The Future of Entertainment, Part 1: Is Hollywood's Business Model Broken?
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this episode of Plain English, Derek Thompson interviews Wall Street Journal entertainment reporter Ben Fritz about the catastrophic decline of Hollywood's film and TV industry. (04:00) The discussion reveals that the entertainment industry has experienced a devastating 40% decline across multiple metrics since 2019 - from movie ticket sales to employment in LA County's motion picture industry. (11:33) Fritz explains how the "golden age" of the 2010s, characterized by franchise blockbusters and streaming boom fueled by low interest rates and growth-focused investors, came crashing down due to COVID, inflation, rising interest rates, and the 2023 writers' strike.
- Main Theme: The entertainment industry's transition from an unsustainable growth model to a profit-focused approach has created massive disruption, potentially leading to either creative renaissance or further decline.
Speakers
Derek Thompson
Host of Plain English podcast and staff writer at The Atlantic, specializing in economics, technology, and business trends. Thompson is known for his analysis of consumer behavior and industry disruption across various sectors.
Ben Fritz
Entertainment industry reporter at The Wall Street Journal who covers Hollywood, streaming services, and the business of film and television. Fritz has become a leading voice in analyzing the economic transformation of the entertainment industry and its impact on Los Angeles.
Key Takeaways
The "40% Rule" Reveals Industry-Wide Catastrophe
The entertainment industry has experienced a uniform 40% decline across virtually every metric since 2019. (04:00) Americans bought 40% fewer movie tickets in 2024 compared to 2019, employment in LA County's motion picture industry dropped by 40%, and the number of mid-budget TV shows declined by 40% in the last three years. This isn't just a correction - it represents a fundamental reshaping of the industry. For professionals, this demonstrates how quickly entire sectors can be disrupted when multiple economic forces converge simultaneously.
The Streaming Bubble Was Always Unsustainable
The peak TV era of the 2010s was artificially sustained by low interest rates and growth-obsessed investors who prioritized subscriber acquisition over profitability. (10:08) Netflix and other streamers were essentially subsidized by public markets to produce content at a loss, similar to how Uber rides were once heavily subsidized. When Netflix's subscriber growth slowed in 2022, Wall Street immediately demanded profitability, forcing a dramatic reduction in content production. Understanding this helps professionals recognize when business models are being artificially sustained versus naturally profitable.
Creative Renaissance Often Emerges from Economic Crisis
Hollywood's most creative periods, like the 1970s renaissance that produced directors like Spielberg, Lucas, and Coppola, occurred when traditional formulas stopped working and studios gave young filmmakers more creative freedom. (23:57) Fritz suggests the current crisis could lead to another golden age of filmmaking as franchise fatigue forces studios to take creative risks. For ambitious professionals, this illustrates how industry disruption creates opportunities for innovative approaches and fresh talent to emerge.
International Markets Can't Be Relied Upon Forever
The 2010s franchise model was built on predictable international box office returns, particularly from China and Russia, which have now largely disappeared due to geopolitical tensions and improved local film industries. (20:53) This forced Hollywood to refocus on American audiences, potentially leading to more sophisticated storytelling versus the "explosion-based" international content of the franchise era. Professionals should recognize that business strategies dependent on external factors beyond their control carry inherent risks.
Artificial Intelligence Will Restructure, Not Eliminate, Creative Work
AI tools like Sora will dramatically reduce production costs while potentially eliminating many apprenticeship roles in visual effects, animation, and assistant positions. (36:00) However, this could democratize filmmaking by lowering barriers to entry - a $100 million movie might be producible for $60 million, and a $20 million movie for $2 million. The key insight for professionals is to position themselves as creative visionaries who can guide AI tools rather than compete with them for routine tasks.
Statistics & Facts
- Americans bought 40% fewer movie tickets in 2024 compared to 2019, dropping from 1.2-1.5 billion tickets annually to approximately 700-800 million. (04:00) This statistic was mentioned by Derek Thompson to illustrate the magnitude of the theatrical decline.
- The number of people employed in the motion picture industry in LA County declined by 40% over the last three years, from 148,000 to 100,000 workers. (04:20) Ben Fritz provided this data to show the human impact of the industry contraction.
- The number of new movies and TV shows with budgets of at least $40 million has declined by 40% in the last three years. (12:01) This statistic demonstrates how the reduction in mid-budget productions has particularly affected the industry's middle class of creative professionals.
