Streaming technology has allowed people to spend much more time watching entertainment than they did in the past. They can binge entire shows if they enjoy the first episode. They can watch almost any movie on an airplane flight or a subway ride.
Normally, a big increase in the use of a product also increases the profits of the companies that make that product. But something strange has happened in Hollywood lately: Even as Americans spend more time watching movies and television shows, the studios that produce this entertainment are struggling.
Disney’s stock price has fallen more than half from its 2021 peak, and the company fired its C.E.O. last year. Shares of Paramount Pictures’ parent company are worth less than they were 25 years ago. Warren Buffett recently described streaming as a particularly difficult environment in which to make money.
How could this be?
I asked my colleague Jonathan Mahler — the co-author of a new Times Magazine article about the problems at Warner Brothers — how Hollywood could simultaneously be booming and suffering. I found his explanation clarifying, and I’m devoting today’s newsletter to it.
Cords cut
As Jonathan pointed out, streaming has both expanded the entertainment business and undermined its old model.
Perhaps the most important disruption has been the decline of cable television. For years, studios made large profits through cable television. They licensed their old movies and shows for rebroadcast, and the studios’ parent companies, like Disney and Paramount, owned cable networks themselves.
“These networks were bundled into expensive packages, forcing consumers to pay for dozens of channels they didn’t watch,” Jonathan notes. Families paid hundreds of dollars a year for their cable bundle, and the entertainment companies made additional money from advertising.
But then came Netflix. When it started a streaming service in 2007, Hollywood failed to recognize how much of a threat the service would be, and the studios sold Netflix the right to broadcast movies and shows at a relatively low price. Netflix used its new library of content to attract millions of subscribers.
“What these legacy companies didn’t realize until it was too late was that streaming wasn’t just going to become the dominant mode by which people watched movies, replacing DVDs,” Jonathan said. “It was also going to replace cable TV.” This cord-cutting revolution has led to a 40 percent decline in cable subscribers since 2014. As Clare Malone wrote in The New Yorker, “The advent of streaming video has demolished old business models.”
Studios have since started their own streaming services, and some have attracted a large number of subscribers. But in an effort to catch up to Netflix, other services have often charged less. Buffett, speaking at the most recent annual meeting of Berkshire Hathaway, his investment firm, said that this low-price model “doesn’t work.”
Adding to the financial pressures on the studios, all of them — including newer players like Netflix and Amazon — are spending money to create new content that can woo and retain subscribers. The movie theater business has also shrunk, because of both streaming and Covid. And the recent settlements of the actors’ and writers’ strikes mean that many of Hollywood’s workers are no longer as low-paid as they had been.
Eventually, a few successful companies will probably emerge. Americans spend more than enough money on movies and TV shows to create healthy profits. But not all the companies that thrived in the past are likely to do so in the future. The current turmoil is in many ways a fight for survival.
David Zaslav, the C.E.O. of Warner Bros. Discovery, has described the situation as a “generational disruption.”
Zaslav is the subject of the Times Magazine article by Jonathan, James B. Stewart and Benjamin Mullin. In the article, you will read about Zaslav’s enormous compensation, the renovation of his Beverly Hills home, his recent cuts to the studio’s budget, his role in the success of “Barbie” and his attempts to reverse the sharp decline in his company’s stock. It’s an entertaining Hollywood yarn.
ISRAEL-HAMAS WAR
Al-Shifa Hospital
Israel said its troops are raiding Gaza’s largest hospital, Al-Shifa, which it believes Hamas is using for military purposes. Details about the attack are scarce.
What happens in Al-Shifa now is likely to shape the war, The Times’s Patrick Kingsley writes.
These maps show how Israel advanced toward the hospital.
Israeli forces likely fired at least three projectiles that struck Al-Shifa on Friday, a Times investigation found. Israel had said they were Palestinian misfires.
Children’s Hospital Footage
The Israeli military released footage showing what it said were Hamas facilities below a different medical facility, Gaza’s main children’s hospital.
The footage showed items that appeared to be weapons and explosives. It also included a calendar that began on Oct. 7, the day of Hamas’s attacks in Israel, and contained the phrase, “Al Aqsa Flood Battle,” the group’s name for the assault.
The Gaza health ministry, which is controlled by Hamas, disputed the video and said the hospital basement had been used as a shelter, not a military facility. A Hamas spokesman called the Israeli presentation a “lie and charade.”
American Response
President Biden said he believed Hamas would agree to release hostages held in Gaza.
More than 500 U.S. officials signed a letter to Biden protesting his support of Israel in its war in Gaza.
Tens of thousands joined a rally at the National Mall in Washington in support of Israel.
MORE NEWS
Congress
The House passed a bill to extend government funding into next year with more Democratic than Republican support. A similar bill led to Kevin McCarthy’s ouster, but hard-line Republicans don’t seem inclined to unseat Speaker Mike Johnson.
A former campaign aide to Representative George Santos admitted to impersonating a House staff member and pleaded guilty to wire fraud.
Late night hosts made fun of chaos at the Capitol: A House Republican accused McCarthy of elbowing him, and Senator Markwayne Mullin, an Oklahoma Republican, challenged a labor leader to a fight.
More Politics
The Supreme Court’s new ethics code is toothless, legal experts say.
The Atlanta district attorney prosecuting Trump said that a trial in the case might not end until after the 2024 election.
Trump planned to refuse to leave the White House “under any circumstances” despite losing the 2020 election, his former lawyer told Georgia prosecutors.
Ukrainian authorities indicted three people for treason, accusing them of working with Russia to help Rudy Giuliani promote corruption allegations against the Bidens.
Climate
Ahead of Biden and Xi Jinping’s meeting today, the U.S. and China have agreed to tackle global warming by increasing renewable energy capacity. Biden wants to keep competition from becoming conflict.
The U.S. has experienced 25 billion-dollar weather disasters this year, a federal report found.
Other Big Stories
Presidential candidates in Argentina are using A.I. images and videos in their campaigns.
Inflation eased last month. Federal Reserve officials believe their approach is working, and stocks rose.
Opinions
Some people question the worth of humanities majors. But the communication and critical thinking skills they teach are invaluable, Beth Ann Fennelly writes.
Here are columns by Thomas Edsall on affirmative action and Ross Douthat on religion.
MORNING READS
Rising costs: This New York City restaurant charges $32 for a lobster roll. The owner explains why.
Brain fog: More Americans say they have serious cognitive problems than at any time in the last 15 years. Long Covid is a factor.
“Metal for Orcas”: Sailors are blasting a special playlist to keep whales from ramming their boats.
Inverted Jenny: See what a $2 million stamp looks like.
Lives Lived: Maj. Gen. Roland Lajoie helped coordinate U.S.-Soviet relations in the last decade of the Cold War, then oversaw the destruction of nuclear weapons from former Soviet republics. He died at 87.
SPORTS
Soccer: Emma Hayes, a multi-championship-winning coach in the English Women’s Super League, will become the head coach of the U.S. women’s national soccer team.
N.B.A.: The Minnesota Timberwolves beat the Golden State Warriors, 104-101. The Warriors’ forward Draymond Green was ejected from the game after putting the Timberwolves’ Rudy Gobert in a chokehold.
Golf: Rory McIlroy resigned from the PGA Tour’s board, five months after the tour’s deal with the Saudi sovereign wealth fund.
ARTS AND IDEAS
In her own words: The former first lady Lady Bird Johnson embodied contradiction. Even her name — a childhood nickname — belied her grit, intellect and ambition. “The Lady Bird Diaries,” a new Hulu documentary based on private tapes, tells her story without outside perspectives or critiques. What emerges is a picture of a loving wife — and a trusted adviser who had surprising influence.
“In an era when a woman’s power could generally find expression only through her husband,” the Times columnist Rhonda Garelick writes, “she found herself married to the most powerful man in the world. She seized the opportunity.”
More on culture
The BBC said it had received five complaints about “inappropriate behavior” by the comedian Russell Brand when he worked on its radio shows.
Steve Carell will make his Broadway debut in a revival of Chekhov’s “Uncle Vanya” next year.
THANKSGIVING PREP LIST
Click around “The Ultimate Guide to Thanksgiving” and consider trying a new potato or sweet potato dish this year.
THE MORNING RECOMMENDS …
Bookmark these classic deviled eggs for the holiday season.
Read this before looking for Black Friday discounts.
Take these gadgets with you on a trip.
GAMES
Here is today’s Spelling Bee. Yesterday’s pangram was dependently.
And here are today’s Mini Crossword, Wordle, Sudoku and Connections.
Thanks for spending part of your morning with The Times. See you tomorrow. — David
P.S. At least 250,000 Americans rallied in Washington against the Vietnam War 54 years ago today.
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