We are in the midst of a trend that is not going to stop until every major Hollywood studio is gone as a standalone entity.

To this point, we already saw MGM and Paramount gobbled up. They were acquired, now part of larger ecosystems.

There is talk of Warner Bros Discovery splitting up, in a move to lighten the debt load on the remaining company.

Image from article linked below

The Death of the Hollywood Studio

For the past 100 years, we saw the movie studio as the epicenter for the world of entertainment. This was more than just a business located in a particular geographic location. Instead, it became a force throughout the world. I

Hollywood was ground zero for all entertainment. The town became synonymous with glitz and glamor. Many dreamed of becoming Hollywood stars.

The entire industry, since the 1930s, was run under the studio system. These become some of the most powerful companies in the world as it relates to culture, fashion, and trends. Around it sprung a great deal more than the movie business.

They are now vanishing, one-by-one, before our eyes.

Warner Bros Discovery Split?

Like the studios before it, not all is glamorous within the offices of Warner Bros.

Here we have a long time Hollywood studio, a household name to most people, looking at reorganization to fend off attacks.

Warner Bros. Discovery has reportedly discussed a plan to potentially split its digital streaming and studio businesses from its legacy television networks (ie. CNN, HBO) according to a surprising report in The Financial times.

On the surface, this might not be a major deal since companies do this type of stuff all the time. However, there is an underlying issue that needs addressing.

This could include selling assets to hiving off its Warner Bros movie studio and Max streaming service into a new company unburdened by the $39 billion net debt load WBD currently has.

Source

Holy Moses. $39 billion in debt.

This is not a positive sign when dealing with an industry that is in contraction. As we covered in a number of articles, the broadcast entertainment industry is dealing with two technological disruptions. The first is the breaking of the monopoly on distribution, which has placed YouTube at the head of the streaming wars.

Then we have the anticipation of AI. This is not only going to be utilized by the studios but, also, wields as sword against them. As the technology improves, others are going to get into the game. We are already seeing thins.

Losing Hundreds of Millions Adds Up

When movies fail, it is quite a hit. This is especially true when it was a heavily promoted film. It is not uncommon to see the costs, with marketing, hitting $300-$400 million.

When a movie only brings in $150 million, that is a problem. Over time, this can add up.

Disney, for example, took a hit of almost $1 billion on its films in 2023. The numbers for this year are not encouraging (although their latest Pixar film is doing well, garnering a strong payday).

Anytime an industry is under attack and facing some sort of disruption, debt loads become even more magnified. The fragmentation of the broadcast industry is only going to continue as technology allows for more platforms to be created. It is rather simply to set up a streaming platform. In fact, many of the television makers are starting to do this.

Then we have the likes of Amazon and Apple in the movie business (Amazon bought MGM).

Things are getting very interesting. It is no wonder the number of movies being produced by the major studios fell off a cliff.

We are looking at a sector of an industry in decline. Time will tell if it is able to bounce back.

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