How will TV’s streaming wars end?

I have a WhatsApp group chat, set up after a night in the pub five years ago, where friends recommend TV shows that everyone just has to see. It started in 2018 when shows like Killing Eve, Succession and Derry Girls were launching and it felt like a TV version of a book group — except with irritating pings whenever people commented.

The pings aren’t irritating these days. They’re non-existent. September and October used to be the time when all the best shows aired — audiences were home from the holidays and advertisers were spending. This year, it’s as if the screens are filled with tumbleweed.

The biggest impact is from this summer’s Hollywood strikes, which have thrown schedules into disarray. The Writers Guild of America downed pencils on May 2, delaying or cancelling a swath of films and shows. The Screen Actors Guild followed suit on July 14, closing down any remaining filming on American films and TV around the world. Although the WGA has agreed terms with the studios and its members are heading back to work, the SAG negotiations are still in progress.

We were enjoying the Golden Age of Television, when Netflix paid $10mn per episode for ‘The Crown’ and HBO forked out $15mn an hour for ‘Game of Thrones’

As a result, streamers have been holding back shows just to make sure they have something to air if the strikes grind on. New seasons of The Last of Us, Euphoria, House of the Dragon, Hacks and The White Lotus have been delayed, while Emily in Paris and Stranger Things have no fixed date. True, The Crown still looks set for November, as does Doctor Who, but unless the Screen Actors Guild reaches agreement with the studios there won’t be any actors available to promote the shows, so you’ll have to keep an eye on the listings.

After years of spending heavily to lock high-profile writers into expensive deals, studios have also taken advantage of the Writers Guild walkout to quietly kill off a number of series — The Great, How I Met Your Father and Metropolis have all been axed. In the UK, meanwhile, a fall in advertising revenue means commercial broadcasters are holding back the best shows to air them when the money returns.

When my friends and I set up our WhatsApp group we were enjoying the Golden Age of Television, when Amazon stumped up $8mn per hour for Jack Ryan, Netflix paid $10mn per episode for The Crown and HBO forked out $15mn an hour for Game of Thrones. Much of that money was spent in the UK, British talent was proving lucrative abroad and there were more new dramas being made than it was possible to watch.

In 2015, John Landgraf, chair of America’s FX Networks, began keeping a running tally of the number of new original series released in the US every year. It peaked in 2022 with 599 shows — meaning you’d have to watch 1.6 series a day to see all of them. Content was king, billions of dollars rolled in and, according to data from the Motion Pictures Association, in 2020 more than a billion people worldwide subscribed to a streaming service.

How times have changed. Now, there are more opportunities to watch than ever before, and yet there’s hardly anything on. The strikes are a symptom of a deeper malaise, and it’s becoming clear that the gold rush of quality content in fact contained the seeds of its own downfall. The reason TV is rubbish at the moment is that no one really knows what its future holds and everyone is fighting to preserve different parts of a broken system.

Seen from a distance, Hollywood’s “hot labour summer” could look a little like pampered movie stars throwing a strop. It was cute to see Meryl Streep, Glenn Close, Kevin Bacon and Constance Wu, along with 300 other big-name actors, pressurise the Screen Actors Guild negotiators to call a strike if their demands weren’t met. But the strikes crystallised problems brewing in TV for years. Writers on hit shows were being paid so badly that many had to take second jobs. Shorter contracts meant showrunners had empty writers’ rooms when trying to finish a season.

This all began when Netflix streamed House of Cards in 2013. The company had dropped a few original shows, such as crime drama Lilyhammer, but Cards had Hollywood movie stars as leads, David Fincher producing and picked up 33 Emmys. “It put Netflix on the map,” says Ed Waller, editor-in-chief of TV trade bible C21Media. “Before then, it was basically a digital DVD rental service.”

It became clear in Hollywood boardrooms that Silicon Valley was making a play for its business. Having disrupted the music industry, books, travel, banking, taxis — you know the list by now — the Valley came for Tinseltown. Netflix was deploying the tech-sector playbook of high debt, rapid growth and cheap acquisition of existing commodities that can then be repurposed and traded at a higher margin. Plus lots of algorithms. This didn’t worry legacy Hollywood as long as Netflix was just showing its old movies. But House of Cards . . .  this felt like an ambush.

For some talent, however, it was more like a payday. Shonda Rhimes, for instance, had been loyal to the Disney-owned ABC network. Her hit series Grey’s Anatomy was (and remains) the longest-running primetime medical drama in US television history, while her political drama Scandal and her thriller How to Get Away with Murder had generated at least $2bn in revenue through advertising, syndication and international licensing.

So when she entered contract negotiations with Disney in 2017 and asked for an extra pass to Disneyland, she felt it wasn’t unreasonable. To her humiliation, when her family visited the park, only one of their passes worked. She reportedly called a Disney exec who asked, “Don’t you have enough?” Before you could say “$150mn exclusive deal”, Rhimes and her company Shondaland were in business with Netflix.

Some studios started using AI to spawn draft scripts or read submissions. Without noticing, Hollywood had become a tech business

At which point everyone started buying up high-profile talent and letting them pursue their offbeat projects. The mantra was quality, and the model was high-end US cable TV. As Ted Sarandos, Netflix co-CEO, said back in 2013, “The goal is to become HBO faster than HBO becomes us.”

The amount of cash being spent on TV was so vast that private equity got involved. As your average PE bro knows as much about script development as they do about belly dancing, they saw that famous faces usually do well and started backing celebrity-led production companies. Reese Witherspoon sold her company Hello Sunshine to Blackstone for $900mn in 2021, for example, and Blackstone-backed Candle Media took a $60mn stake in Will Smith and Jada Pinkett Smith’s Westbrook Inc last year.

But the streamers were still more Silicon Valley than Beverly Hills. They were borrowing to finance programme budgets in the tens of billions, but they weren’t investing as much in the basics of programme-making as TV companies used to. The Writers Guild of America’s strike demands highlighted that fewer writers were working on more TV shows for less time and far less money.

The streamers had struck deals with writers and actors in the early years, and as start-ups they didn’t pay quite the same money in quite the same way as the legacy TV companies. Take residuals. Actors and writers are usually paid royalties over the life of a show, but streamers negotiated a considerable discount on those payments. Actors including Kimiko Glenn of Netflix’s Orange Is the New Black took to social media to show cheques of, in Glenn’s case, $27 in total for foreign residuals earned over the decade since the show began.

At the same time, writers’ rooms were smaller, training was impossible and writers were tired, broke and uninspired. Some studios started using AI to spawn draft scripts or read submissions. Without noticing, Hollywood had become a tech business.

The Writers Guild of America and the Screen Actors Guild aren’t usually the people you’d turn to when barbarians are at the gate. But what we’ve been watching is creatives mounting organised labour’s first sustained campaign of resistance to Silicon Valley and possibly managing to eke out a victory . . . of sorts.

The WGA deal announced last month goes some way to increasing residual payments for successful shows and adding restrictions on the use of AI. It looks like Silicon Valley is having to play and pay the Hollywood way. This, it’s worth noting, is how Things Have Always Been. From the moment Wyatt Earp gave up gunslinging to act as consultant on early Westerns, almost no one has had the edge on Tinseltown.

And yet this is an uneasy peace at best. Post-pandemic, Wall Street had suddenly noticed a problem. The peak streamer uptake of lockdown faltered in 2022. Netflix’s subsequent loss of subscribers caused the company’s market cap to dip $54bn that year. Disney, NBCUniversal and Paramount lost a combined $8.3bn on their streamers. Overnight, Wall Street decided that chasing subscriber growth was not the play — profitability was. The businesses started restructuring, laying off staff and introducing free subscriptions to viewers prepared to watch ads.

Most streaming services, according to Ampere Analysis research, have cut back on scripted television by as much as 24 per cent. “It’s quite shocking to see streamers like Netflix and Disney move away from drama and into reality television,” says Hannah Walsh, Ampere’s research manager.

“Disney, Warners and NBC have had five years of trying to pivot to streaming services,” explains Tom Harrington, analyst at Enders Analysis. “They’re losing crazy money, but they’re supported by their legacy free-to-air networks, which are still very profitable and popular. But they’re not investing in those networks, they’re moving top programmes to streamers, fewer people are watching ads and they’re killing the cash cows.”

Pretty much all of the big US content companies from Netflix to Warner Bros are carrying high levels of debt, mostly from the past decade’s spending spree. Currently, interest payments are a manageable 5-10 per cent of revenues, but lots of this debt will need to be paid off or refinanced in the near future.

Harrington suggests this refinancing will be very expensive, with interest rates much higher, meaning that companies are going to start selling off subsidiaries, with Disney already touting ESPN and ABC for sale. A spate of M&A deals looms — in which the more sanguine and cash-rich operators such as Apple could clean up in a fire sale, acquiring, say, ESPN sports rights at bargain prices.

“Maybe some billionaire wants to play movie mogul,” explains Richard Rushfield, editorial director of entertainment industry daily newsletter The Ankler. “But if you’re betting right now, the most likely outcome for each of them is consolidation into a tech conglomerate or in a giant combination with each other.”

Landgraf, the man who counted the dramas in the peak TV era, has seen his FX Networks swallowed up by Disney. His long-term prediction is that only a couple of streamers will survive. Big brands will be bought up and wrapped into global streamers, losing their identity along the way.

The result we’re staring in the face is fewer, bigger companies, less risk, less competition, less creativity and far, far fewer jobs

The slow death of HBO is a case in point. As part of the cutback in budgets, the channel that enticed Martin Scorsese, Julia Roberts and Paul Newman on to the small screen has to face the indignity that the fastest-growing source of quality drama on its service comes from AMC, a rival company, which is sharing shows such as Fear the Walking Dead and Killing Eve in a bid to increase its own subscriber base.

Sarandos offered high praise for HBO in 2013. In 2019, Netflix chair Reed Hastings updated his comments — “We compete with (and lose to) Fortnite more than HBO.” When Warner Bros launched its streaming service in 2020 it was branded HBO Max. This year, it was rebranded to Max. HBO now sits on a hub inside the Max brand.

Disney chief executive Bob Iger keeps hanging a possibly-for-sale sign on Disney’s TV businesses, but high interest rates mean cash-rich bidders such as Apple, Amazon or Alphabet are the only likely buyers.

“The result we’re staring in the face is fewer, bigger companies, less risk, less competition, less creativity and far, far fewer jobs,” Rushfield believes. “All driven by tech goliaths that are manifestly hostile to many of the main tenets of the industrial experience.”

In theory, then, things are bleak. The money is running out, the debts are being called in, there’s a shortage of the good stuff and even the bad stuff looks pretty expensive. Those private-equity-backed production companies aren’t producing hits — of the 20 films and TV shows that Hello Sunshine has created, just three have performed well. But this could turn out to be the best year in entertainment for decades.

First, there are the mavericks who have had a killer year. A24, for instance, an independent studio which inspires such devotion in its fan base that it has its own A24 merch. It was founded in 2012 by young Hollywood execs Daniel Katz, David Fenkel and John Hodges, and its movie output includes Oscar-winning Moonlight, Greta Gerwig’s solo directorial debut Lady Bird and 2022’s hit The Whale. Its TV output is equally impressive — recent hits include HBO’s Euphoria and Netflix’s Beef. A24 has been in business all year, as Katz and co refused to join the Alliance of Motion Picture and Television Producers and continued making films and TV under special union dispensation, having accepted union terms.

Then think about Hollywood’s shocking summer with every sure-fire banker — from The Flash to Mission: Impossible — disappointing at the box office. The hits were counterintuitive. No one expected Barbie to be Warner Bros’ biggest film of all time. No one predicted Oppenheimer’s huge success. Meanwhile, Past Lives, a semi-autobiographical story from Korean-Canadian playwright Celine Song, has been hailed as a film of the year.

This could prove to be one of those generational shifts where an audience wants to watch new things, not the same old tat, just as programme-makers work out how to tell stories we’ve not heard before.

And while it is taking time to soak through the system, I can tell you what to watch if you’re looking for the good stuff. A24 has Dreaming Whilst Black on BBC3, co-created by and starring Adjani Salmon, about a filmmaker working crappy jobs to get by. There’s Better, a Leeds-based thriller with Leila Farzad as a compelling detective inspector falling into corruption to help her son, on iPlayer. Or try Then You Run, featuring Rye Lane’s Vivian Oparah, giving a Fargo-style twist to four 18-year-old Londoners running from drug dealers.

Rushfield points out that although Hollywood is still run by Boomers, the new breed of writers, directors and producers are just sidestepping the old guard to do things their own way. We saw this before in the 1970s. Terrified by television, studios flung money at spectacle, such as 3D films, but kept losing money. Out of desperation, they turned to young talent inspired by European cinema and weird B-movies — including Robert Evans, Martin Scorsese, Francis Ford Coppola and the rest of the American New Wave.

It feels as if we’re on the verge of that level of creative change all over again. If we’re lucky, this new wave of talent will break through, and this time the revolution will be televised.

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