Video Killed the Radio Star, Content Killed Cinema

Lessons on How to Make [Prof]It In Hollywood

ONCE UPON A TIME . . . Hollywood was analogous with star power and the studio system. It was a time when film directors, producers and actors made their money from the box office. Sorry to report: the nostalgia of the Golden Age has been traded in for a digital future built on streaming and monthly subscriptions.

How will Hollywood compete with the streaming companies? Three words: mergers and acquisitions. In 2009, Comcast bought NBCUniversal (14B). In 2012, Disney bought Marvel (4B). In 2016, AT&T acquired Time Warner (85B) and CBS-Viacom merged. In 2018, Disney bought 21st c. Fox (71B). Last week, Amazon closed a deal with MGM (8B).

In film, there are two things you never have enough of: time, and money. 

Amazon’s Metro-Goldwyn-Mayer.

12 years ago, MGM filed for Chapter 11 bankruptcy and the company’s $4B in debt was leveled in exchange for 99% of equity. If investors indeed envisioned a lucrative future for MGM, it’s unlikely they would have sold. If you can’t beat ‘em, join ‘em. Today, it’s not enough to have a library filled to the brim with 4,000 classic film and 17,000 scripted series — Cue: James Bond, the Addams Family, Rocky. It isn’t enough to license off rights. Above all, what is needed is the free cash to finance and run productions.

Enter scene left: Big Tech in Hollywood. It’s no surprise that Wall Street saw this coming. In terms of access to capital, investors place more faith in tech to generate profitable returns. At a 2016 Vox Code Conference, Jeff Bezos reminded an audience that when Amazon “wins a Golden Globe, it helps sell more shoes.” To tech conglomerates entering into media and entertainment, film studios are just ancillary business revenue when compared to the profit margins of their online retail store.

Supposedly, for Amazon, the appeal of purchasing MGM was not only to develop Prime Video’s catalogue. It was a tactical move — buy, so no one else can. At an annual shareholders meeting, Jeff Bezos hinted that MGM’s IP would be most successful if, or when, “reimagined for the twenty-first century.” I’m imagining a Raging Bull sequel directed by the Safdie Bros. Legally Blonde could be a hit. But… Gone with the Wind? How can you remake one of the most popular films ever made? Not to mention — how can you remake one of the most openly racist films ever made, in a post-Civil Rights Movement era? Some stories just shouldn’t be re-contextualized for the “modern audience.” We can understand history just fine by reading and watching the products of a historic period — not by adapting the source material for younger audiences and maximal profit.

In an essay on Federico Fellini (8½, La Strada) printed for Harper’s Magazine, Martin Scorsese pined about how the method of streaming is “devaluing, demeaning and reducing” the art of cinema to its “lowest common denominator.” He argues that the term ‘content’ is used by two classes: the filmmakers, and the suits. Come to think of it, it’s only ever used in academics — film history professors, perhaps film critics herald the term — “form and content,” they say. Scorsese’s argument is that ’content’ is a word used by executives at media companies who may lack the knowledge or passion about the history and the art of cinema. Under this school of thought, Scorsese said “all moving images” are held as equals —“a cat video, a Super Bowl commercial, a superhero sequel, a series.”

The on-going wave of M&A proposals by media conglomerates, amounting to nearly $183 billion since 2009, could ring in a resurgence of anti-trust regulation by the FTC and FCC.

Vanitas Vanitatum. There’s Nothing New Under the Sun.

The origin story of Hollywood runs parallel to the introduction of antitrust law. In 1921, the newly formed FTC accused Paramount Studios of conspiracy to: (1) monopolize, and (2) to acquire and distribute the best films on the market. This is the 21st c. equivalent of the FTC’s obsession with Big Tech. In the 2020 case, “Investigation of Competition in Digital Markets,” against Facebook, Amazon, Apple and Google, Sen. David Cicilline referred to the companies’ CEOs as the “gatekeepers” of our economy, holding the keys “to enrich themselves while choking off competitors.” The tension between regulators and tech leaders is very reminiscent of the tension between regulators and movie producers in the Golden Age of Hollywood.

◀ Rewind to 1938. ◀

The Hollywood Era was ruled by 8 film studios, all of whom maintained their profits through vertical integration and controlled 95% of films exhibited in the U.S. These included the Majors (Paramount, MGM, Warner Bros., Fox, RKO) and the Minors (Universal, United Artists, Columbia). 

While vertical integration was, and is, expensive to maintain — the returns are lucrative when the industry is booming. In 1948, there were about 90 million moviegoers. While tickets cost only about 36¢ at the time, Hollywood was growing at a rapid pace. That is, until the Divestiture Decree was enacted by the Supreme Court to enforce the separation of production chains from distribution chains to broaden competition and fight against monopolization.

The infamous U.S. vs. Paramount case, 334 U.S. 131, singlehandedly sparked the independence of Hollywood and the inception of celebrity-run independent studios. Paramount was accused of distributing films of “such quality and popularity that they were in great demand,” which hardly seems like a crime. They were forced to divest from exhibition.

The goals of antitrust law are to increase competition, improve quality whilst decreasing price, and improve the condition of the market for consumers. More options are generally viewed as more fair. However, the effects of the Supreme Court’s threshold were felt a decade later. The number of moviegoers in the U.S. dropped by 50%. In order to offset losses, studios would sell their library of films to TV stations and release actors from contracts who would go on to become the new stars of television. Sound familiar? 

▶ Fast-Forward to 2022. ▶

From 2020 to 2022, in the midst of and post-pandemic, annual movie ticket sales grew from 222M to 498M to 671M. This is popcorn kernels when compared to numbers when Hollywood was at its peak. In 1948, 3,352M movie tickets were sold annually.

Alongside Scorsese, dir. Christopher Nolan (The Dark Knight, Inception) expressed some grief about the direction of the film industry. He tells a short story:

One night, “the biggest filmmakers and most important movie stars went to bed thinking they were working for the greatest movie studio.” In the morning, they awoke to “find out they were working for the worst streaming service.”

THE END

of Hollywood

¡Viva La Cinema!