with suspects,

1:06

motives, clues, and consequences.

1:08

I think there's a crime

1:10

scene. A crime scene? Yeah.

1:13

There's definitely a crime that's happened upon the entertainment

1:16

industry here.

1:16

Okay, so who's the victim

1:19

of this crime? The

1:22

victim is everyone who has

1:24

any stake in the entertainment industry,

1:26

so the whole industry is the victim. You

1:29

can't make shows now, so that's bad

1:31

for the companies. It's obviously bad for the talent

1:33

when they can't make any programming, and

1:36

it's not great for the consumers who

1:38

are looking forward to

1:40

whatever it is, Abbott Elementary or- White

1:43

Lotus? White Lotus or Euphoria or

1:45

any of that stuff. So we,

1:47

the viewers, are kind of like the loved

1:50

ones? I think so, yeah. We're

1:52

sort of looking

1:54

on, dismayed, and where the whole

1:56

thing indirectly hurts us too,

1:58

yeah.

2:00

Amal has visited the crime

2:02

scene. He's collected clues and

2:04

leads, all to get to the

2:06

bottom of this mystery. We're

2:09

trying to figure out sort of who has

2:11

killed, at least temporarily, the

2:13

entertainment industry, or who at least

2:15

has kidnapped the entertainment industry. I don't know

2:18

what the best way to say it is.

2:19

One thing about making a true crime podcast

2:21

like this, many of them have

2:23

unsatisfying endings. Yeah. Are

2:26

we gonna have a good ending for this? I

2:28

think you can make that case.

2:32

Welcome to The Journal, our show

2:35

about money, business, and power. I'm

2:37

Kate Limebaugh. It's Friday, July

2:40

28th.

2:45

Coming up on the show, the whodunit

2:48

over the standstill in Hollywood.

2:58

At KPMG, it's people who make the difference

3:00

for their clients, with talented teams leveraging the right technology

3:04

to uncover insights that illuminate opportunity. KPMG

3:07

advisors embed themselves in their clients' business,

3:09

working together

3:11

as true team members to help grow and transform their enterprise.

3:15

Ready to make the difference together? Visit

3:17

their website at visit.kpmg.us backslash transformation

3:19

to learn more.

3:30

As Amal set out to figure out this Hollywood

3:33

mystery, he

3:35

first surveyed the damage. Hey, hey! Go, go! One,

3:38

two, three, and time to go! Man,

3:40

hold back! Where do you want it? Now!

3:43

At the picket lines in L.A., Amal

3:47

spotted a lot of famous actors, like Alan Ruck, who

3:49

played

3:50

Connor on Successful. He was a famous

3:53

actor, like

3:55

Alan Ruck, who played Connor on Succession.

3:58

Because I don't need love. It's

4:00

like a superpower. Jared Harris

4:02

from The Crown. I mean, I'm going to

4:05

act with patriotism. And

4:07

even Jane Fonda. Do you not see

4:09

me? You might

4:11

not exist. I'm not gonna lie,

4:14

it wasn't that easy always to spot the

4:16

famous people when they're wandering around like in

4:18

cargo shorts and like, you

4:20

know, in a hat and haven't

4:22

gone to makeup prior to attending

4:25

the rally.

4:27

A lot of the actors out picketing aren't

4:30

big names. They're lesser known

4:32

actors who say they don't bring in big

4:34

paychecks. You know, working

4:37

actors, regulars on shows, people

4:39

that you think, oh, that person must be doing

4:41

really, really well. And then

4:44

you find out that they consider

4:46

themselves middle class and what they're earning

4:48

is pretty tough to get by on

4:50

in Los Angeles.

4:52

At the Netflix strike, I

4:54

met a guy who was a regular actor

4:57

on the show Blackish on

4:59

ABC, or he was before it

5:01

ended, Nelson Franklin. But,

5:04

you know, he described himself as a working actor

5:07

really who's been hit

5:09

a bit in the streaming era and is

5:11

trying to figure that out. Sorry, go

5:13

ahead. Yeah, I've been

5:15

an actor for 15 years. And, you

5:17

know, I've had a very pleasant

5:20

sort of middle class existing doing that.

5:22

And over the last sort of six or seven years,

5:25

I've just been, I've had like a front row seat of it just sort

5:27

of diminishing as time goes on. Less

5:30

money for the actual work

5:33

that I'm doing and also less money for residuals,

5:35

no residuals in terms of streaming. So

5:38

I just need to be able to make a living again

5:40

because as it is now, the middle class actor can't

5:42

survive on the current country.

5:46

Striking actors and writers are asking

5:49

studios for more money and better

5:51

conditions. One of the key

5:53

demands is for higher payments

5:55

for residuals. What they receive

5:57

when reruns air on TV

5:59

or when something's watched on a streaming platform.

6:03

The coalition representing the studios

6:05

and streamers have said they made significant

6:07

offers to the writers and actors. According

6:10

to the executives

6:13

you spoke with, why can't the

6:15

studios give them what

6:17

they want? Well, some of the things that

6:19

the talent is asking for are actually

6:21

really hard to do. One

6:23

of the asks is, we want a

6:26

percentage of revenue from all your streaming,

6:29

but it's just not that simple. And

6:31

the companies have basically been like, we're not going

6:33

to even negotiate on that. So

6:35

let's keep it to just regular questions

6:38

of pay. And even

6:40

on those, the companies don't

6:42

have a tremendous amount of wiggle room in their

6:45

view right now.

6:46

Getting back to our mystery, these

6:49

strikes mean that shows cannot

6:51

be made right now. So

6:54

in this crime that has shut down Hollywood,

6:57

does this mean that the actors and writers

7:00

are suspects?

7:02

Yeah, I think they play a role, but

7:04

I think it's hard to make the case that

7:06

they are like the

7:08

sort of main culprit. But I think if you

7:11

look at how we got here and who's

7:13

to blame and who the suspects

7:15

are, you could start with cable

7:17

companies, which basically

7:20

created this very lucrative

7:23

system that was almost too good to be true for

7:26

years and years.

7:27

That system was

7:30

the old cable bundle.

7:34

When you paid your cable bill, a

7:36

lot of that money went to the channels and

7:38

made its way down to the Hollywood writers,

7:40

producers, and actors.

7:42

A lot of people did very well. Amal

7:46

says the cable companies are suspects

7:48

because they allowed the cable bundles

7:51

to get too expensive.

7:53

Yeah, we didn't like having like 400 channels for $175 a month.

7:59

Yeah. Exactly. So as

8:01

the cable bundle is starting to unravel

8:04

or you start to detect, like people

8:06

are unhappy and want

8:09

to cut the cord, but it's not really yet a thing.

8:11

You need somewhere to go where

8:13

you're going to go. Netflix

8:15

storms onto the scene. It's the pioneer

8:18

in streaming. And Netflix

8:21

is our next suspect. For

8:23

a long time, Netflix focused on growth,

8:26

gaining more and more subscribers. And

8:28

with that,

8:29

it devoured the entertainment landscape.

8:33

And they started changing

8:36

the entire economics. Like even the

8:38

way talent is paid, they'd say we're going to pay

8:40

you a lot of money in the front, like up front

8:42

right now, this big check, instead

8:44

of spreading it out over time, which is

8:46

the way that it happened in TV.

8:49

They changed the pricing that would

8:51

be appealing, the product you should

8:54

offer, which would be a ton of content,

8:57

the delivery of it should be streaming and the

8:59

way you pay the talent. All Netflix pioneering

9:01

all of that.

9:02

The rest of the entertainment industry wanted

9:05

in on it. Traditional media

9:07

companies and studios like Disney and Paramount

9:10

sold their own shows, like

9:13

The Office and Friends to Netflix.

9:16

One could argue they created the Netflix monster

9:19

in the first place. They did not

9:21

have to give all their stuff, all

9:23

their old shows and libraries of things

9:25

to Netflix. They licensed them. They sold

9:27

that stuff to Netflix. So it was short term

9:30

money, which looked good to investors,

9:33

but

9:33

they enabled Netflix to get stronger

9:36

and stronger by giving them this content. In

9:39

other words, the media companies

9:41

and studios fueled the shift

9:43

to streaming by empowering

9:46

Netflix. And this raises

9:49

the idea that maybe the studios

9:52

are also a suspect.

9:55

The studios decided they needed to compete

9:57

with Netflix directly and began launching

10:00

their own streaming services. In 2019,

10:03

Disney came out with Disney+, and

10:06

in 2020, NBCUniversal

10:08

launched Peacock.

10:09

The studios did not manage the shift

10:12

to streaming well, to put it mildly. One

10:14

could argue that the way that the strategy

10:16

they've picked to go about competing

10:19

with Netflix also isn't working, which

10:21

is a, let's make a ton

10:23

of stuff. Let's make a ton

10:26

of content. We have to be a supermarket.

10:28

But it's also the golden age of television.

10:31

It is. So many shows. So

10:33

many shows, yes. And I think a

10:35

lot of people, you know, honestly thought that's

10:38

the answer. You just have to make a ton of programming. You have

10:40

to pay a ton of people. You have to make a ton of shows.

10:42

Huge programming budgets, right? The

10:45

truth is now every top entertainment

10:47

executive I talk to is reflecting on

10:49

that and saying things like, maybe we overshot.

10:52

The striking actors and writers,

10:55

the cable companies, Netflix,

10:58

the studios.

11:00

But there's another suspect, a

11:02

dark horse. That's

11:05

next.

11:12

This episode is brought to you

11:14

by booking.com. Booking. Yeah.

11:17

Podcasts are a kind of escapism, but

11:19

when you need to actually get away, there's booking.com.

11:22

You can choose from thousands of unique stays across

11:24

the US from hotels and beach houses

11:27

to wooden cabins and dreamy vacation rentals.

11:29

So whatever type of trip you want to take, lying

11:31

on the beach, camping in nature, exploring

11:34

new cities, find your perfect place

11:36

to stay. Booking.com. Booking.

11:38

Yeah. Tap the banner to learn

11:40

more.

11:48

One key plot point in our mystery

11:50

happened last spring

11:52

when Netflix announced its first

11:54

quarter earnings. It was not

11:56

a good week to be a Netflix shareholder. The

11:59

stock plummeted more than. 35% on Wednesday. They

12:02

lost 200,000 subscribers. They

12:04

expect to lose 2 million more. I think basically

12:06

times have caught up to Netflix. Up

12:09

to that point, Netflix's

12:11

growth had looked unstoppable.

12:14

So when the company reported its first

12:16

subscriber loss in more than a decade, it

12:18

shocked Wall Street

12:20

and the whole entertainment industry.

12:24

What did that mean for the studios?

12:27

I think everyone just said,

12:29

wait a minute, this is like the

12:31

800-pound gorilla.

12:32

This is the juggernaut that can't be stopped. They

12:35

are a few years ahead of where we are in

12:38

sort of pursuing this streaming gold

12:40

rush. And we all thought there

12:42

was a lot more kind of like low hanging

12:45

fruit out there to get like subscribers

12:47

to sign up. It's just going to be easy. Oh

12:49

no, it's going to be hard. If it's hard for Netflix,

12:52

it's going to be hard for the rest of us.

12:56

And was that

12:57

because of pressure from Wall Street?

13:00

Well,

13:01

Wall Street sent the signal to

13:04

all these companies that if you weren't

13:06

taking the Netflix situation seriously,

13:08

you better be, because Netflix

13:11

stock was hit hard when that happened.

13:14

And every other company knew they'd be next

13:16

if they weren't going to shape up and

13:19

figure out a better, more efficient way to run their

13:21

streaming businesses. Wall Street? Yeah.

13:24

Potentially our dark horse suspect.

13:27

Potentially the dark horse, yeah. They're like

13:29

the shadow. And then all of a sudden,

13:32

the camera lens turns to them. And you're like,

13:34

wait a minute. They're the suspect.

13:36

Yeah. I

13:38

mean, I don't want us to like the conclusion

13:41

to be, OK, we figured it out. Like

13:43

Wall Street killed the streaming industry. But

13:46

I do think it's really

13:48

fair to say that investors

13:51

were rewarding one thing for a really

13:53

long time. Just show me how many subscribers

13:55

you can get in streaming. Prophets, schmuffets.

13:58

I don't really care.

13:59

All of a sudden, it all changed, and

14:02

they're like, what? This doesn't make money?

14:04

And all of a sudden, that was the only thing that mattered

14:06

to these companies.

14:08

The result has been a painful transition

14:10

for Hollywood. Entertainment

14:12

companies have laid off thousands of people,

14:15

canceled shows, and pulled back on

14:17

new content.

14:18

Netflix had to make big changes, too, like

14:21

cracking down on password sharing. And

14:24

at the same time that Wall

14:27

Street's putting pressure on the studios,

14:30

talent, Hollywood actors and writers,

14:32

are trying to negotiate new contracts. Yeah.

14:36

So the talent

14:38

is showing up in this environment

14:40

where the companies are under tremendous

14:42

pressure from Wall Street to

14:45

show profits, to show progress. And

14:47

they're basically saying, we need a raise now

14:50

because this whole system isn't working for us.

14:52

And these strikes have

14:55

just sort of

14:56

made it a much more complicated

14:58

situation to navigate. I

15:00

have a question here. It's a little bit of a curveball.

15:03

Is the victim actually the business

15:07

model? I think the business model

15:09

might be the weapon. The

15:12

weapon. Yes. Okay.

15:16

It depends how you look at it. I mean, in

15:18

a weird way, the business model is the weapon,

15:21

and it's also the way out of this, if

15:24

they change it and fix it in some way.

15:27

And how long do they have to fix this

15:30

problem? Well, it depends

15:32

who you ask, but almost everyone agrees that

15:34

if this goes through the fall and into

15:36

the winter, you start seeing real damage

15:38

to some of the key pillars of

15:40

the entertainment business. Broadcast

15:43

television already is pretty

15:45

screwed up for the fall season. I mean, shows

15:48

should be in production now that people

15:50

would want to watch in September. They're not.

15:53

As you get later in the year, big

15:55

movies aren't launched. And

15:58

if you go further out into...

15:59

by the end of the year or early next year if this

16:02

strike is still going on,

16:04

then you start asking yourself, like there are hit

16:06

shows people are really excited about and want

16:08

to see. Like White Lotus. Might

16:10

not come back for a while. Yeah, White Lotus

16:12

might be into 2025 or Euphoria

16:15

might be into 2025.

16:19

So now that we have our

16:22

suspects, we have our

16:24

weapon, we have our stage,

16:27

do we have our answer in

16:29

our Agatha Christie analogy here? Like

16:31

who is to blame?

16:33

I just think it's really hard

16:35

to look at it and not see that this was at

16:37

least a two man job. I mean, it took

16:40

both Netflix and the entertainment companies

16:42

to get us where we are. You could argue

16:44

who's more responsible. Certainly

16:47

I've heard both sides of that,

16:50

but clearly both sides

16:53

wanted to pivot to streaming. Eventually

16:55

they both were pivoting to streaming aggressively

16:58

and change the entire industry

17:00

and its economics in the process in about five

17:02

years. And now are

17:04

realizing, oh, some

17:06

of this is not working

17:08

and there's collateral damage.

17:23

That's all for today, Friday, July

17:25

28th. Additional reporting

17:27

in this episode from Joe Flint, Sarah

17:30

Krause and Jessica Tunkel. The

17:32

journal is a co-production of Gimlet

17:34

and The Wall Street Journal. The show's

17:37

made by Mahar Adoni, Annie

17:39

Baxter, Catherine Brewer, Maria

17:41

Byrne, Pia Godkari, Rachel

17:43

Humphries, Ryan Knudsen, Matt

17:46

Kwang, Jessica Mendoza, Annie

17:48

Minoff, Laura Morris, Enrique

17:51

Perez de la Rosa, Sarah Platt,

17:53

Alan Rodriguez Espinosa, Heather

17:56

Rogers, Jonathan Sanders, Pierce

17:58

Singie, Jeevika Verma. Lisa

18:00

Wang, Catherine Whelan, and

18:02

me, Kate Limebaugh. Our engineers

18:05

are Griffin Tanner, Nathan Singapak, and

18:07

Peter Leonard. Our theme music

18:10

is by So Wylie. Additional music

18:12

this week from Peter Leonard, Bobby

18:14

Lord, Emma Munger, So Wylie,

18:17

and Blue Dot Sessions. Fact

18:19

checking by Nicole Pasulka.

18:30

Thanks for listening. See you Monday.