|To: Glenn Petersen who wrote (1977)||7/16/2020 5:30:08 PM|
|From: Glenn Petersen|
|NFLX is down about 10% in after hours trading.|
Netflix shares fall after earnings miss, weak subscriber guidance for third quarter
PUBLISHED THU, JUL 16 20203:31 PM EDT
UPDATED 20 MIN AGO
Lauren Feiner @LAUREN_FEINER
-- Netflix missed analyst expectations on earnings per share but beat revenue expectations.
-- The company provided weak subscriber growth guidance for the third quarter, saying, “growth is slowing as consumers get through the initial shock of Covid and social restrictions.”
-- The company announced that Netflix Chief Content Officer Ted Sarandos will become co-CEO alongside current CEO Reed Hastings.
Netflix reported its second quarter 2020 earnings after the bell on Thursday, the first full quarter to reflect the impact of the coronavirus pandemic.
The company announced that Netflix Chief Content Officer Ted Sarandos will become co-CEO alongside current CEO Reed Hastings. He will retain his current role and also join the Board of Directors. Chief Product Officer Greg Peters will also serve as COO.
Netflix missed analyst expectations on earnings per share but beat revenue expectations. Shares fell about 10% after hours as the company provided weak subscriber growth guidance for the third quarter.
Here are the key numbers:
Earnings per share (EPS): $1.59 vs. $1.81 expected, according to Refinitiv survey of analysts
Revenue: $6.15 billion vs. $6.08 billion, according to Refinitiv
Global paid net subscriber additions: 10.09 million vs. 8.26 million expected, according to FactSetNetflix provided third-quarter revenue guidance of $6.33 billion, below analyst estimates of $6.40 billion, according to Refinitiv. It expects Q3 EPS of $2.09 versus analyst estimates of $2.01.
Netflix’s guidance for subscriber net adds fell far below analyst expectations. The company expects 2.5 million net subscriber additions for Q3, while analysts were expecting 5.27 million.
Executives explained the slowdown in their letter to shareholders, saying, “growth is slowing as consumers get through the initial shock of Covid and social restrictions. Our paid net additions for the month of June also included the subscriptions we cancelled for the small percentage of members who had not used the service recently.”
Netflix, which notoriously has named everything from Snapchat to sleep a competitor, now counts TikTok among its rivals.
“TikTok’s growth is astounding, showing the fluidity of internet entertainment,” the company wrote to shareholders. “Instead of worrying about all these competitors, we continue to stick to our strategy of trying to improve our service and content every quarter faster than our peers. Our continued strong growth is a testament to this approach and the size of the entertainment market.”
Netflix said it does not expect its 2020 slate of content to be significantly impacted by production shutdowns created by the pandemic. It expects that current production setbacks will push more of its big titles to the end of 2021, but that the “total number of originals for the full year will still be higher than 2020.” Netflix plans to supplement its original content with other films and shows it’s acquired.
Netflix said it has made the most progress resuming production in Asia Pacific and never fully shut down in Korea. It’s resumed some production in Europe as well as two stop-motion animation projects in Oregon and two films in California. But the company warned that “current infection trends create more uncertainty for our productions in the US. Parts of the world like India and some of Latin America are also more challenging and we are hoping to restart later in the year in these regions.”
The company said its net cash in operating activities was +$1 billion compared to -$544 million in the same period last year. Netflix was free cash flow positive for the second consecutive quarter, coming in at +$899 million versus -$594 million in Q2 last year. The company said its growing operating margin has helped its free cash flow profile continue improving, along with content spending being pushed into the second half of 2020 and into next year. Netflix expects free cash flow for the year to be breakeven or positive, though it expects to dip into the negative again next year.
Netflix revealed some viewership numbers in its earnings report. “Never Have I Ever,” the coming of age series by Mindy Kaling, saw 40 million households choosing to watch the show in its first four weeks on the service, according to Netflix. And Spike Lee’s film “Da 5 Bloods” was viewed by 27 million households, Netflix said. However, Netflix changed the way it counts views last year, and now counts a view as a household watching at least two minutes of a show or movie. In Q3, Netflix expects shows and films with big stars to drive engagement, such as “The Old Guard” with Charlize Theron and “Project Power” with Jamie Foxx.
This story is developing. Check back for updates.
Disclosure: NBCUniversal is the parent company of CNBC.
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|To: Glenn Petersen who wrote (1978)||7/17/2020 10:48:24 AM|
|From: Glenn Petersen|
|NBC's new streaming service - Peacock - has launched.|
Inside Peacock’s Ambitious Plan to Crash a Crowded Streaming Field
By Todd Spangler
Zohar Lazar for Variety
In September 2019, Steve Burke, then NBCUniversal chief executive, called Matt Strauss, with a question: Would he take the wheel of the Peacock project?
Strauss would need to unleash the service across the U.S. on a dauntingly short timeline — in just 10 months, pegged to the Tokyo Olympics (more on that later). Peacock would face massive competitors and come to the starting line with comparatively very low brand recognition. Comcast and NBCU wouldn’t be investing as much in the project as peers Disney or WarnerMedia planned to in their respective streaming vehicles.
Peacock also would involve a more complex and, to consumers, potentially confusing go-to-market strategy, with various free, ad-supported versions and premium no-advertising options. The job required coordinating the work of teams in the U.K., New York, Los Angeles, and Lisbon, Portugal, among other locations — Peacock today has a staff of about 1,000 — and collaborating with most of NBCU’s other business units.
And Strauss, who at the time was executive VP of Comcast’s Xfinity consumer services, based in Philadelphia, would need to relocate to New York City. Peacock had until then been overseen by Bonnie Hammer, a longtime NBCU creative exec, and Burke wanted a more product- and tech-oriented leader to shepherd the OTT initiative. (Hammer moved into a new role as chairman of NBCUniversal Content Studios.)
Strauss mulled over the proposition for a few days, then eagerly accepted. “To me it was like a no-brainer. It was exciting,” he says. Within a week, he had packed a bag, then spent the following several months living out of various hotel rooms in the Big Apple. “My wife still doesn’t know what happened. I said, ‘I have to go and get this product launched!’”
Next week (on July 15), Peacock is set to unfurl its plume for a national audience, after a three-month test run on Comcast systems.
Strauss, chairman of Peacock and NBCU Digital Enterprises, doesn’t have everything he wanted for the streaming service’s big debut. Most of the Peacock originals slate has been delayed by COVID-19. The service will come out with just nine originals, which include a slick series adaptation of “Brave New World” and U.K.-set workplace comedy “Intelligence,” starring David Schwimmer. The Summer Olympics were postponed until 2021, depriving the launch of some valuable promotional real estate. And with two weeks before go time, Peacock had deals for Apple, Google, Xbox and Vizio and LG TVs, but still had not clinched distribution pacts with Roku or Amazon Fire TV, the two biggest over-the-top TV device makers (which also have been holdouts on HBO Max).
But Strauss remains undeterred, convinced that Peacock’s greatest potential lies in the free-to-watch tier with a light advertising load that promises no more than 5 minutes of commercials per hour. NBCU’s theory is that “Free as a bird” will resonate with millions of Americans who are financially strapped or just too maxed out to pay for yet another streaming package.
Even before COVID-19 hit, “there were already signs of subscription fatigue,” he says. “And there was thbelief in the industry that people didn’t want advertising or didn’t like advertising. That just isn’t true. Free, ad-supported content plays to our strength, and that has been where we focused.”
Adds Strauss of the advertising-based plan, “In an unstable economy, it’s taken a different meaning. It’s more relevant now than any other time.” He likens the rush into subscription-only business models to “a swarm of bees.”
In streaming video’s animal kingdom, Peacock is both fish and fowl.
While Hulu sells a cheaper VOD service with ads, the streamer killed off its free-to-watch service in 2016. (Hulu is now controlled by Disney, after Comcast agreed to sell its stake.) For now, Peacock uniquely blends current TV content; a back catalog of movies, sitcoms and dramas; news; late-night segments; and sports and other live programming rolled into one service, available either for free or for a $5-$10 monthly fee, the last without ads.
Zohar Lazar for Variety
But analysts say Comcast and NBCU realistically didn’t have much choice about Peacock’s tack. Of the big media companies, it’s the last to push into direct-to-consumer streaming, and its content catalog doesn’t match the breadth of those of WarnerMedia or Disney.
Peacock’s prioritizing the ad-supported VOD side (or AVOD, in industry lingo) was all but inevitable, says Laura Martin, senior media analyst at Needham & Co. “This is the only strategy that NBCU can really have,” she says. “To launch as the 10th subscription service was not as good an idea as trying something different.”
Like every other media and entertainment conglomerate, NBCU needed a direct-to-consumer play in order to have access to first-party data and best monetize its intellectual property, says Martin. To feather Peacock’s nest, the company is also reclaiming content it had licensed: “The Office,” hugely popular on Netflix, will come to Peacock in January. NBCU can pull its content from Hulu starting next year on a nonexclusive basis, and by 2022 has the right to cancel most of its content-licensing agreements with the service.
Comcast was hesitant to move quickly into OTT because of the potential for conflict with its cable programming partners, says Tuna Amobi, senior equity analyst with CFRA Research. Only in the past few years has the effect of cord-cutting on cable TV pushed Comcast to fully embrace internet video — an effort, not incidentally, led by Strauss. “The landscape was changing so fast, their hand was forced. Effectively, they were in a position where they had to respond,” Amobi says.
The industry’s read on Peacock is that NBCU started with the same idea as everyone else — to create a subscription service to compete with Netflix. But once the SVOD market grew uncomfortably congested, legacy media companies began to turn their focus on free video services. Last year Viacom bought Pluto TV, and more recently Fox Corp. snapped up Tubi. Comcast has acquired free streamer Xumo, and NBCU’s Fandango is in the process of closing a deal for Walmart’s Vudu.
“In a global business worth billions of dollars, we always anticipated more entrants into free streaming and AVOD,” says Tubi chief revenue officer Mark Rotblat. Tubi’s long-tail approach to content and cost model make it different from Peacock, he says. But, Rotblat acknowledges, “in the ad business, there’s only so many dollars to go around, so in that sense they will be competition.”
NBCU execs insist AVOD was always in the cards. As far back as three years ago, NBCU had planned to have an ad component for what became Peacock, according to Linda Yaccarino, the media company’s chairman of advertising and partnerships. “Marketers need scale, and there’s no surrogate for free, premium content in generating scale,” she says. “AVOD was the right bet. There’s no question about where consumer behavior has gone.”
“I don’t think we’re anywhere near the saturation point with streaming. There’s a huge , insatiable appetite for the next three-to-five years. There’s still a lot o f runway ahead.”
Tuna Amobi, Analyst
Peacock is in several ways a defensive play, designed as a hedge against the market forces pressuring NBCU’s TV networks and Comcast’s pay TV biz. In 2019, Comcast shed 671,000 residential video subscribers (down 3.2%) over the previous year, while NBCU cable networks revenue dropped 2.2%, to $11.5 billion during the same period.
NBCU is using Peacock to reinforce the legacy pay TV business of parent Comcast and other operators. (Cox Communications is a launch partner for Peacock.) Peacock Premium with ads is included for no extra charge to Comcast’s and Cox’s customers; for others, it’s $4.99 per month. To get Peacock without any ads, it’s another $5 per month, but Strauss says that isn’t where the team is focused. He wants to strike additional deals with pay TV partners and platform providers modeled on the deals with Comcast and Cox. Fast forward two years, he says, and the goal is for “the majority of market to be able to get Peacock free.”
In other words, as Strauss outlines it, Peacock looks sort of like a basic cable channel — except, he says, NBCU is not asking for carriage fees from any affiliates. He’s circumspect about whether Peacock is open to revenue-sharing agreements, saying there are “different forms of value exchange.”
As it turns out, launching during a global health emergency may be a stroke of luck for Peacock and its free-to-watch story. During the pandemic, 47% of U.S. consumers said they used at least one free, ad-supported streaming video service, according to a Deloitte survey. The majority said they want access to cheaper, ad-supported streaming-video options, both before the COVID-19 outbreak (62%) and since (65%). And while Americans have signed up for more SVOD services — an average of four now, versus three pre-pandemic — they’re canceling those at a higher rate now, the study found.
“The industry can’t just keep adding new paid subscriptions,” says Kevin Westcott, Deloitte’s U.S. telecom, media and entertainment leader, pointing out that there are more than 300 individual subscription-video platforms in the U.S. alone.
The allure of free streaming will be a major growth opportunity in 2020, Westcott predicts: “This will be the year of ad-supported VOD.”
Along with the COVID-19 disruption, Strauss has had to juggle management changes as Peacock races toward its unveiling. He’s had three bosses in the past six months: Burke announced in December he was retiring, replaced in the CEO post by Jeff Shell, formerly head of NBCUniversal Film and Entertainment. Then in May, Shell put TV programming boss Mark Lazarus in charge of a new group, NBCUniversal Television and Streaming, overseeing Peacock along with the networks, stations and NBC Sports.
Shell’s vision with the reorg is “how are we going to organize the company for the next decade,” says Lazarus. “We both thought the best structure for the company was to put all of the entertainment businesses into one portfolio.” The strategy, according to Lazarus, is that Peacock fits into NBCU’s overall approach to entertainment to “leverage our scale in the creative community to acquire, curate and produce content for Peacock.”
Lazarus concedes that the Olympics was going to be “a very nice launching pad” for Peacock. But he says the silver lining is that NBCU was able to reallocate to Peacock promotional resources that would have gone to the Summer Games. And NBC will have the Olympics next summer, followed by the 2022 Super Bowl and the Beijing Winter Olympics, also in 2022.
Strauss is well suited to adapting to shifting conditions, according to a former colleague, who says he’s an exec who embodies “the Comcast way”: He’s a strategic thinker who doesn’t panic, can maintain enthusiasm without being Pollyannaish and engenders team loyalty.
Strauss says Lazarus is helping Peacock get buy-in from other parts of NBCU that may be reluctant to move fast. “Challenging the status quo, it takes time,” Strauss says. “Having Mark in this position accelerates that.”
Analysts agree that while Peacock may be coming out of its shell later than other streaming services, it’s not too late to make a mark. “Arguably, among ad-supported platforms, if there’s a leader, they’re definitely the one to watch,” CFRA’s Amobi says. “I don’t think we’re anywhere near the saturation point with streaming. There’s a huge, insatiable appetite for the next three-to-five years. There’s still a lot of runway ahead.”
Zohar Lazar for Variety
Lazarus disputes that Peacock is meaningfully “late” to the game: “This is early days. I don’t think five years from now we’ll be talking about who was first, who was second.”
During the pandemic, Peacock has been able to “accelerate our deal flow” for content licensing, Strauss says, citing pacts with A+E Networks, Warner Bros., Sony and Paramount. The Peacock Premium tier will have close to 20,000 hours of content at launch (versus the 15,000 hours NBCU projected earlier this year), and Peacock Free will have more than half the titles in the upper tier.
The streamer will feature current-season programming from NBC and Telemundo; access to hundreds of movies, like “Jurassic Park,” “Do the Right Thing” and “Shrek”; and TV comedies such as “Parks and Recreation,” “30 Rock,” “Saturday Night Live,” “King of Queens,” “Everybody Loves Raymond” and “Two and a Half Men.” Peacock also is home to dramas including “Law & Order: SVU,” “Downton Abbey,” “Yellowstone,” “Friday Night Lights” and “House,” as well as kids programming including “Curious George” and DreamWorks Animation’s “Where’s Waldo?”
Peacock will include daily programming highlights from NBC News outlets, NBC Sports, E! News and Access Hollywood, as well as late-night fare from Jimmy Fallon and Seth Meyers. It will have an NFL Wild Card game in January 2021 and sports like Premier League soccer and Ryder Cup coverage. News and sports are “an important part of our content strategy,” says Frances Manfredi, president of content acquisition and strategy for Peacock and NBCUniversal Digital Enterprises.
As Manfredi concedes, Peacock isn’t going to get content from some quarters. “It would be stupid to deny that the vertical integration isn’t happening in the market,” she says. On the other hand, the Peacock acquisitions team has had “a lot of discussions with studios that felt their content potentially gets lost on really large platforms. They felt we would give them more attention in terms of promotion,” according to Manfredi. “Nobody has said, ‘Nah, we don’t want to be on Peacock.’”
Peacock’s originals slate is led by Bill McGoldrick, president of original content for NBCU Entertainment Networks and Direct-to-Consumer. The originals cut across genres and range from the forthcoming “Battlestar Galactica” reboot from exec producer Sam Esmail (“Mr. Robot”) to a revival of “Saved by the Bell.”
What makes a Peacock show versus, say, one for Bravo or USA? “The word we use is ‘premium,’” McGoldrick says. “We need a certain amount of those shows that create bigger swings.” The fact that Peacock isn’t going to churn out hundreds of originals (which it wouldn’t be doing even without COVID) is something McGoldrick spins into a plus in talks with producers. NBCU won a bidding war for “Dr. Death,” based on the Wondery podcast, by highlighting the promotional opportunities Peacock was prepared to provide for the show, which stars Jamie Dornan, Christian Slater and Alec Baldwin. “We can say, ‘You are not going to go into a big conveyor belt that will forget you unless an algorithm brings it up.’”
Comcast has projected it will invest $2 billion into Peacock over 2020 and 2021. The company expects the streamer to generate $2.5 billion in revenue by 2024, with 30 million-35 million users, and to break even that year. But does NBCU need to pump more cash into Peacock to stay in the race?
“Spending more money doesn’t mean you’re going to be more successful,” Strauss says. Once Peacock achieves “meaningful share” in the next few years, “that opens up opportunity to make decisions about more investment and strategic decisions.”
As for the low consumer awareness for Peacock: It stands just a hair higher (26.8%) than Quibi (24.8%), per a recent YouGov survey provided exclusively to Variety Intelligence Platform. Strauss believes the branding exercise will be a function of time for Peacock (which, obviously, nods to NBC’s iconic logo).
“We made this strategic decision to not call ourselves ‘NBC Plus,” Strauss says. “We certainly see the value of the NBC catalog and the history of the content. But at the same time, we called ourselves Peacock, and that gives us permission to create a service that is not exclusive to NBC.”
Using data from the initial Comcast test, reaching 15 million Xfinity X1 and Flex customers, Strauss and the Peacock team have made some adjustments ahead of the broader midsummer launch. Strauss had T-shirts made for the crew with the word “Pivot”— a well-known Shell directive — emblazoned across the back.
Zohar Lazar for Variety
Among the learnings: People were looking for an escape from the news, with viewing of classic movies like “E.T. the Extra-Terrestrial” and Hitchcock films performing well, along with nostalgic comedies like “30 Rock,” “Frazier” and “Everybody Loves Raymond.” Peacock adjusted to account for the viewing behavior.
Also, Peacock users gravitated to the curated channels on the service, around brands like NBC News Now, shows like “SNL” and genres like true crime. For the U.S. launch, Peacock will more than double those channels, to more than 40, with a longer-term target of having around 75. (That will include a channel around “Keeping Up With the Kardashians.”)
“Sometimes when you turn on the TV, you just want to watch TV,” Strauss says. “There’s this notion that ‘Nobody watches TV’ — but the data suggests something different.”
Working during COVID-19 has, of course, been as much of a challenge for Peacock as it has for any other enterprise. Strauss had been holed up in his Cherry Hill, N.J., home before decamping in early June to the family’s summer house on the Jersey Shore. “I had to get a desk, buy a printer and move my kids’ Xbox and their computers so they could play ‘Fortnite,’” he says.
Strauss holds two all-hands meetings each week (on Mondays and Thursdays) for Peacock. So far, there have been more than 30 such confabs. Before, the team was meeting as a group just once a month. The Peacockers include the British team developing the service’s tech infrastructure, composed of the same folks who built the Now TV streaming service for Sky (the U.K.-based satellite operator Comcast bought in 2018).
“The team hasn’t lost any momentum,” Strauss claims. “We’ve been able to hit all our deadlines. I’m really proud of that fact. We are probably working better than we were before.”
For the Peacock team, Strauss says, he’s tried to establish a culture of more risk-taking and agility — a philosophy that goes against the grain of the make-sure-not-to-break-anything world of traditional cable. “As you are navigating change, you have to be flexible,” he says. “We have a young culture, and I’m excited about our future.”
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|From: Glenn Petersen||7/29/2020 10:02:19 AM|
|Netflix scores record 160 Emmy nominations, and Disney Plus notches its first ever|
Also: Apple TV Plus' big-budget originals earn the service's first nods, but none in the most coveted category: outstanding drama.
Joan E. Solsman
July 28, 2020 10:50 a.m. PT
Netflix spends billons of dollars every year making TV programming, more than any competitor -- and in the Emmy nominations Tuesday, it showed. Netflix earned a record 160 nominations, the most ever for a single network, beating out No. 2 HBO by more than four dozen.
Disney Plus also made its mark. The service, only eight months old, earned its first nominations, including one in the coveted category for outstanding drama series. Disney Plus netted 19 total Emmy nominations, with 15 of them for The Mandalorian, the live-action Star Wars series, nominated for best drama, that was a breakout hit for the new service. No other streaming service has landed a nomination in that all-important best-drama category in its first year.
Meanwhile, Apple TV Plus, which launched just weeks before Disney Plus and also spent top-dollar on its originals, accumulated major acting nominations, but none of its original shows themselves were nominated for best series. The Morning Show, Apple's marquee drama, with a reported $200 million budget for 20 total episodes over two year, earned acting nominations for Jennifer Aniston, Steve Carell, Billy Crudup and Mark Duplass. Apple TV Plus had 18 nominations total.
The nominations mark symbolic victories in the so-called streaming wars, a seven-month window when media giants and tech titans released a raft of new streaming services to take on Netflix. These battles pitted rookies like Apple TV Plus and Disney Plus (and more recently HBO Max and NBCUniversal's Peacock) against heavyweights like Netflix and Amazon Prime Video, spurring these huge corporations to pour billions of dollars into the hope of shaping the future of television.
Among other streaming services, Amazon generated 30 nominations and Hulu got 26 this year.
HBO, which was perennially the leader of Emmy nominations before Netflix began to overtake it, garnered 107 nominations this year. It had the distinction of generating the most nominations for a single title: Its drama Watchmen earned 26.
ABC will broadcast the Emmy award ceremony on Sunday, Sept. 20, from the Microsoft Theater in Los Angeles.
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|From: Glenn Petersen||8/4/2020 6:07:44 PM|
|Disney+ grows to more than 60.5M subscribers|
Anthony Ha @anthonyha /
3:45 pm CDT•August 4, 2020
Disney+ had more than 60.5 million paying subscribers as of yesterday, according to The Walt Disney Company’s CEO Bob Chapek.
Chapek shared the number during a call to discuss the company’s latest earnings report, which covered the company’s most recent quarter ending on June 27. He was essentially offering an update on the 57.5 million paid subscriber figure included in the report, and he said the growth is “far exceeding our initial projections for the service.”
Disney+ launched in November of last year. The company previously announced in April that the service had passed 50 million subscribers. (Those numbers include subscribers acquired through bundling with Hotstar in India, as well as free subscribers through a promotion with TechCrunch’s parent company Verizon.)
The coronavirus pandemic has accelerated growth for some streaming services. Most notably, Netflix added more than 10 million new subscribers in its most recent quarter, bringing its global total to nearly 193 million. As for Disney’s other streaming services, ESPN+ has grown more than 100% year-over-year to 8.5 million subscribers (as of June 26), while Hulu grew 27% to 35.5 million subscribers (3.4 million of them are paying for both video on demand and live TV).
And Disney+ may have gotten an additional bump, thanks to the release of “Hamilton” over the July 4 weekend.
Overall, Disney said revenue for its direct-to-consumer and international division increased 2% year-over-year, to $4.0 billion, while the unit’s operating loss grew from $562 million to $706 million.
Still, streaming likely counts as a relative bright spot compared to many of Disney’s other businesses that have either slowed or paused entirely due to the pandemic. (Parks are gradually reopening, for example.) The company’s total revenue fell 42% YOY to $11.8 billion, and earnings per share for the quarter showed a loss of $2.61.
Update: During the call, Chapek also announced that “Mulan” will be released on Disney+ on September 4, as a “premiere access” title that costs an additional $29.99.
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|From: Glenn Petersen||8/17/2020 9:20:19 AM|
|The Week Old Hollywood Finally, Actually Died|
The streaming services are in charge, and bringing a ruthless new culture with them.
By Ben Smith
New York Times
Published Aug. 16, 2020
Updated Aug. 17, 2020, 7:43 a.m. ET
Bob Greenblatt, the chairman of WarnerMedia Entertainment, was among those ousted this month as Warner Media emptied the executive suite at the once-great studio that built Hollywood. Credit...Mike Segar/Reuters
For decades, the best thing about being a Hollywood executive, really, was how you got fired. Studio executives would be gradually, gently, even lovingly, nudged aside, given months to shape their own narratives and find new work, or even promoted. When Amy Pascal was pushed out of Sony Pictures in 2015, she got an exit package and production deal worth a reported $40 million.
That, of course, was before streaming services arrived, upending everything with a ruthless logic and coldhearted efficiency.
That was never more clear than on Aug. 7, when WarnerMedia abruptly eliminated the jobs of hundreds of employees, emptying the executive suite at the once-great studio that built Hollywood, and is now the subsidiary of AT&T. In a series of brisk video calls, executives who imagined they were studio eminences were reminded that they work — or used to work — at the video division of a phone company. The chairman of WarnerMedia Entertainment, Bob Greenblatt, learned that he’d been fired the morning of the day the news broke, two people he spoke to told me. Jeffrey Schlesinger, a 37-year company veteran who ran the lucrative international licensing business, complained to friends that he had less than an hour’s notice, two other people told me.
“We’re in the brutal final scenes of Hollywood as people here knew it, as streaming investment and infrastructure take precedence,” said Janice Min, the former Hollywood Reporter co-president who did a brief stretch as an executive at the streaming platform Quibi. “Politesse and production deal kiss-offs for those at the top, and, more importantly, the financial fire hose to float a bureaucracy, seem to be disappearing. It’s like a club, already shut down by the pandemic, running out of dues to feed all its members.”
The drama at Warner marked a turning point, in part because of its huge size and the high profile of the iconic companies under its umbrella: Warner Brothers, HBO and CNN among them. And it comes as Hollywood power is conspicuously absent from the national conversation. Washington is consumed by TikTok, the Chinese-owned video-sharing app that’s the most successful new content platform in the world. TikTok has succeeded as Quibi — Hollywood’s premium alternative to user-generated content — struggles to find an audience. The California politician just nominated for the vice presidency comes from San Francisco, and doesn’t particularly advertise her Hollywood ties (though she was all over Hollywood insiders’ Instagram last week).
The most interesting profiles of entertainment executives are, literally, obituaries, notably the catalog of victories and vices that marked the career of Viacom’s founder, Sumner Redstone.
(Like much of his industry, Mr. Redstone, who died last week at age 97, held on far longer than anyone expected. Former Viacom employees recalled that it had been more than six years since, the then- chief executive, Philippe Dauman, asked his aides to draft a stirring eulogy for Mr. Redstone, who was 90 at the time, and to create a website in his memory. But Mr. Dauman was fired four years ago, there are no plans for him to deliver a eulogy and the website remains on some forgotten digital shelf.)
Much of what’s happening now in Hollywood, too, has that feeling of a death so long anticipated that you half assumed you’d just missed the funeral. At WarnerMedia, the executives’ firings came after the company badly botched the introduction of a streaming service whose name — HBO Go, HBO Now, or HBO Max — nobody could figure out. The service has primarily distinguished itself so far by its energetic and unsuccessful attempts to spin about 4 million people who have actually used the service into a number north of 30 million.
“It’s the great reckoning,” another top executive who was abruptly forced out, Kevin Reilly, told The Hollywood Reporter.
When Amy Pascal was pushed out of Sony Pictures in 2015, she got an exit package and production deal worth a reported $40 million. Credit...Mark Sagliocco/Getty Images
That reckoning is mostly driven by the unglamorous economics of streaming, though it also overlaps with this year’s better-known reckoning, over race and gender. Studio executives have been mortified by the “About Us” pages with profiles of their leaders — pages that are full of white faces as the push for representation adds new pressure for change.
But the underlying rationale is economic, and obvious. “The golden rivers of money from cable TV are drying up. With the only growth business for most of the companies coming from streaming, which isn’t a profit maker yet, the companies have no alternative than to cut costs,” The Information wrote. (News of Warner’s planned layoffs leaked to that Silicon Valley-based business publication, not the usual Hollywood trades, adding insult to injury.)
The new leaders in the industry do not come out of old Hollywood, which has seen its clubbiness and values fall into disrepute. The new WarnerMedia chief executive, Jason Kilar, spent the formative years of his career as the senior vice president of worldwide application software at Amazon, known for its grim corporate culture. He ran Hulu, then left it after clashing with its legacy media owners. At WarnerMedia he promoted an executive who hadn’t made her career inside the Hollywood club, Ann Sarnoff, to head his content division.
Many of the new leaders are admirers of the culture at Netflix, which is hardheaded and unsentimental: Executives eat in the cafeteria and have a corporate philosophy that holds, in an admired slide presentation, that employees are like athletes. Managers should always be looking to trade up, and fire even high performers if a better player comes along. (The well-regarded human resources executive who developed the presentation with the company’s chief executive, Reed Hastings, was, herself, eventually fired.)
WarnerMedia’s Mr. Kilar told me in an email that his cuts and reorganizations were aimed at pushing the company “from a wholesaling mind set to a retailing mind set” — that is, from the old studio hitmakers’ handshake deals with distributors to a techie’s focus on user-friendly streaming interfaces and subscriber retention.
That’s an unromantic vision that still rankles many in the industry.
“This is the difference between people who got into the movie business and people who are in the content business,” said Terry Press, the former president of CBS Films, whose division was eliminated in a merger with Viacom earlier this year.
The industry’s cultural shift is also wiping out fiefdoms. A day before the WarnerMedia firings, NBCUniversal forced out the embattled chairman of its entertainment division — a storied role held in the past by, among others, Mr. Greenblatt — and announced it wouldn’t replace him. Instead it’s shearing off executive roles and merging most of what were once separate operations across channels as varied as Syfy and NBC. Similarly, WarnerMedia combined its crown jewel, HBO, and the workaday cable channels TBS and TNT and the struggling new streaming service.
The companies deny that the organizational changes will affect what you see. (“The brands will maintain their distinctiveness, and there won’t be visible differences to the viewer,” an NBC official said.) But that’s not how it usually plays out in declining industries. The moves echo those taken by long-declining publishing industry institutions like the magazine company Condé Nast, which has gradually combined the roles of executives at magazines like Vogue and Vanity Fair, all the while insisting that they weren’t diminishing the inevitably diminished brands.
And at WarnerMedia, the challenge is particularly existential. We won’t know for a couple of years whether this month’s layoffs signaled a successful shift, as Mr. Kilar and AT&T’s chief executive, John Stankey, intend, or whether they were simply a clumsy attempt to mask the company’s remarkable failure in the streaming world. HBO Max has barely been able to compete with Netflix and Disney, despite having a service full of beloved shows and movies, from the best of Alfred Hitchcock to HBO’s long hot streak that includes, this summer, the releases of “Lovecraft Country” and “I May Destroy You."
With the purge of top creative executives completed, the responsibility for what’s inside HBO Max and the cable TV channels will fall largely on Casey Bloys, an HBO veteran who is now overseeing all of WarnerMedia’s entertainment content. He has, he said in a telephone interview, told his new team that he wants programming on the streaming service that will complement the buzzy, complex adult shows like “Watchmen” and “Succession” that HBO is best known for. He is pointed to straightforwardly fun titles that appeal to younger audiences like “Green Lantern” and “Gossip Girl" as models for broadening out the service. His success will depend, in part, on the company’s ability to clearly market its streaming service and perhaps more on whether AT&T is really willing to keep spending on TV like Netflix and Disney.
Mr. Bloys is a great programmer, not a power player or politician of the old model. Indeed, the studio bosses seem to have lost their central place in the American power structure and become simply the well-compensated employees of ordinary companies, with ordinary attention to the bottom line. There is one exception, Disney, which also proves the rule: Bob Iger’s Disney+ started just in time to catch the streaming wave and provide a business that met the coronavirus moment.
“Disney will remain relevant into the future,” said Barry Diller, who once headed Paramount and Fox and is now chief executive of the digital media company IAC. “All of the rest of them are caddies on a golf course they’ll never play.”
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