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Photo: Warner Bros Discovery
Although economists disagree on whether or not we are in a recession, increasing interest rates and inflation have dramatically affected media companies. Since these companies are classified as tech stocks on the stock market, they have suffered the most from the Federal Reserve’s latest interest rate hike.
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The Federal Reserve’s goal is to slow economic growth enough to tame inflation, but not so much that economies slip into a recession. Wall Street is concerned that this government intervention was mis-timed and may have the economy veer off into a recession anyway. In any case, media companies, along with tech companies, have suffered the brunt of this latest development.
The Result – Layoffs
Companies starting to consolidate are looking to maximize efficiency and reduce overhead expenditures. Employees and possibly entire departments that are not considered essential will be terminated, and duties will be reassigned among the remaining employees to increase efficiency. Additionally, tighter budgets will be set for current and future projects.
Netflix and HBO alone have eliminated over 200 positions in the last few months. CNN has abandoned its streaming service venture, while Paramount is discussing shutting down all stand-alone services and transferring premium content to Paramount Plus. HBO Max and other studios have also asked for 20 to 30% reductions in tv series budgets and will not approve any other projects above a certain amount. Disney will also be reducing their content spending by 10%. Consequently, film and television production have aggregately decreased by almost 25% in Los Angeles county.
Beyond the financial restrictions that have been put in place, creativity and originality will also see an indirect limitation from now until the foreseeable future. Studios are unwilling to approve projects unless they are based on familiar material. Media agents are now hesitant to offer completed scripts to studios and instead provide basic story outlines for executives to consider. Currently, many proposals must go through the highest level of executives before they can be approved or denied. Some are never even read. Nowadays, a great proposal can sit on an executive’s desk in limbo. Chris Fenton, an executive producer of lower-budget films, recently said, “This fear in town it’s an all-or-nothing game… either you’re
involved in the super-premium category, or you’re nervous.” This anxiety over the industry’s situation has changed the material output to an influx of sequels and remakes and the cancellation of many original projects. This isn’t necessarily bad, but it is generally accepted that making a great sequel or remake is very challenging. Executives may think reverting to this method is the safest way to weather this storm, but it may just be what further cripples them. Fortune favors the bold.
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Generally, employees with higher salaries are targeted for termination during consolidation. More responsibilities are then delegated to other employees with lower wages. This means that employees will have to work harder and longer. Eventually, there will be a need to transfer some of the menial work. This is where interns come in. As the added workload proves difficult, companies will likely begin to offer internships, whether unpaid or at entry-level wages. This is the upside for people struggling to break into the industry. Those willing to dedicate their time and effort through an internship will gain valuable experience and may find greater opportunities once the industry stabilizes.
As for the companies, this may serve as a valuable lesson on what works and what doesn’t. Although our economy’s issues don’t fall squarely on their shoulders, had these media companies run a tighter ship, some of them may not have had to take such drastic measures for consolidation.
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A few years ago, Netflix made several high-priced deals with celebrities and successful producers like Spike Lee and Shonda Rhimes to create content for their service. There was a time when Netflix was flooded with Netflix originals on the home page. Only a handful of these shows finished the series organically or are still on today. This might make Netflix realize that sometimes quality trumps quantity and that big names don’t guarantee big profits. This approach by Netflix seems to have been an attempt to take the easy way out of creating their own original content to supplement their streaming profits. Perhaps they will benefit greatly during this time by being more diligent about where their time and resources are going.
Another major media company has erred greatly by not already taking action on a potentially lucrative venture. Warner Bros. released ‘Justice League’ in 2017. Zack Snyder was replaced as director during post-production after enduring a personal tragedy. Joss Whedon stepped in and finished the film after several reshoots. The film did well enough at the box office, but it did not measure up to critics and big fans of the DC universe. After three years of an online campaign demanding that Warner Bros. release Zack Snyder’s version of the movie, it was released on HBO Max in May 2021.
Despite a boost in HBO Max subscribers, a significantly better critical response, and tons of positive publicity in the months leading to the release, Warner Bros decided Snyder might not be the right person to continue the DC cinematic universe. Snyder achieving this success without a proper theatrical release speaks volumes of his talent and reputation among his fans. Although there is yet no confirmation on whether or not he will return for future projects, the decision not to keep him onboard would be insane. With the appropriate support from Warner, backed by a fanbase loyal to Snyder’s vision, a massive return on investment from a sequel could be made. Whether this hesitation comes from internal politics or complications from the Discovery merger, one thing is clear; Warner Bros Discovery could be throwing away an amazing opportunity during a tough time. They could register a big win instead if they play their cards right.
By Alvaro Devora
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Alvaro Devora is an aspiring writer/director whose life revolves around the creation and appreciation of literary and cinematic content. Though still new to the industry, Alvaro is also passionate about discussing important and substantial topics in Film and TV, and has found the perfect place to do so at The Hollywood Insider. Being an anti-gossip media network and taking pride in meaningful content, The Hollywood Insider is a company that Alvaro can take pride in writing for and continue nurturing his passion.