Hollywood strikes are a product of monopoly power, Wall Street sycophancy, and dehumanization
In other words, it's our entire economic decline in a glossy package
Welcome to a Friday edition of Progress Report.
There’s a fair amount of political news to discuss right now, and I’ll have a newsletter with those stories within the next 24 hours. But today I want to talk about what’s happening in Hollywood — and across the country.
It may feel silly to care about a bunch of striking actors, but there are actually 160,000 members of SAG-AFTRA, most of whom work just enough to keep health insurance and earn some money to supplement other part-time jobs. The entertainment industry is also a perfect example of the rot that has set in across our economy, a toxic brew of monopoly power, Wall Street boosterism, and craven executives who have never had to work real jobs.
I’ll be returning to the politics tomorrow, but let me know if you like this kind of long-form post!
Leaders of SAG-AFTRA, the union that represents television and film actors, voted to send its 160,000 members out on strike on Thursday following a breakdown in contract negotiations with the AMPTP, the trade group that represents Hollywood studios and producers. With the Writers Guild of America still on strike more than two months since its 11,000 members put their pencils down, it marked the first time that actors and writers have shared a picket line since 1960.
Incidentally, Ronald Reagan was the president of the Screen Actors Guild back then, a position he used to blacklist every alleged communist from working in Hollywood.
That piece of trivia actually serves as a decent point of comparison. It’s grimly ironic that President Reagan would later usher in the era of mega-corporations and vulture capitalism, because Bedtime for Bonzo star Reagan led SAG in a successful fight to obtain health insurance, pensions, and residuals. All three of those things, especially residuals, are at stake here.
Entertainment industry revenues were up last year, and most studios resumed profitability after the pandemic crash, so the suggestion that they can’t fairly compensate writers and actors is patently false. That being said, the conflict happening right now between studios and talent isn’t only a result of greed and avarice, solvable by resetting the balance of power through a fresh financial formula.
The obscene pay imbalance between megamedia executives and the average actor and writer is immoral, but does not exist in a vacuum. I spent a decade as an entertainment reporter, watching and chronicling the industry, and see this moment as the rotten outcome of haphazard transformations, dubious bets, and global factors — many of which are wreaking havoc on workers and middle-class Americans in all sectors of the US economy.
To understand this rolling catastrophe is to understand so much about this country’s power structure, perverse incentives, and what can be done about it — not just for Hollywood unions, but Americans everywhere.
The Hostile Takeovers
For all the glamor associated with its biggest stars, Hollywood was at one point a sleepy industry that tended to exist on small profit margins driven by a few big hits a year. There was a factory element to it — studio soundstages and backlots were versatile and reduced variables — and everyone involved in production tended to make decent money thanks to long-standing contracts worked out by guilds that had shut the place down in the 1930s and ‘40s.
After the studio system collapsed and young auteurs like Robert Altman, Hal Ashby, and Francis Coppola built the creative pandora of New Hollywood, the studios, many under new ownership, began hiring young Wall Street types to wrest back control. As has been the case with every sector of the American economy, these ruthless executives and raiders seized hold of the industry and have never let go, reshaping it through brute force into a collection of monopolistic corporate entities that have slowly expanded and squeezed out independent businesses and fair competition.
By the ‘80s, movies were often seen as profit centers, starting points for theme park rides, Happy Meal toy tie-ins, sequels, and franchises. The Indiana Jones movies and then Tim Burton’s Batman (1989) blew it all wide open. It was at this point that brands began to usurp individuals and studios started to become comfortable swapping out actors from movie to movie so long as the cape, cowl, and logo remained the same. It took a few more decades to reach its zenith, or what we now bemoan as the Death of the Movie Star.
By the early-90s, globalization had opened up new markets, and as the world “liberalized” and made entertainment more accessible, the demand from places like the former USSR (and a few decades later, China and the Middle East) skyrocketed. At the same time, after several decades of new mini studios driving innovation and fresh competition in the business, the majors began to be purchased by major media conglomerates (which continue to trade and consolidate them).
It soon was no longer enough to be profitable; investors and bank analysts demanded ever-expanding quarterly margins, lest they send the parent company’s stock price tumbling. The quarterly demands are largely incongruent with how the entertainment industry necessarily functions. Movies take years to make and require significant upfront investments, which inherently skews bottom-line numbers. It’s also never guaranteed that the productions will ever recoup the investments. Historically, most don’t, but they’ve collectively proven worth the gamble.
Hollywood moves quickly to embrace and maximize the profits of trends and phenomena, even when they have obvious expiration dates. DVDs brought boom times in the early 2000s, as studios made exponential sums on putting both new releases and back catalogs on home video. (The profit share on these residuals was at the center of a tense 2005 contract fight, though in far less dire circumstances than today. More on that in a minute…)
As the DVD-driven passive income dropped, studios were eager to make up for it, so they licensed their libraries to Netflix, which paid what would become increasingly large fees to stream popular programs.
Streaming and Profit as Moral Value
Apologies in advance if you work in this field, but I’ve come to believe that Wall Street analysts and the stock-watching business reporters that rely on them have had a uniquely toxic influence on both our national economy and culture.
Slick MBAs and detached quants, molded by admiration for corporate brutes like Jack Welch and Carl Icahn, have turned earnings reports into moral referenda, rebranded mass layoffs into virtuous “cost-cutting,” and deified the executives who can dispose of as many workers as possible.
Because Hollywood studios are now owned by major conglomerates (Disney is its own monopoly), they are hardly immune from the autocratic fanaticism of Wall Street analysts generally and the journalists who parrot their demands and warnings. Once Netflix transformed itself into a behemoth, these analysts — who work for banks and funds that often own a piece of the companies they are trying to influence! — decided that every studio had to have its own streaming service.
They howled about it for years, manipulating Disney’s stock price as they berated the company’s leadership every quarter into building a bespoke streaming service. They cast skeptical eyes on any growth that didn’t include building what would become full-blown streaming platforms. To not have one was akin to committing a crime, and studio executives were forced to testify every quarter as to why they were failing. And of course, it wound up being the workers far below the executive level that suffered.
Disney faced immense pressure to launch Disney+ and maximize its back catalog, which became important to the media for the first time once analysts and investors made clear it was a priority. Reporters took their cues from these glorified pundits and billionaires, turning a company’s bottom line into the only thing that mattered in their stories and narratives. The pressure ramped up, necessitating rushed products pitched in giant presentations that were covered like international peace negotiations for a war driven by media coverage, with no regard for the damage caused along the way.
The consequences were felt before the company launched Disney+. Buying Fox for its catalog and share of Hulu was a $70 billion expenditure thay was paid for by the thousands of people that were made redundant. It was great for the stock price, though.
NBC had to plead for relevance in 2018, then do a song and dance to present Peacock, its largely unsuccessful streaming service, in 2019. I was at NBCUniversal at the time, doing editorial work for a cable network and its digital arm. I saw this process happen up close.
The entire cable business, while previously roiled by earlier media company horse trading, was still healthy, profitable, and producing shows that provided good salaries for people in all jobs across the industry. But the employees — everyone from folks on the inside to actors, writers, and craftspeople — that created those profits were nonetheless juggled around in massive reorganizations so that the company could go into extreme debt to build Peacock, which was mocked by the same media that drove its creation in the first place. Some version of this happened at every other big network, as well.
Every quarter became about subscription numbers, which were naturally stagnant given the sheer number of streaming services that were piling up and turning off consumers. Studios committed to losing billions upon billions to build these money pits — all for analysts to last winter decide that they actually were wasteful and poor ideas in the first place.
Stocks plummeted, spending dried up.
They decided to put their faith in a technology that’s never generated a major profit and break a business model that had long delivered major profits shared by hundreds of thousands of workers, creatives, and adjacent industries across Los Angeles and other cities with production across the country. The trajectory may not have been on the upward slope, but in using their bully pulpit to demand the new and fresh, they’ve put an anchor around a business that still makes money hand over fist.
Tens of thousands of people have lost their jobs in recent years due to the debt that these executives took on, often at the behest of analysts and business journalists. Disney this year alone has announced layoffs of 7000 workers, not because the business isn’t profitable, but because activist investors, who get disproportionate coverage, want cost cuts.
The same thing happened with Uber, delivery work, health care, and so many other fields. Cost-cutting is the primal goal, and wages and other expenditures on personnel seem to be the priority. Which brings us to the crux of the problem for both writers and actors: Pay and residuals.
In the traditional model, actors and writers on TV shows would be on season-long contracts that paid them either per episode and/or a salary for the eight months it took to produce around 22 episodes per season. These would be solid payments on their own, but the real money came in syndication.
Both local and cable TV networks would license gobs of TV episodes and movies to air when they were needed to fill time on the schedule, which tended to be most of the time. Actors with one hit show could rely on residuals for a solid portion of their income (or, for stars of big shows like Seinfeld or Friends, an enormous monthly check that financed a lavish lifestyle).
For actors and writers fortunate enough to still have jobs on a cable or network TV show, the upfront paychecks still look good, but streaming residuals are far less than what they’re used to in syndication. The market has consolidated and pushed down the rate that producers can get for their old shows; instead of hundreds of cable channels and local networks across the country, there are maybe five or six streamers that buy these programs. What’s more, many of those streamers are owned by networks, even further minimizing the payday available to the talent.
It’s even worse for those who work on direct-to-streaming programs. Fewer episodes, no ad revenue, and no syndication have made it increasingly hard to scrape by, much less live a middle-class life. To ensure that residuals are minimized, streamers owned by networks are now even pulling shows from their platforms altogether.
This is undoubtedly a product of the corporate profit motive, but it’s also the result of outside forces breaking the business and the continued devaluing of individual contributors.
Globalization and IP Domination
In the mid-2010s, virtually every major studio movie outside of the awards bait was being pitched toward China, which was building movie theaters at record rates. I covered this quite often back then and wrote stories about the compromises being made to satisfy censors and quick cameos of local stars to drum up interest.
When the stars aligned for big opening weekends in China for movies such as the various Fast and Furious flicks and Iron Man 3, the industry became even further committed to franchises and intellectual property over individual iconography.
Marvel, for example, sells superheroes and not movie stars. The Disney-owned Marvel Studios finds up-and-coming actors to play the protagonists in its comic book adaptations and pays them far more for sequels than first flicks. The actors may become well-known names after a few movies, but then their contracts run out and they’re replaced by someone else who wants to play a wise-cracking hero. When an actor plays a character who wears a mask and is largely CGI is then dubbed into other languages, does it really matter who the actor is?
I worked at NBCUniversal when the Minions movie was released, and it quickly became clear that those swarming yellow lunatics were the studio’s ideal movie star: they had zero spoken lines, could not become mired in controversy, were endlessly pliable, and cost the studio virtually nothing.
Not every new studio movie is intended to launch a new IP franchise, but nearly all of them, save for those Oscar films, build in the possibility of sequels and spin-offs. While acknowledging the fact that marketing helps to shape consumer choice, audiences have still consistently shown a preference for the spectacle and franchise. They still pour into movie theaters (though with more discernment this year) and entire industries have been built around covering these movies. Studios are rewarded for these movies, and while blaming consumers for a broader shift in contracts, they do further encourage this approach to programming and negotiating.
Ultimately, the strikes are about profit shares and respect, both of which are increasingly hard to squeeze out in an era of corporate consolidation. The executives could and should give more in negotiations, and I will never defend a single millionaire CEO over a union, but it’s not as simple as an Amazon or UPS strike.
The industry has been hijacked, crashed, and manipulated by world events. The real problem that ails the entertainment industry, and so much of the US economy, is the fact that it is controlled by these mega-corporations that treat studios as piggy banks and unsettle a careful ecosystem based on the biases and impulses of self-interested executives and grubby, self-indulgent “experts” with no concept of what it’s like to work for a living.
Wait, Before You Leave!
Progress Report has raised over $7 million dollars for progressive candidates and causes, breaks national stories about corrupt politicians, and delivers incisive analysis, and goes deep into the grassroots.
None of the money we’ve raised for candidates and causes goes to producing this newsletter or all of the related projects we put out. In fact, it costs me money to do this. So, I need your help.
For just $5 a month, you can buy a premium subscription that includes:
Premium member-only newsletters with original reporting
Financing new projects and paying new reporters
Access to upcoming chats and live notes
You can also make a one-time donation to Progress Report’s GoFundMe campaign — doing so will earn you a shout-out in the next weekend edition of the newsletter!
Excellent summary of the issue. The David Simon interview is really enlightening.