(Welcome to the “Most Important Story of the Week”, my bi-weekly strategy column analyzing the most important (but often not buzziest) news story of the last two weeks. I’m the Entertainment Strategy Guy, a former streaming executive who now analyzes business strategy in the entertainment industry. Please subscribe.)
In Jason Pargin’s quite enjoyable 2024 novel, I’m Starting to Worry About This Black Box of Doom—I’d strongly recommend listening to Sonny Bunch’s interview with the author about the its themes—one character tells another character that they’re going to tell them something that’s inarguably true but the other character is going to get really, really upset when they tell them this very true thing:
The world is better than it’s ever been before.
Naturally, like many people these days, especially the chronically online, the other character does indeed get upset. But it’s not like this only happens in novels. The other day, a friend asked me how I’m doing in our “dystopia hellscape these days” as they ate filet mignon tacos from a delightful taqueria before we went to a fancy piece of live art and had a thoroughly enjoyable evening in the Bay Area.
What matters is why people feel this way: constant, unceasing, depressing media. This problem actually started decades ago, with the advent of local television news, which made people think the murder rate was sky-high, creating the phenomenon of “mean world syndrome”. Click-based websites and then social media only turbo-charged this trend further. And it’s not without consequence; according to countless studies, people are more depressed today than they’ve ever been before.
How does this happen? Take the clearly biggest story for Hollywood this week:
The WGA agreed to terms with the AMPTP, preventing a WGA strike for four years.
Did you see this headline blared to the high heavens? I did not. In fact, if someone hadn’t texted me on Friday, I’d have missed the news entirely until I caught up on my email newsletters. Heck, even then, I might have missed it. Most news outlets just mentioned this huge news in passing.
If, in contrast, the writers did go on strike, we’d be deluged with bad news and depressing headlines all year long.
Again, I understand why this happens. But it’s worth acknowledging that it happens so that we can all recognize how it distorts our understanding of the world. Things look and feel horrible, partially because headlines are always saying how awful everything is. And they ignore genuinely good news like the WGA and AMPTP making a deal for not just three but four more years!
So let’s discuss that as the “most important story” of the week. It’s not necessarily the most interesting story, but it is the most consequential. And again, it’s great news. I’m leading with this story even though no one else is. So I’ll look at that, but also a lot of different valuations of companies that, frankly, puzzle me. That, plus why OnlyFans has the funniest valuation out there, the saddest news of the week (at the very end), State AGs putting a merger on ice, some terrific video game data analysis, and more.
Most Important Story of the Week – The WGA and AMPTP Agree To a Deal
The news that the WGA and AMPTP made a deal genuinely and pleasantly surprised me.
While we can debate whether or not the writers earned more in salary than they lost by striking in 2023, what we can’t debate is whether or not the strike had a huge impact on the industry as a whole. It walloped earnings, for both talent and companies, and set content production back 12 to 24 months. Coming out of Covid-19 disruptions, it only further destabilized the industry. It likely had an outsized impact on Hollywood itself—meaning the Los Angeles area—since it likely encouraged some productions to move overseas to avoid future labor issues.
Again, this doesn’t mean the writers should or shouldn’t have struck, but those were the impacts.
Given the proximity to the last strike and current geopolitical instability, the appetite for further content disruption wasn’t high on either side. This Hollywood Reporter headline likely captures the feeling of many writers:
I’d add, film and TV production never rebounded from the 2020 to 2023 disruptions, and likely never will.
As for the strategic impacts right this moment, the odds of a major production shutdown have declined dramatically. Not entirely, of course, as SAG-AFTRA and the DGA could still decide to strike for better working conditions. Of those two groups, SAG-AFTRA is the more likely to strike. First, the DGA usually agrees to deals, as happened in 2023. Next, compared to writers and directors, LLMs (note I didn’t just say “AI”) can replace actors’ work without complementing it or making it easier to do their jobs. Writers can dabble with AI and it may help speed up certain tasks, but LLM-produced scripts aren’t ready for primetime, so they won’t get replaced anytime soon. Actors, on the other hand, can’t really use AI to help with their work; LLMs can mostly just steal their likenesses.
Still, I doubt either of these two groups will strike. IATSE (the union representing below-the-line workers) could strike next year—their last deal came in 2024—but after years with far less work in Los Angeles, those workers have even less savings to shield from a slowdown.
Notably, the WGA also agreed to a four year deal, which is probably the biggest strategic shift in this negotiation, and again, probably speaks to the desire to avoid further disruptions this decade. Extending the timeline probably helps studios more than the Guilds/Unions, but I understand the logic for both sides.
Still, the lingering issues of the strikes remain: declining pay for talent (especially residuals) and AI disruptions. The latter would likely require federal legislation, and I’m doubtful that happens.
But if the other guilds/unions come to terms this year, I’d argue that the work needs to continue. They should redouble their efforts on restoring “markets” to Hollywood, as I suggested three years ago. Talent wins when there are lots of buyers and lots of sellers. This means a focus on (re)creating markets for content resales, licensing and syndication. But I’ve been writing about this topic (antitrust and so on) a lot recently and don’t want to come across like a broken record.
Almost Most Important Story of the Week – The Gap Between Public and Private Markets and the Implications for Hollywood
Over the last 25 or so years, the difference between public markets and private markets has narrowed. Bloomberg columnist Matt Levine has argued that “private markets are the new public markets”. Essentially, in this framework, companies can and do stay private for longer, enabling them to grow despite never joining the stock market. The walls have broken down between the two.
I realize some of my readers may not follow the financial press closely, so let me quickly define what I mean here:
- A privately-held company doesn’t have a stock that is traded on open exchanges. This means only accredited investors—private equity, venture capital, hedge funds, banks, and high net worth individuals—can buy or sell shares. This also means they don’t release audited financial statements.
- A publicly-held company is traded on a stock exchange like the NYSE or NASDAQ. They do release audited financial statements to the public.
The walls between the two have slowly broken down, primarily due to deregulation. In the past, privately held companies couldn’t exceed 500 shareholders, and those investors couldn’t resell their shares. (Indeed, this is what forced Facebook to go public, and the laws actually changed in 2012 in the 2012 JOBS Act.) As such, one of the main incentives to go public—to reach much more capital—was removed. Later in the 2010s, basically any pretenses about reselling shares have been removed. Today, companies like SpaceX, OpenAI and TikTok can stay private for long, long stretches, eventually earning billion dollar valuations.
That very last word, “valuation”, is what caught my eye for today’s article. See, even as the walls between public and private companies have shrunk, one core change has not: publicly traded companies see their equity value change every business day, while private companies don’t. As I wrote in December, this often leads to eye-popping valuations for privately held companies that, essentially, never come down.
And I think this is an issue for the entertainment industry.
What Does This Have to Do with Hollywood, One May Ask?
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