US cinema business ‘teetering on disaster’ as Hollywood budgets shrink
Studios will focus on fewer but more ambitious endeavours, with the potential to deliver Oppenheimer and Barbie-sized cultural and box-office impact. Photo: Melinda Sue Gordon/Universal Pictures
When stars returned to the red carpet in early January after two bruising strikes to celebrate the success of Oppenheimer and Succession, one existential threat above all was on everyone’s mind: Hollywood is shrinking.
The era of “peak TV,” is over, said 17 entertainment business executives, agents and bankers who spoke with Reuters. From fewer original series and movies to greater scrutiny of budgets and a further squeeze on movie theatre profits, people who call the shots said the television and film industries are adjusting to sober economic realities.
“The great contraction is upon us,” said one veteran television executive, speaking on condition of anonymity. “I think there will be a significant retrenchment in the quantity of content, and the amount spent on content.”
The industry is slowing down, executives said. Development executives are taking longer to greenlight shows, even for projects from established showrunners like Ronald D Moore, whose credits include For All Mankind and Outlander.
Production budgets are contracting – including at the streaming service Apple TV+, whose cash-flush corporate parent, Apple, boasts a market capitalisation of $3trn (€2.78bn). Both examples are reported here for the first time.
Fox is looking to slash spending on one prestige drama to $4.5m per episode from $10m. At Disney, where CEO Bob Iger is fending off activist shareholders, development executives are under deeper scrutiny.
“They’re all a bit scared about what to do next,” said one prominent talent manager.
The movie business is having its own existential crisis as once reliable formats have fallen flat at the box office. One long-time studio chief said he has been hearing for years about “superhero fatigue”. That was in full display last year, when a procession of big-budget but poorly received films, including The Marvels, Shazam: Fury of the Gods and The Flash, fell short of expectations.
In response, industry insiders say studios will focus on fewer but more ambitious endeavours, with the potential to deliver Oppenheimer and Barbie-sized cultural and box-office impact. Both films helped prop up a 2023 box office where well-established franchises fell flat.
“You've got to have a spectacle,” said one studio executive associated with one of the biggest blockbusters in recent years. “It’s got to be, ‘You have to see it while it’s in the theatre.’ We can’t greenlight something large scale, if you could probably watch this at home and it’s just as good.”
Audiences are gravitating to streaming services to watch all but the biggest, loudest, films, noted investment bank TD Cowen. Just 19 action/adventure films accounted for 56pc of the total box office for the top 100 films of 2022. The outlook for a sustained recovery, beyond this type of high-adrenaline flick, is questionable, said TD Cowen.
That will further constrain cinemas, said another long-time media executive and investor, who warned there will be too few films released to justify maintaining 39,000 screens in the US, a sentiment echoed by TD Cowen. The theatre business, this executive said, is “teetering on disaster”.
