The Big Picture

by Ben Fritz

  Theater attendance, which has fallen by 5 percent this century despite our rising population, is going to keep going down. The number of multiplexes will shrink, and studios will release fewer movies. Those who still go will likely pay higher and higher prices, albeit for a more luxurious experience, with reclining seats, food ordered by app and delivered by hand, and the absolute best visuals and sound systems.

  Are they still movies, though, if more than 99 percent of the people who watch them don’t do so in a movie theater? Who cares. Take out the commercial breaks and “previously on”s, and Breaking Bad is a forty-five-hour movie that’s better than anything most movie studios have made this century. And no matter how many billions they earn at the box office, no one can convince me that the third Avengers offering and the fourth Captain America film aren’t super-expensive episodes in the most successful television series of our era.

  The more digital our entertainment becomes, the more creators are going to discard old ideas about how long a “movie” should be and how many minutes define an “episode” of a television show or how many episodes define a “season.” Movies, as most of us watch them most of the time, will just be one part of a spectrum that also includes mini-series, television shows, digital shorts, and forms that haven’t yet been invented. The lines that divide these types of content will blur to nonexistence.

  As long as we’re getting great visual stories, with the option to watch them on screens big and small and enough variety to satisfy fans of Iron Man and Almodóvar, how could we possibly complain?

  The changes that are roiling Hollywood and revolutionizing the ways we watch movies will continue to be bad news for struggling studios like Sony Pictures and traditionalists who think cinema is first and foremost a physical location. I don’t think studios or theaters will disappear, but if they’re an essential part of your definition of film, the future undeniably looks a bit bleak.

  But for those of us who simply want to sit down, turn off the lights, and be immersed in the magic of stories told in images on a screen, the future has never looked brighter.

  Afterword

  Edge of Tomorrow

  Nearly four years after a cyberattack struck a legendary movie studio, ended the career of one of the industry’s most beloved executives, and put Sony Pictures’ innermost secrets on display for the world, the U.S. government figured out who did it.

  Nobody cared.

  The Justice Department, on September 6, 2018, indicted Park Jin Hyok, part of a North Korean government–backed hacking team known as the Lazarus Project, for allegedly engaging in multiple cybercrimes, including breaking into Sony’s computer system and stealing thousands upon thousands of e-mails and documents.

  Many at Sony, including Amy Pascal, had long thought the hack was actually the work of disgruntled former employees. So many current and former staffers were upset after years of layoffs and mismanagement, after all, and the hackers seemed to have methodically released the e-mails of Pascal and Michael Lynton for maximum embarrassment.

  Underneath that belief, though, was the article of faith that drove Pascal and so many Hollywood moguls of her generation: Everything is personal.

  But in the corporatized, commoditized Hollywood of the twenty-first century, not many things are personal anymore. As the Justice Department’s indictment lays out, hackers backed by North Korea sought revenge for The Interview and its mockery of Kim Jong-un. They attempted to send malware directly to an unidentified actor in the film—possibly Seth Rogen or James Franco—as well as directly to Sony employees. The former attack didn’t work, but the latter did.

  By this point in the book, you know everything that happened next.

  If the indictment had been released a few years earlier, it would have been a hotter read in the power corridors of Hollywood than any screenplay. It is, after all, the story of an international conspiracy that upended the entertainment industry for many months. And as the people with Oscars on their mantelpieces for making Argo, The Artist, and La La Land can tell you, there’s nothing Hollywood loves more than a story about itself.

  But by 2018, Sony had been restructured, Amy Pascal had moved on, and the rest of Hollywood had way too many new anxieties keeping them up at night to worry about what brought down one studio several years ago. The Justice Department’s indictment generated barely any coverage in the entertainment press or furious gossip over the secure texting apps many industry professionals use now.

  The hack of Sony Pictures had become just another sophisticated drama for adults that nobody cared about.

  Me Too Rocks an Industry on Its Heels

  By the fall of 2018, a year since I finished writing this book, Hollywood was upended by multi-billion-dollar acquisitions aimed at turning films into digital content, a full-bore invasion of the movie business by Net­flix, and the further narrowing of consumer attention down to a handful of franchises, to the exclusion of nearly everything else.

  And then there was Me Too, which turned horrifying revelations of sexual assault and harassment by powerful men into a movement for safety, respect, and diversity that has become a historic turning point in Hollywood.

  While I have reported on alleged misconduct by executives at Amazon, Disney, and Lionsgate, other journalists who broke massive stories about Harvey Weinstein or Les Moonves are more qualified to write at length about what to make of the cultural moment these revelations have created.

  I must note, though, some facts I learned only after writing this book. One of the executives featured in the preceding chapters, former Amazon Studios chairman Roy Price, was allegedly engaging in appalling mistreatment of women, not to mention mismanagement of his business, at the same time I spoke to him. The story of Amazon’s surprising takeover of the indie film sector holds true, but now we also know that Roy had allegedly sexually harassed a producer and actresses, sometimes while apparently drunk, and made many people who worked for him uncomfortable with his behavior. I learned about his misconduct later in the fall of 2017, thanks to the people who spoke to my colleague Joe Flint and me for articles we published in the Wall Street Journal, as well as in excellent work by the Hollywood Reporter’s Kim Masters.

  The Me Too movement has intensified the uncertainty that Hollywood decision-makers feel about the future. The industry now is nothing like it was just a few years ago, let alone when the people running studios started their careers ten, twenty, or thirty years ago. These moguls are now struggling to make decisions in a cultural, technological, and business landscape no one can honestly say they fully understand.

  And Then There Were Five

  It shouldn’t surprise readers that between the time I finished this book and the time it came out, a massive deal took place that will reduce Hollywood’s six major movie studios to five. The only surprise is which one is shutting its gates.

  In the book’s conclusion, I wrote that Sony Pictures or Paramount were most likely to be acquired. Poor management had made them the worst-performing studios for many years and neither was part of a huge content or Internet company, where a broader strategic purpose might justify the relatively low and inconsistent profits of making movies.

  But as it turned out, Sony and Paramount were still in such rough shape in 2017 that nobody wanted to buy them.

  The first studio to disappear will instead be 20th Century Fox, the studio that has long been in the middle of the pack. Competently run, part of a big but not massive company. A studio that controls a few popular franchises like Avatar and the X-Men, but not enough of them to compete with the likes of Disney, Universal, and Warner Bros.

  Disney in December 2016 agreed to acquire most of the assets of the studio’s parent company, 21st Century Fox. After a counter-bid from Universal owner Comcast raised the price, Disney ended up paying $71.3 billion. As of this writing, Bob Iger’s company is just waiting for approval from some foreign governments before the deal is official and done.

  Iger hasn’t been shy about why he’s s
pending so much money to swallow up a competitor: he needs to compete with Netflix. He may run the dominant entertainment company in Hollywood, but he knows Disney is being surpassed by Netflix. To compete, he needs to transform his old-fashioned film, television, and theme parks conglomerate into a digital distribution company that delivers its movies and series directly to consumers.

  To accomplish that goal, he needs more content and brands to stream online, which is why he wanted Fox.

  Disney is developing its own Netflix-like subscription video service that will feature nearly all the movies and TV shows it currently makes, along with new ones produced exclusively for the platform. Iger informed Netflix in late 2017 that he would give up the estimated $300 million the online entertainment giant pays annually for the rights to stream Disney movies after their theater runs are over. Instead, Iger plans to put the Marvel, Stars Wars, animated films, and others his company produces onto his own service, starting in 2019.

  Acquiring Fox also gives Disney control of Hulu, a second streaming service that Iger intends to aim at adults. Rather than the everything—for-everyone Netflix approach, his strategy is to have one Disney-branded service that’s safe for kids and a separate one for people without kids or who want something more mature to watch after the children are asleep.

  And what about the Fox movie studio—the home of The Sound of Music, Cleopatra, and Star Wars—which has been around since 1935? It will, essentially, be stripped for parts.

  Disney plans to turn Avatar into a Disney franchise and integrate the X-Men with the rest of the Marvel cinematic universe, from which it has been separated since a 1990s licensing deal. Fox’s top two franchises will thus strengthen Disney’s traditional theatrical movie business, which will continue relying on a small number of massive global brands.

  Iger will also hold onto Fox Searchlight, the indie division that released recent Oscar winners like The Shape of Water and Three Billboards Outside Ebbing, Missouri. It’s a surprising move for the CEO who shut down former Searchlight competitor Miramax because it was an “awful business.”

  But the Netflix era requires a new strategic calculation. Fewer, bigger movies makes sense in a world where each film is supposed to make the biggest possible profit on its own. But to get people to subscribe to an online video service, you need a lot of content, including the types of films that don’t gross anything close to $1 billion, but that certain people absolutely love. Searchlight’s Oscar winners fit that bill. Disney will continue to release many Searchlight films in theaters, so that they can be reviewed by top critics and win awards and get the aura of a big-screen release. But ultimately, the reason Iger will keep making them is to feed Hulu.

  That’s why they make economic sense. It’s the same reason why after so many years with so little to do, Disney’s movie executives are suddenly busy. They’re developing updated versions of classics from the studio’s vault, including Lady and the Tramp, The Sword in the Stone, Honey, I Shrunk the Kids, Three Men and a Baby, Flight of the Navigator, and Sister Act. All are intended exclusively for the Disney-branded streaming service.

  After years of making fewer movies, Bob Iger wants to make more. Even ones that have mid-size or low budgets. Even ones that might not become franchises. He wants to compete online and he needs more stuff to do it with.

  As for the Fox movies that aren’t Avatar or X-Men and don’t fit onto those streaming services? Original films like The Greatest Showman, The Martian, The Post, and Spy? Those are done. Outside of Searchlight and the franchises Disney takes, Fox will shrink over the next several years and, eventually, die. Though Disney may keep the brand name alive in some form, one of Hollywood’s six major studios will have disappeared.

  Sadly, this development makes sense, because the franchise era of filmmaking is going stronger than ever. Just five movies—Black Panther, the third Avengers, Incredibles 2, the second Jurassic World, and Deadpool 2—accounted for 31 percent of 2018’s box office as of this writing, compared to 21 percent for last year’s top five new releases. In such an environment, there simply isn’t a good business reason for six studios to exist.

  Even five is probably too many.

  Old Hollywood Hangs On by a Thread

  This brings us to the studios still fighting to be one of the survivors. Warner Bros., for one, is at the beginning of what’s sure to be a revolution in its business since AT&T acquired its parent company in the summer of 2018.

  Compared to Disney’s plans for Fox, changes have been slow at Warner. In the months after AT&T took over, Warner had a few hits of the lower budget, old-fashioned variety, like Crazy Rich Asians, the highest grossing live-action comedy since 2014 and the biggest romantic comedy since Will Smith made Hitch in 2005.

  Still, Warner employees aren’t feeling that confident, because big changes are in the works. A new subscription video service is planned for late 2019, the same time that Disney will launch its service. Warner’s will be anchored by HBO and include new and old movies from Warner Bros. Anyone will be able to subscribe, but it’s sure to be tailor-made, and discounted, for AT&T subscribers, in an effort to keep them glued to their mobile devices.

  Warner Bros., which has for many years released more films annually than any other studio, will keep doing so. But that business will shrink in importance as its main reason for existing increasingly becomes keeping AT&T wireless subscribers satisfied. Will it really be a studio? Or a cellular-content provider?

  Other studios are making their way toward a similar future. After losing out on Fox, executives at Universal and other parts of the Comcast entertainment empire are busy trying to figure out where they fit in the world of online video.

  Smaller studios, meanwhile, are simply trying to execute as best they can so that their business is as successful, and valuable, as possible when it comes time for a sale or merger of their own.

  Under Amy Pascal’s replacement, Tom Rothman, Sony made progress. After so many years ranked fifth or sixth at the box office, Sony was number four through October 2018, thanks largely to its mega-hit Jumanji: Out of the Jungle, along with Peter Rabbit and Venom. The latter movie even proved Sony could make a successful Spider-Man spin-off without Marvel’s help, if not one remotely on the level of the billion—dollar-plus blockbusters that Kevin Feige’s studio keeps pumping out, like Avengers: Infinity War and Black Panther.

  Rothman has cut back on, though not eliminated, the mid-budget dramas, comedies, and thrillers that were the heart of Amy Pascal’s slate for so long, emphasizing instead the hunt for more franchises and a focus on international audiences she had ignored.

  Rothman’s boss and Michael Lynton’s replacement, Tony Vinciquerra, was blunt. “We have to grow,” he said. “If we don’t grow, we will be somebody’s purchase.” Vinciquerra’s goal wasn’t to sell his studio as soon as possible, he insisted, but few who knew him doubted that his plan over the next few years was to get his studio into shinier shape in order to do some kind of a deal.

  Lynton dropped off the Hollywood map entirely since exiting Sony in early 2017. His part-time job as chairman of Snapchat was certainlyheadache enough, as that company struggled to find a secure place in a social messaging space almost completely dominated by Facebook.

  Meanwhile, Amy Pascal kept her head down, trying to produce movies and stay away from the press she felt had treated her so unfairly. When it came to the films she made, Pascal’s focus was similar to her best days at Sony: Spider-Man sequels and mid-budget dramas. She had a huge hit in Spider-Man: Homecoming and earned an Oscar nomination for The Post.

  By 2018 she was finally close to making one of her longtime passion projects, Little Women, with Ladybird’s Greta Gerwig directing and a cast so strong that Tom Rothman agreed to make it. She was also, with perhaps some sense of poetic justice in mind, developing a movie about right-wing trolls on the Internet. It wasn’t clear if she’d find the money to get it made, but there was one thing Amy felt strongly about it: as with all her other movi
es, she wanted to make it for theaters, not for Netflix.

  The World According to Netflix

  That put her in an increasingly small camp. When I wrote this book, Netflix was on its way to becoming the biggest company in modern Hollywood. Now it may just be the most powerful company Hollywood has ever seen.

  As traditional entertainment companies like Disney finally wise up and stop selling content to the once-unassuming Silicon Valley startup, Netflix now needs to make more and more of its own content. To do so, it’s spending at a level that would put any drunken sailor to shame.

  Outbidding studios and networks for everything it wanted, it was on track to release nearly one thousand pieces of original content in 2018, including television shows, standup specials, and movies.

  Money was no object. Netflix reached 130 million paying subscribers around the world by late 2018 and revenue grew at a 38 percent clip. Old-fashioned movie studios had to worry about profits, but Wall Street valued Netflix as a growth company, meaning it could spend every penny it earned, and then some, so long as it kept attracting more subscribers. The formula was simple: more subscribers meant more money to produce more content which would draw even more subscribers and fund even more content in a never-ending loop until Netflix’s name was as synonymous with entertainment as Kleenex is with blowing your nose.

  Ted Sarandos oversaw about $13 billion of content spending in 2018, about thirteen times as much as Amy Pascal ever had under her control.

  When I finished the book in 2017, Netflix was figuring out where it fit in the film ecosystem. By 2018, it was making a huge impact, and not only because it released a stunning eighty original films in the year, while most studios released fewer than twenty.