Monday, January 30, 2017
Hollywood Facing Same Future As Newspapers And Music Industry. Maybe This Will Change The Way They Think.
AS WE KNOW
IT IS ALREADY
With theater attendance at a two-decade low and profits dwindling, the kind of disruption that hit music, publishing, and other industries is already reshaping the entertainment business. From A.I. Aaron Sorkin to C.G.I. actors to algorithmic editing, Nick Bilton investigates what lies ahead.
A few months ago, the vision of Hollywood’s economic future
came into terrifyingly full and rare clarity. I was standing on
the set of a relatively small production, in Burbank, just north
of Los Angeles, talking to a screenwriter about how inefficient
the film-and-TV business appeared to have become. Before us,
after all, stood some 200 members of the crew, who were
milling about in various capacities, checking on lighting or
setting up tents, but mainly futzing with their smartphones,
passing time, or nibbling on snacks from the craft-service
tents. When I commented to the screenwriter that such a
scene might give a Silicon Valley venture capitalist a stroke
on account of the apparent unused labor and excessive cost
involved in staging such a production—which itself was
statistically uncertain of success—he merely laughed and
rolled his eyes. “You have no idea,” he told me.
After a brief pause, he relayed a recent anecdote, from the set
of a network show, that was even more terrifying: The
production was shooting a scene in the foyer of a law firm,
which the lead rushed into from the rain to utter some line
that this screenwriter had composed. After an early take,
the director yelled “Cut,” and this screenwriter, as is customary,
ambled off to the side with the actor to offer a comment on
his delivery. As they stood there chatting, the screenwriter
noticed that a tiny droplet of rain remained on the actor’s
shoulder. Politely, as they spoke, he brushed it off. Then,
seemingly out of nowhere, an employee from the production’s
wardrobe department rushed over to berate him. “That is not your job,” she scolded. “That is my job.”
The screenwriter was stunned. But he had also worked in
Hollywood long enough to understand what she was really
saying: quite literally, wiping rain off an actor’s wardrobe was
her job—a job that was well paid and protected by a union.
And as with the other couple of hundred people on set, only
she could perform it.
This raindrop moment, and the countless similar incidents
that I’ve observed on sets or heard about from people I’ve
met in the industry, may seem harmless and ridiculous
enough on its face. But it reinforces an eventuality that seems
both increasingly obvious and uncomfortable—one that might
occur to you every time you stream Fringe or watch a former
ingénue try to re-invent herself as a social-media icon or
athleisure-wear founder: Hollywood, as we once knew it, is
In the mid-90s, the first time I downloaded an MP3, I realized
that the music industry was in grave trouble. People who
were my age (I wasn’t old enough to legally drink yet) didn’t
want to spend $20 on a whole compact disc when all we
coveted was a single song on the album. Moreover, we
wanted our music immediately: we preferred to download it
(illegally) from Napster or eventually (legally) from iTunes
without the hassle of finding the nearest Sam Goody. It turned
out that this proclivity for efficiency—customizing your
music and facilitating the point of sale—was far from a
generational instinct. It explains why the music industry
is roughly half the size it was one decade ago.
Video: How Marvel Studios Achieves Cinematic Greatness
These preferences weren’t confined to music, either. I also
felt the raindrop moment firsthand when I began working
at The New York Times, in the early 2000s. Back then, the
newspaper’s Web site was treated like a vagrant, banished
to a separate building blocks away from the paper’s newsroom
on West 43rd Street. Up-and-coming blogs—Gizmodo,
Instapundit, and Daily Kos, which were setting the stage for
bigger and more advanced entities, such as Business Insider
and BuzzFeed—were simultaneously springing up across the
country. Yet they were largely ignored by the Times as well as
by editors and publishers at other news outlets. More often
than not, tech-related advances—including e-readers and free
online blogging platforms, such as WordPress and Tumblr—
were laughed at as drivel by the entire industry, just as
Napster had been years earlier.
Of course, the same logic that had decimated music would
undermine print publishing: readers didn’t want to travel
to a newsstand to buy a whole newspaper when they were
interested only in one story or two. And, in so many cases,
they really didn’t care all that much whose byline was at the
top of the piece. Subsequently, newspaper advertising revenues
fell from $67 billion in 2000 to $19.9 billion in 2014.
Meanwhile, the same pummeling occurred in the book-
publishing world. Many consumers didn’t want hardcover
books for $25 when digital versions were available for
$9.99. An algorithm generally provided better suggestions
than an actual in-store clerk. And consumers never had
to leave home to get the book they wanted. Amazon, knowing
this, eviscerated the business. While print sales have finally
leveled out (largely through a reliance on science fiction and
fantasy), the industry has seen sales fall precipitously over
the past decade.
“IN MY MIND, HOLLYWOOD IS DYING,” MIKE MORITZ TOLD ME.
Hollywood, these days, seems
remarkably poised for a similar
disruption. Its audiences increasingly
prefer on-demand content, its
labor is costly, and margins are
shrinking. Yet when I ask people
in Hollywood if they fear such a fate,
their response is generally one of
defiance. Film executives are smart and nimble, but many also assert that what they do is so
specialized that it can’t be compared to the sea changes in
other disrupted media. “We’re different,” one producer
recently told me. “No one can do what we do.”
That response, it’s worth recalling, is what many editors and
record producers once said. And the numbers reinforce the
logic. Movie-theater attendance is down to a 19-year low,
with revenues hovering slightly above $10 billion—or about
what Amazon’s, Facebook’s, or Apple’s stock might move
in a single day. DreamWorks Animation was sold to Comcast
for a relatively meager $3.8 billion. Paramount was recently
valued at about $10 billion, approximately the same price
as when Sumner Redstone acquired it, more than 20 years
ago, in a bidding war against Barry Diller. Between 2007
and 2011, overall profits for the big-five movie studios—
Twentieth Century Fox, Warner Bros., Paramount Pictures,
Universal Pictures, and Disney—fell by 40 percent. Studios
now account for less than 10 percent of their parent
companies’ profits. By 2020, according to some forecasts,
that share will fall to around 5 percent. (Disney, partly
owing to Star Wars and its other successful franchises,
is likely to be a notable outlier.)
Show business, in many ways, has entered a vicious cycle set
off by larger economic forces. Some 70 percent of box office
comes from abroad, which means that studios must traffic in
the sort of blow-’em-up action films and comic-book thrillers
that translate easily enough to Mandarin. Or in reboots and
sequels that rely on existing intellectual property. But even
that formula has dried up. Chinese firms, including Dalian
Wanda, are rabidly acquiring companies such as Legendary
Entertainment, AMC, and Carmike Cinemas, a smaller
theater chain, with an apparent goal of learning how
Hollywood does what it does so China can do it better.
As The Wall Street Journal reported last summer, more
sequels bombed than did not. Fortune called it “a summer
of big flops.” MGM’s Ben-Hur, which was produced by
Mark Burnett, cost $100 million and yet grossed only $11 million in its opening weekend.
But the real threat isn’t China. It’s Silicon Valley. Hollywood,
in its over-reliance on franchises, has ceded the vast majority
of the more stimulating content to premium networks and
over-the-top services such as HBO and Showtime, and,
increasingly, digital-native platforms such as Netflix and
Amazon. These companies also have access to analytics
tools that Hollywood could never fathom, and an allergy
to its inefficiency. Few have seen the change as closely as
Diller himself, who went from running Paramount and
Fox to building his own tech empire, IAC. “I don’t know
why anyone would want a movie company today,” Diller
said at Vanity Fair’s New Establishment Summit in October.
“They don’t make movies; they make hats and whistles.”
(Half of the people in the audience, likely representing the
tech industry, laughed at this quip; the other half, from
Hollywood, cringed.) When I spoke to Mike Moritz, the
iconic venture capitalist, backstage at the event, he
noted that a nominal investment in a somewhat
successful tech company could generate more money
than Hollywood’s top-grossing movies. “In my mind,”
he said, “Hollywood is dying.”
II. HERE COMES
Part of the problem, it seems, is that Hollywood still views
its interlopers from the north as rivals. In reality, though,
Silicon Valley has already won. It’s just that Hollywood
hasn’t quite figured it out yet.
When Netflix started creating its own content, in 2013, it
shook the industry. The scariest part for entertainment
executives wasn’t simply that Netflix was shooting and
bankrolling TV and film projects, essentially rendering
irrelevant the line between the two. (Indeed, what’s a
movie without a theater? Or a show that comes available
in a set of a dozen episodes?) The real threat was that
Netflix was doing it all with the power of computing. Soon
after House of Cards’ remarkable debut, the late David Carr
presciently noted in the Times, “The spooky part . . . ?
Executives at the company knew it would be a hit befor
e anyone shouted ‘action.’ Big bets are now being informed
by Big Data.”
Carr’s point underscores a larger, more significant trend.
Netflix is competing not so much with the established
Hollywood infrastructure as with its real nemeses: Facebook,
Apple, Google (the parent company of YouTube), and others.
There was a time not long ago when technology companies
appeared to stay in their lanes, so to speak: Apple made
computers; Google engineered search; Microsoft focused
on office software. It was all genial enough that the C.E.O.
of one tech giant could sit on the board of another, as
Google’s Eric Schmidt did at Apple.
These days, however, all the major tech companies are
competing viciously for the same thing: your attention.
Four years after the debut of House of Cards, Netflix,
which earned an astounding 54 Emmy nominations in
2016, is spending $6 billion a year on original content.
Amazon isn’t far behind. Apple, Facebook, Twitter, and
Snapchat are all experimenting with original content of
their own. Microsoft owns one of the most profitable
products in your living room, the Xbox, a gaming
platform that is also a hub for TV, film, and social media.
As The Hollywood Reporter noted this year, traditional
TV executives are petrified that Netflix and its ilk will
continue to pour money into original shows and films
and continue to lap up the small puddle of creative talent
in the industry. In July, at a meeting of the Television
Critics Association in Beverly Hills, FX Networks’ president,
John Landgraf, said, “I think it would be bad for
storytellers in general if one company was able to seize a
40, 50, 60 percent share in storytelling.”
It would be wrong, however, to view this trend as an
apocalypse. This is only the beginning of the disruption.
So far, Netflix has merely managed to get DVDs to people
more quickly (via streaming), disrupt the business plan
of the traditional once-a-week, ad-supported television
show, and help solidify the verb “binge” in today’s culture.
The laborious and inefficient way shows and films are
still made has not been significantly altered. That set I
visited in Los Angeles with its 200 workers wasn’t for an
NBC or FX show; it was actually a production for a
streaming service. The same waste and bloated budgets
exist across the entire industry. To put the atrophy into
perspective, a single episode of a typically modest television
show can cost $3 million to shoot and produce. By comparison,
a typical start-up in Silicon Valley will raise that much to run
a team of engineers and servers for two years.
But all those TV workers feel as if they are in safe harbor, given
that the production side of a project is protected by the unions—
there’s the P.G.A., D.G.A., W.G.A., SAG-AFTRA, M.P.E.G., and
I.C.G., to name just a few. These unions, however, are actually
unlikely to pose a significant, or lasting, protection. Newspaper
guilds have been steadily vanquished in the past decade. They
may have prevented people from losing jobs immediately, but
in the end they have been complicit in big buyouts that have
shrunk the newspaper industry’s workforce by 56 percent
since 2000. Moreover, start-ups see entrenched government
regulation, and inert unions, not so much as impediments
but as one more thing to disrupt. Uber and Lyft have largely
dominated unions and regulators as they have spread around
the world. Unions did not impede Airbnb from growing across
American cities. (The company has 2.3 million listings in
34,000 cities.) Google, Facebook, ad-tech giants, and countless
others have all but stampeded demands for increased privacy
online from groups such as the A.C.L.U. And that’s just to cite
the most obvious examples. In the 1950s, the movies were the
third-largest retail business in the U.S., surpassed only by
grocery stores and car dealerships. Look what Silicon Valley
has already done to the other two sectors.
At the heart of the disruption is the most profound element
of Hollywood: the theater. Just as customers now generally
eschew albums for singles (or streaming services such as
Spotify), and hardcovers for more economical e-books, we
will eventually stop going to the movies, which are already
expensive, limiting, and inconvenient. Instead the movies
will come to us. If the industry continues the process
of “windowing” (in which studios wait weeks, or sometimes
months, to release a film that has already been in the theaters
onto other platforms), people will continue to steal a movie
they want to see, or they’ll simply stop watching them
altogether. (In 2015, the top films in theaters were illegally
downloaded more than half a billion times.) Meanwhile,
consumers will continue to opt for other forms of
entertainment, such as YouTube, Netflix, and video games, or turn to Instagram or Facebook.
Video: Why Barry Diller Isn't Buying Movie Studios
And it’s only a matter of time—perhaps a couple of years—before movies will be streamed on social-media sites. For Facebook, it’s the natural evolution. The company, which has a staggering 1.8 billion monthly active users, literally a quarter of the planet, is eventually going to run out of new people it can add to the service. Perhaps the best way to continue to entice Wall Street investors to buoy the stock—Facebook is currently the world’s seventh-largest company by market valuation—will be to keep eyeballs glued to the platform for longer periods of time. What better way to do that than a two-hour film?
This might begin with Facebook’s V.R. experience. You slip on a pair of Oculus Rift glasses and sit in a virtual movie theater with your friends, who are gathered from all around the world. Facebook could even plop an advertisement next to the film, rather than make users pay for it. When I asked an executive at the company why it has not happened yet, I was told, “Eventually it will.”
III. A.I. AARON SORKIN
The speed with which technologies can change an industry today is truly staggering. Uber, which is eight years old, is worth more than 80 percent of the companies on the Fortune 500 list. When Silicon Valley goes after a new industry, it does so with a punch to the gut.
Hollywood executives may invoke their unique skills, but engineers are unlikely to see things quite that way. We generally assume that artificial intelligence poses a risk to lower-skilled jobs, such as trucking or driving cabs. But the reality is that the creative class will not be unharmed by software and artificial intelligence. Researchers at M.I.T.’s Computer Science and Artificial Intelligence Laboratory are looking at ways to teach computers how to corral information so as to perceive occurrences before they even happen. At present, this application anticipates events that will move markets, or monitors security cameras to help emergency responders before something tragic occurs.
But there are other applications for these kinds of technologies, too. If you could give a computer all the best scripts ever written, it would eventually be able to write one that might come close to replicating an Aaron Sorkin screenplay. In such a scenario, it’s unlikely that an algorithm would be able to write the next Social Network, but the end result would likely compete with the mediocre, and even quite good, fare that still populates many screens each holiday season. The form of automation would certainly have a massive impact on editors, who laboriously slice and dice hundreds of hours of footage to create the best “cut” of a film or TV show. What if A.I. could do that by analyzing hundreds of thousands of hours of award-winning footage? An A.I. bot could create 50 different cuts of a film and stream them to consumers, analyzing where viewers grow bored or excited, and change the edits in real time, almost like A/B testing two versions of a Web page to see which one performs better.
Actors, in many ways, have been disrupted for years—from the reliance on costumed superheroes to the rise of C.G.I. filmmaking. Many agents whom I’ve spoken with already seem to know this and have moved their portfolios away from Hollywood to include, among others, clients from professional sports. There is a reason we see so many once promising actors, from Jessica Alba to Kate Hudson to Jessica Biel to the Mowry sisters, looking to re-invent themselves in new careers during their 30s and 40s, once their prime. The future augurs less of a need for actors other than, despite Donald Trump’s puerile objections, the Meryl Streeps of the world.
Kim Libreri, who spent years in the film industry working on special effects for films such as The Matrix and Star Wars, predicts that by 2022 graphics will be so advanced that they will be “indistinguishable from reality.” In some respects, that is already on the verge of happening. If you watched Rogue One, you will have noticed that Peter Cushing appeared as one of the main actors in the film, which was shot last year in London. Cushing, who died in 1994, was (mostly) rendered in C.G.I. The same was true for Princess Leia, played by the late Carrie Fisher, who has a cameo at the end. The C.G.I.-enhanced version of herself hasn’t aged a day since 1977. “While stars used to be able to make a movie, now they can hurt it,” one Hollywood producer lamented to me. His outlook resembled Moritz’s: “The movie star, like everything else in Hollywood, is dying.”
IV. THE AUDIENCE WINS
In all of these instances of technological disruption—A.I., C.G.I. actors, algorithmic editors, etc.—there will be the exceptions. Like everything else involving money and creativity, there will indeed be a top category—those who have great, new, innovative ideas, and who stand above everyone else—that is truly irreplaceable. (Indeed, this has proved to be the case in music, journalism, and publishing.) There will be great screenwriters and even great actors. The real winners, however, are the consumers. We won’t have to pay $50 to go to the movies on a date night, and we’ll be able to watch what we want to watch, when we want, and, most important, where we want.
And while Hollywood could take control of its fate, it’s very difficult for mature businesses—ones that have operated in similar ways for decades and where the top players have entrenched interests—to embrace change from within. Instead, one can imagine the future looking something like this: You come home (in a driverless car) and say aloud to Alexa or Siri or some A.I. assistant that doesn’t exist yet, “I want to watch a comedy with two female actors as the leads.” Alexa responds, “O.K., but you have to be at dinner at eight P.M. Should I make the movie one hour long?” “Sure, that sounds good.” Then you’ll sit down to watch on a television that resembles digital wallpaper. (Samsung is currently working on flexible displays that will roll up like paper and could encompass an entire room.) And you might, through the glory of A.I., be able to watch with your spouse, who is halfway around the world on a business trip.
There are other, more dystopian theories, which predict that film and video games will merge, and we will become actors in a movie, reading lines or being told to “look out!” as an exploding car comes hurtling in our direction, not too dissimilar from Mildred Montag’s evening rituals in Fahrenheit 451. When we finally get there, you can be sure of two things. The bad news is that many of the people on the set of a standard Hollywood production won’t have a job anymore. The good news, however, is that we’ll never be bored again.