(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.)
Every so often, after I gather data on a topic, I debunk something that I wholeheartedly believed. For example, last week, I published my annual look at the economy, and I mentioned that “median wage growth” in America had returned after a bit of a stall from the 2000s to mid-2010s.
That surprised me when I first read it in Noahpinion’s newsletter, but again, the data is the data. It turns out that workers have seen their situations improve, especially in the late 2010s. (Though at the same time, inequality has hit all-time highs.)
Today, I have another example of a debunked truism (or aphorism? Not sure, honestly) that I’ve repeated since I went to business school. At b-school, I learned this truth about Hollywood movie studios:
There are always six movie studios.
That’s a truism I’ve believed for years, like “Content is King”. (Though that one’s still true.) And on the surface, it feels true. What were the major studios at the dawn of the century? Well, it was Warner Bros., Universal, Sony, Disney, 20th Century Fox, and Paramount. Cool, six movie studios. (There were fewer minors back then, which we’ll get to.) Let’s hop back to 1980. Still six, but not the same six. Notably, in 1980, Disney was a minor studio. Instead, the studios were 20th Century Fox, Universal Pictures, Warner Bros Pictures, Paramount Pictures, Columbia Pictures and MGM (which then bought United Artists).
See, always six!
But as I sat down to write this week’s “Most Important Story of the Week”, well, one question loomed:
Will this still be true after Warner Bros. is sold?
Paramount-Skydance, Comcast-NBC Universal and Netflix all submitted bids for this legacy studio yesterday. If one of them wins and successfully merges with Warner Bros, we’ll see the end of a second major studio in just ten years. That’s a historical anomaly. And it will drop us down to five major film studios…or will it? Some pundits are constantly repeating a line (from executives) that Hollywood “has to” consolidate to survive the threats of Big Tech and social video.
So it’s the perfect time to explain this truism to my audience…and to my surprise, it’s not really true! It’s “mostly true”, but not quite, and that difference tells us a lot about what is and isn’t inevitable in the entertainment business. In particular, the idea that this industry “has to consolidate” isn’t some economic fact of history. If anything, it’s the opposite.
So strap in for a combination history and data lesson.
There Have Always Been 8, 7 or 6 Movie Studios: A History
To be clear, today, I’m analyzing the history of “movie studios”, which I’m defining as just American studios making feature-length films, either for theaters or for streaming.
As for the data, this isn’t the most data-rich environment, especially before 1980. So my sources are:
- Wikipedia for pre-1980s, particularly the “Major film studios” page, along with individual company webpages.
- The-Numbers market share for the 1980s and beyond.
- My data on streaming film releases by streamer over time.
- Some of my own judgement.
Again, this is NOT a true “data analysis”, since the data is noisy and incomplete. As for who qualifies, think of it like “share of film production budgets of films released in America”. The majors are the studios that, historically, have spent 12.5% to 20% of total domestic film production budgets. And yes, I’m focusing on America here, going back to the founding of industry.
So with that in mind…here’s the key chart:
Yep, that’s it. Six movie studios for most of the last fifty or so years, and either seven or eight before that.
For the data sickos, here’s the table in Excel, which you know I made first, due to my love of spreadsheets:
(Yes, for future articles on M&A/antitrust, I’m going to use some other visualization tools. See below if you’d like to help make future merger charts. And yes, I tried to make the image in ChatGPT, but it kept making mistakes, and since each output is fresh, it’s hard to correct.)
And this decade threatens to end that trend…so let’s look at it by time period.
1920s to 1970s – The Golden and Silver Age
The first major studios were founded between 1912 and 1935; there were “five majors”—Universal, Paramount, Warner Bros, 20th Century Fox and RKO Pictures—and “three littles”—Columbia, United Artists and MGM.
Yeah, the three littles could be “mini-majors”, but together the “Big Eight” accounted for something like 90 to 98% of domestic box office. Four of the five majors survived until the 2010s (when 20th Century Fox was bought by Disney). And that was the first surprise for me, debunking one of my favorite truisms that “there are always six studios”: we used to have eight!
In the 1960s, the whole industry struggled, partially due to the rise of television, and that’s when we saw the first “death” of a studio, RKO Pictures, though Hollywood still had seven studios.
By the way, this history ignores who bought and sold movie studios themselves, as that list is much more colorful and long, including General Electric (consumer and business electronics) owning Universal, Seagrams (alcohol) also owned Universal at one point, Time-Warner and AOL (internet) merging, Gulf & Western (mining) owning Paramount, and even Coca Cola (sodas) owning Columbia!
1980s to 2010s – Age of Consolidation and Biz Models
Starting in the 1980s, the entertainment industry began to consolidate across TV and film, and we saw a major shift in power for the first time in a while. Disney (under its Buena Vista label) was re-energized by CEO Michael Eisner and film head Frank G. Wells and became a major studio. By the 2010s, Disney became the utter king of the box office, especially after their Pixar, Marvel and Lucasfilm acquisitions. Meanwhile, United Artists was acquired by MGM, but both struggled, and MGM became a mini-major (at best) after the 1980s:
Then, Sony bought Columbia, and rebranded it—Columbia had earlier bought Tristar, a distributor founded in the 1980s—but that didn’t really change operations for the movie studio. Investors created Lionsgate in the late 1990s, and you could even argue that, at points in the 2000s and 2010s, they were a true major, outperforming Paramount at times.
Still, from 1980 to 2019, the major studios reigned. Like the majors of old, the majors and mini-majors—I put those studios which earned $1 billion or more in the time period at the box office, according to The-Numbers—owned 92% market share:
That said, no one studio dominated. Here’s The-Numbers chart of US box office performance since 1995, showing all the major studios having ebbs and flows in performance:
The types of corporate owners shifted too, and most movie studios fell under the ownership of major entertainment conglomerates, combining film and TV production, broadcast and cable ownership, and theme parks, and even the corporate owners tended to be entertainment adjacent, like cable or telecoms.
Then came the streaming disruption.
2015 to Now – Streaming and Disruption
We’ve seen more disruption in the 2010s and 2020s than any time since the 1980s, and then the birth of film before that.
I made the timeline above by decade, rounding up or down in a few cases, but inarguably, the age of streaming disruption started in the mid-2010s, then accelerated in 2019, the “streaming ratings era”. We’ve seen a rash of new entrants and a resulting renewed push for consolidation (with some antitrust) pushback since then:
- Netflix started releasing original films in 2015, and now releases 40+ movies per year in America, including big blockbusters. I had debated calling them a mini-major, but they simply make too many films to not count as a major.
- Amazon Studios started around then, then they bought MGM in 2021 (and closed in 2023), though admittedly, they massively overpaid for that deal. They now say they plan to release 15 films in theaters per year, though they already release high-profile original films both in theaters and straight-to-streaming.
- Disney bought 21st Century Fox in 2019.
- Apple TV+ started making original films as well, though they’re a mini-major at best, though F1 is a top fifteen film this year.
And now one of the majors will buy Warner Bros, ending its life as a major studio. That will mean one of two outcomes:
- Amazon-MGM Studios (or maybe Apple) rises up to become a new major or…
- …We drop down to five major studios.
In either scenario, the number of films the new combined studio makes will likely decrease again. This happened after Disney purchased 20th Century Fox, and I expect it will happen again with whatever company buys Warner Bros. Discovery. Even if the number of films stays steady, the industry will likely pay less per film, and we may see fewer blockbuster flicks.
Ramifications
Overall, my biggest takeaway from doing this exercise is this:
This is absolutely one of the more disruptive times in feature films.
While the number of studios has changed before, notably in the 1960s and 1980s, we’ve never seen multiple studios disappear this quickly.
Indeed, if Warner Bros does disappear as an independent movie studio, and Amazon (or maybe Apple) doesn’t really step up to replace it, we’ll have absolutely shifted from the historical norm. This would be better for the remaining studios’ profit margins, but worse for customers overall, since it will mean fewer films for them to enjoy.
Fewer films means less value created for customers. It’s pretty simple math.
And that’s where the one word I haven’t mentioned yet really needs to be brought up: antitrust.
I prefer using “competition”, but whatever word you want to use, the point is a movie ecosystem with fewer, more powerful distributors is absolutely more profitable for the remaining survivors, but is it healthier, more efficient, prosperous and better for society? I don’t think so. If anything, the above history says to me that we need more competition, not less.
So…What Happens to Warner Bros Discovery?
That’s just the table setting for the story everyone in town is (rightfully) talking about: Paramount-Skydance, NBC-Universal and Netflix all bidding for some or part of Warner Bros. Discovery yesterday. Given that this deal is still in the “TBD” phase, there’s a limit to how much we can opine. But still, I have some scattered thoughts.
Let’s go list style…
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