With the Strikes Over, the Mood in Hollywood Is Decidedly Mixed

It should be a rapturous time in Hollywood.

Writers have been back at their keyboards for a month, having negotiated a strike-ending deal so favorable that it seemed to leave even them a bit gobsmacked. On Wednesday, the actors’ union said it had negotiated a tentative contract of its own, all but ending its 118-day strike and clearing a path for the film and television business to roar back to life for the first time since May.

Champagne for everyone!

Instead, the mood in the entertainment capital is decidedly mixed, as celebratory feelings compete with resentment over the work stoppage and worries about the business era that is coming.

“People are excited — thrilled — to be getting back to work,” said Jon Liebman, co-chief executive of Brillstein Entertainment Partners, a venerable Hollywood management firm. “But they are also mindful of some sobering challenges that lie ahead.”

Analysts estimate that higher labor expenses will add 10 percent to the cost of making a show, and studios are expected to compensate by cutting back on production.

“Companies are not going to increase their budgets accordingly,” said Jason E. Squire, editor of “The Movie Business Book” and host of a companion podcast. “They will compensate by making less. The end.”

Hulu, for instance, expects the number of new shows it makes in 2024 to fall by about a third from 2022.

The Directors Guild of America also has a new contract that guarantees raises. And two more union contracts, both covering crews, come due in the next few months. Studios will either have to pay up or risk another shutdown. “READY for our contract fight next year,” Lindsay Dougherty, lead organizer for Teamsters Local 399, recently said on X, formerly known as Twitter. Her branch represents more than 6,000 Hollywood workers, including truck drivers, location managers and casting directors.

Even before the strikes, Hollywood was swinging from boom times to austerity. Peak TV, the glut of new programming that helped define the streaming era, ended last year as Wall Street began pressuring streaming services to put a priority on profit over subscriber growth. TV networks and streaming platforms ordered 40 percent fewer adult scripted series in the second half of 2022 than they did in the same period in 2019, according to Ampere Analysis, a research firm.

Put another way, 599 adult scripted series were made last year. Some analysts predict that, by 2025, the annual number will be closer to 400, a roughly one-third decline. Even the most modest series employs hundreds of people, including agents, managers, publicists and stylists, who in turn fuel the broader economy.

“With the strike over, we’re all staring down the barrel of a painful structural adjustment that predates the strike,” Zack Stentz, a screenwriter with credits like “X-Men: First Class” and “Thor,” wrote on X. “A lot of careers and even entire companies are going to go away over the next year.” (He added, on a glass-half-full note: “This is also a time for clever little mammals to survive and even thrive in the new landscape. Your job is to be a clever mammal.”)

The streaming profitability problem remains largely unsolved. Netflix and Hulu make money, and Warner Bros. Discovery has said its Max service will turn a profit by the end of the year. But Disney+, Paramount+, Peacock and others continue to lose money. Peacock alone will bleed $2.8 billion in red ink in 2023, Comcast said last month.

Most analysts say that there are too many streaming services and that the weakest will ultimately close or merge with bigger competitors.

The entertainment industry’s underlying cable television and box office problems also remain dire, in some cases growing worse during the five months it took to restore labor peace.

Fewer than 50 million homes will pay for cable or satellite television by 2027, down from 64 million today and 100 million seven years ago, according to PwC, the accounting giant. In July, Disney announced that it was exploring a once-unthinkable sale of a stake in ESPN, the cable giant that has powered much of Disney’s growth over the past two decades. Paramount Global’s once-venerable cable portfolio, centered on Nickelodeon and MTV, has also been pummeled by cord cutting; Paramount shares have dropped nearly 50 percent since May.

The film business is also unsettled. Movies now arrive in homes (either through digital stores or on streaming) after as little as 17 days in theaters, compared with about 90 days, which had been the standard for decades.

Audiences have finally started to tire of Hollywood’s prevailing movie business strategy — endless sequels, each more bloated than the last — with lackluster results for the seventh “Mission: Impossible” film, the fifth “Indiana Jones” installment and 11th “Fast & Furious” chapter as evidence.

Theaters are not dead, as blockbuster turnout for “Five Nights at Freddy’s,” “Taylor Swift: The Eras Tour,” “Barbie” and “Oppenheimer” has shown. But ticket-buying data suggests a worrisome trend: People who were going to six to eight movies a year before the pandemic are now going to three or four. Even the most ardent fans of big-screen entertainment are paring back.

Cinemas in North America sold about $7.7 billion in tickets this year though October, a 17 percent decline from the same period in 2019.

There is more competition for leisure time; TikTok has 150 million users in the United States, a majority of them younger than 30, and the average time spent on the app is growing quickly.

Everywhere you look in Hollywood, or so it seems, businesses are trying to cut costs. Citing the strikes and “volatile larger entertainment marketplace,” Anonymous Content, a production and management company, laid off 8 percent of its staff last month. United Talent Agency also trimmed its head count, as did several competing agencies.

DreamWorks Animation recently eliminated 4 percent of its work force, while Starz, the premium cable network and streaming service, is reducing head count by 10 percent. Netflix is restructuring its animation division, which is expected to result in layoffs and fewer self-made films.

Consider what is happening at Disney, which is widely considered the strongest of the old-line entertainment companies, partly because it is the largest.

Before the strikes, Disney had about 150 television shows and a dozen movies in production. But worries about streaming profitability and the decline of cable television have battered Disney’s stock price. Shares have been trading in the $80 range, down from $197 two years ago. Sorting out ESPN’s future is Disney’s first priority, but the company is also selling holdings in India and weighing whether to part with assets like ABC; the Freeform cable channel; and a chain of local broadcast stations.

Disney is so vulnerable that the activist investor Nelson Peltz has made it known to The Wall Street Journal that he intends, for the second time in a year, to push for board seats. Disney fended off Mr. Peltz in February, partly by saying it would cut $5.5 billion in costs and eliminate 7,000 jobs. On Wednesday, Disney said that, in the end, it had cut $7.5 billion and more than 8,000 jobs. It added that it would continue to tighten its belt.

Phil Cusick, an analyst at J.P. Morgan, said of Disney in a note to clients in late September, “The company plans to make less content and spend less on what it does make.”

Nicole Sperling contributed reporting.