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Monday, Jul 22, 2024

OC Leader Board: Hollywood Faces Paradigm Shift

Editor’s Note: Stephen Galloway was executive editor at the Hollywood Reporter before in 2020 becoming the dean of Chapman University’s Dodge College of Film and Media Arts. The Hollywood Reporter earlier this month ranked the college No. 4 on a list of the best film schools in the country. Galloway wrote this Leader Board for the Business Journal.

On March 6, 1933, MGM chief Louis B. Mayer gathered together his employees—all the brilliant men and women he had hired at Hollywood’s greatest studio, the place that boasted “more stars than there are in heaven”—and promptly burst into tears.

Times were hard, he lamented. America was in the throes of the Great Depression; film attendance was dropping; and Mayer (then the highest-paid executive in the country) wasn’t sure how much longer his dream factory could last.

Would the actors, writers, directors and technicians join him, he begged, and agree to a 50% pay cut?

Cheers and yells erupted. One by one his employees stood up and pledged their allegiance, vowing to do whatever L.B. needed.

Unanimously, they agreed to cuts that would decimate their incomes and force everyone at Metro-Goldwyn-Mayer to retrench—everyone, that is, except Mayer himself. Despite promising to share their pain, he kept his $1 million salary, unscathed.

Vicious Battle

This little story is the background to today’s vicious battle over the two strikes that have paralyzed the entertainment business.

Three and a half months since the Writers Guild of America (WGA) stopped work on May 2, and several weeks since the Screen Actors Guild (SAG) did the same on July 14, talks have sputtered off and on at press time, with the latest being held Aug. 15.

On the opposing side of the unions is the Alliance of Motion Picture and Television Producers (AMPTP), who are not really producers, but rather the studios and streamers.

More than economics divides the two warring parties: there’s a mutual distrust that goes back decades, separating the creatives and the suits.

The cost is monumental—and not only to the industry: a Milken Institute report estimated that the last WGA strike (which continued for 100 days) cost California’s economy more than $2 billion, and the number could be more than twice that today.

So who’s right and who’s wrong?

It should be obvious from how I began this column that my heart is with the artists. I’m a writer, and writers have long felt underpaid by the powers that be. But in truth, both parties have equally compelling cases.


We’re amid one of those upheavals that hit the entertainment business every few decades. First came sound in the late 1920s, and with it the end of the silent era.

Then in the 1950s, television siphoned millions of moviegoers away from theaters. After that, video and cable shook up every aspect of industry economics.

Now we’re facing not one but two leviathan changes. Streaming has allowed audiences to access pretty much any content they want, whenever they like, here and around the world.

It’s causing the death of broadcast TV as we knew it, and quite probably cable, too.

Then there’s AI, which, unlike streaming, isn’t just a distribution model but a whole new means of creation, posing an existential threat to the writers and actors who see themselves being supplanted by computers.

Everybody knows these are game changers. But nobody knows quite how they’ll play out.

A few years ago, all the major conglomerates were convinced streaming was the future and threw billions into ventures attempting to emulate Netflix’s success. Unfortunately, that arms race didn’t work.

Subscriptions stalled and most of the companies that had bet the house realized they were unlikely to earn the mega-profits they’d envisioned.

On the other hand, their old-school divisions weren’t generating colossal numbers either. Broadcast TV was shedding viewers like a molting dog; families were “cutting the cord” on cable; and ad dollars—once Hollywood’s golden goose, providing the revenues that turned investors into gazillionaires—were drying up all around.

Since then, blue-chip companies like Disney and Warner Bros. have slashed their workforce by thousands, while watching their stock price hit new lows.

And so they’re doing the same as any other struggling entity: legitimately looking for ways to cut costs.

On the other side, the creatives, the ones who make the product that these companies sell, have seen their incomes dwindle. While a few superstars have gotten rich, ordinary mortals are earning way less than before, with reduced job security, too.

Among other things, the WGA insists that networks and streamers go back to a pre-pandemic model where dozens of writers worked on each show—a worthwhile notion, if it weren’t that ratings are a sliver of what they were in the heyday of, say, “The West Wing.”

Similarly, actors complain about how little they’re being paid on short-lived series that no longer guarantee the residuals they once received—forgetting that the studios and networks have lost much of that income, too, while backing more shows than ever before.

Indeed, a mindboggling 599 scripted series were filmed last year alone (almost 50% more than a decade ago) and few of them made any real money.

Ultimately, the AMPTP will have to throw the creatives a meaty bone. Writers, in particular, have always proved stubborn opponents and are likely to hold out longer than the shareholders who ultimately dictate the negotiations.

The Likely Deal

The studios will probably agree to a minimal threshold for the number of writers on each show; and they’ll also accept limitations on the use of AI, drawing a gasp of relief from SAG’s 160,000 members, most of whom don’t work in any case.

What they won’t do is open their books for the guilds to see where and how they earn their profits.

Any agreement will likely be a stopgap. Technology is changing so fast that neither side can keep up, and in a few years, the models they’re currently tweaking won’t even exist.

That’s something Hollywood has always had trouble understanding. Back in the 1920s, when Warner Bros. was shooting a revolutionary new movie called “The Jazz Singer”—the first to use sync sound—the other studios pooh-poohed it.

Sound would never catch on, they said, as they kept on investing in silents. The man most adamant in this belief? Louis B. Mayer. It almost cost him his throne.

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Sonia Chung
Sonia Chung
Sonia Chung joined the Orange County Business Journal in 2021 as their Marketing Creative Director. In her role she creates all visual content as it relates to the marketing needs for the sales and events teams. Her responsibilities include the creation of marketing materials for six annual corporate events, weekly print advertisements, sales flyers in correspondence to the editorial calendar, social media graphics, PowerPoint presentation decks, e-blasts, and maintains the online presence for Orange County Business Journal’s corporate events.

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