← Plain English with Derek Thompson
Plain English with Derek Thompson
The Future of Entertainment, Part 1: Is Hollywood's Business Model Broken?
00:46:22
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- [00:00]
A
What's up? It's Todd McShay, host of the McShay show at the Ringer and Spotify. We're building this thing up and I couldn't be more excited to be back talking college football and everything, NFL draft with the most informed audience out there. That's you, my co host Steve mentioned. I will be with you three times a week throughout the football season with all the latest news, analysis and scouting intel from around the league. For even more insight, subscribe to my newsletter, the McShay Report to access my mock drafts, big boards, tape breakdowns and other exclusive scouting content you can't get anywhere else. It's going to be a great season and I hope you'll be with us at the McShay show every step of the way.
- [00:45]
B
This episode is brought to you by Zendesk introducing the next generation of AI agents built to deliver resolutions for everyone with an easy setup that can be completed in minutes, not months. Zendesk AI agents resolve 30% of interactions instantly, quickly giving your customers what they need. Loved by over 10,000 companies, Zendesk AI makes service teams more efficient, businesses run better and your customers happier. That's the Zendesk AI effect. Find out more@Zendesk.com this episode is brought to you by Workday. When you're a forward thinker, you don't just bring your A game, you bring your AI game. Workday is the AI platform that transforms the way you manage your people, money and agents so you can transform tomorrow Workday, moving business forever forward. Hello everyone. This is the first of a two part series on the future of entertainment, focusing on two capitals of media today Hollywood, film and TV and Los Angeles. On Tuesday, we'll talk about Broadway, theater and New York. In the last few weeks, I've been interested in several trends that I've seen unfolding in film and tv. And before we introduce today's guest, I want to go through them so that you can see what I'm looking at. The 2010s were not quite a golden age for the business of Hollywood, but they were a golden age of certainty. The film and TV business knew what worked, and they knew what growth looked like. For film, the franchise model was running at full blast, with properties like Marvel and Fast and Furious doing crazy numbers with worldwide audiences. At the same time, the TV industry was moving rapidly to online streaming, where Netflix and HBO and Amazon prime and others poured billions of dollars into original shows with little care for profit. At a time when interest rates were low and investors valued subscriber growth over operating income. That era is over. It's over because of COVID inflation, interest rates, a new investor calculus that put profits over subs, a strike and the fallout of a Hollywood strike. The reality is that entertainment today is a much smaller business than it used to be, even five years ago or three years ago. The key number here is 40%. In 2024, Americans bought 40% fewer movie tickets than they did in 2019, the year before the pandemic. The number of people employed in the motion picture industry in LA county that's also declined in that era by 40%. In the last three years, the number of millions budget TV shows and miniseries has declined by yes, 40%. 40% is no insignificant figure. If the US economy declined by 40% year over year, it would be a catastrophic depression. If say the agricultural industry suddenly made 40% or produced 40% less corn or beef or, or soybeans, it would be an absolute calamity. 40% is a huge drop off. And this collapse has been particularly hard on Hollywood itself. By Hollywood here I mean not just the symbol of movie making Hollywood, but the literal industry in Los Angeles, which has dealt with years of work flowing to other states and countries that offer lavish tax breaks for film and TV production. Few people have done more to shape my understanding of these developments than Ben Fritz, an entertainment industry reporter at the Wall Street Journal. Today we talk about what happened to the TV and film business in the last few years. What would it take to reverse this negative trend? And why are some people seeing this calamitous decline as potentially a hopeful sign for high quality filmmaking in the future? I'm Derek Thompson. This is plain English, Ben Fritz. Welcome to the show.
- [05:18]
C
Thanks for having me, Derek.
- [05:20]
B
Your latest in the Wall street journal is quote, LA's entertainment economy is looking like a disaster movie. End quote. I had heard rumblings of film and TV struggling, but I had no idea that things were as bad in the entertainment industry as you ably described. So the goal of this episode is to understand how things got there. And before we get into the struggles of TV and film production today, I want you to take us back 10, 15 years to the world of the 2000 and tens. A very different world. Low interest rates and growing streamers. Television production is booming. There are hundreds and hundreds of new scripted dramas that are being produced every single year for Netflix and HBO and Amazon. The streamers are going like crazy. What made the 2010s such a good decade for for video entertainment, film and television and for Los Angeles in particular?
- [06:17]
C
Yeah, it was one of those golden ages where you don't know you're in it till it ends. And both movies and TV were really firing on all cylinders, as you say in movies. There was this franchise formula that was really working. You could pump out a new Marvel movie, a new Fast and Furious movie, a new Transformers movie every year or two, and they were consistently successful. Audiences seem to just want more and more. And the foreign market was booming. So you could just, you could almost be guaranteed you were going to get hundreds of millions of dollars from China, from Russia, from Brazil, from these markets where there hadn't been a lot of money in the past. And they loved the franchise movies, the big event movies. So it wasn't like Holly, the movie studios didn't have to figure out, geez, what are we going to do next? The answer is easy. Pump out another movie in your big hit franchise. And that formula kept working. And obviously those movies employ a lot of people. And then at the same time, on television, you had the dawn of streaming. Obviously, Netflix was the pioneer. Everybody started to catch up. And Wall Street's attitude towards streaming services was like a lot of tech startups. We want to see growth, we want to see subscriber growth quickly, and we don't care about profits. Well, the way to get subscribers is to have hot content that people are talking about, which means just have a lot of shows. So put out a lot of shows and there'll be something for everybody, and everybody will feel they got to sign up for HBO Max or Disney or Apple TV. So, you know, it was the era of Peak TV. There were 5, 6, 700 new original scripted television shows being produced every year for cable and for streaming. And all those shows each employed hundreds of people in the cast and crew. And of course, because there were so many being made, the competition for talent was high, which means the pay was high. So if you were working in movies and tv, it was just a fantastic time.
- [08:11]
B
So you brought us up to 2019, and then this mini golden age comes to an end. And when I think about what might have caused the end, I think about COVID I think about inflation and the resulting increase in interest rates, which shifted the psychological attitude of a lot of investors away from focus on subscriber growth, toward focus, focus on profitability, which means a lot of these streamers are going to make fewer shows and focus on making only those shows that they think can be most profitable. And then also, you've got this strike in 2023, this writer's strike. Help me as someone who understands the ingredients but doesn't understand sort of their proper ratio in the sort of explanatory dish here. What caused the mini golden age to end?
- [08:59]
C
Sure. Well, let's start with TV, because TV really is the bulk of production. A lot more TV shows get made than movies. And actually the TV golden age continued past the beginning of the pandemic. 2021, 2022 were actually the peak years for TV production. It really kept going because everybody was at home just watching streaming shows, right? And as soon as they were able to get sets going again in late 2020, the streamers went back on steroids, producing shows. So everybody you talk to in the entertainment business who works on cruise says there were way more jobs, way more job offers than they knew what to do with in 2021, 2022. What really started the turn was in 2022, Netflix's subscriber growth started to slow and actually briefly stopped. And Wall street freaked out like, oh, my God, this growth. There actually is a ceiling to streaming growth. And as soon as that happened, they immediately pivoted and said, we want to see profits. We got to see that you can turn this into a real business once the growth slows down. And of course, the studio started to think, okay, well, how can we make these profitable? Well, the obvious answer is to slow down spending, stop production. And that coincided with the strikes, which happened in 2023, because stopping production is kind of a difficult thing because productions are planned many months in advance and. And you can't just like turn on a dime. But the strikes for the studios were a blessing in that regard because everything stopped and provided an opportunity to reset because there was no production for four or five months when the strikes ended, the studios were like, okay, we're going to reset at a much lower level. We're going to spend a lot less money. We're going to show Wall street we can make a profit. And less spending meant a lot fewer TV shows, meant a lot fewer jobs. It was shocking because before the strikes, production was at this level, I'm gesturing way up high. And after the strikes, they thought it would come back. And it was way lower. We're like 30, 40% lower.
- [10:58]
B
And that's the piece that I did not understand. I mean, these are numbers from your piece. The number of new movies and TV shows with budgets of at least $40 million, so that's like a sort of a middle class movie, has declined by 40% in the last three years. The number of people employed in the motion picture industry in LA county has also declined by 40% roughly in the last three years. I mean, these are enormous numbers. If you're Talking about a 40% decline in America's say, manufacturing industry, that's something that happened over many decades and it was considered a catastrophe. Right? You saw something like that happen in say like the agricultural industry over decades in the early 20th century, a 40% decline in the number of these mid budget films or mid budget miniseries or people employed by the motion picture industry in LA county. So what I guess folks outside of LA think of as Hollywood, I mean, that's extraordinary. How has this been felt in la?
- [12:04]
C
It's been devastating. I mean the people who work on cruise are the creative middle class of Los Angeles. And these are really good jobs. These are union jobs. You're working steadily, you make low six figures. These are people who can typically afford houses and raise a family and work at a job that they love. People come here to work in entertainment because they really love storytelling and it's a really meaningful job. They work long hours with a big bunch of people who become like a family and they get to produce stuff that in success entertains millions of people around the world. And so when, when the, you know, people have described it to me as the floor just fell out all of a sudden, they didn't know why. And so what you're talking about here are lots of middle aged, middle class people who've worked steadily for decades who all of a sudden can't find any work and they can't afford their mortgage. If their kids are in college, they can't afford the tuition, they have to cut back on spending on everything. Some people are considering moving. People are depressed because they don't have the work that brings them meaning. And of course those people spend money. So there's all these other businesses that rely on spending. Either buy studios, you know, buy props, buy costumes by catering, or to spending by regular middle class entertainment. People who go out and you know, go out to a restaurant, et cetera. So you feel it all across the economy. There's a lot of people who are financially struggling and there's a lot of people who are really depressed and feel like they've lost, they've lost their life purpose.
- [13:31]
B
To what extent is this something that you believe and other experts believe will come back? Right. Inflation has come down. Consumers are still spending, they're still going to the movies, they're still watching a ton of streaming. And yes, the economics of it has changed and Netflix has changed its strategy from make as much stuff as is possible to make stuff that preserves a certain operating income for our company as long as we're publicly traded and being judged by our operating income. To what extent are folks in Hollywood thinking this is the new normal, this is going to last forever versus this is a dip? We're still dealing with some crises. We're still dealing with the aftermath potentially of the strike. This will probably get better in the next few years.
- [14:14]
C
Well, there's really different schools of thought. I mean, I think the optimistic school of thought is Hollywood has been disrupted by outside factors many times before. And people thought Hollywood was going to be over when sound came in, when television came in, when the VCR came in, when DVDs came in, when Internet streaming came in, and they were all disruptive. And in the end, Hollywood came back stronger than ever. So that's the hope. And people, of course, always want to be entertained. But the concern is that even when these economic factors abate, there's all these other problems that may, that may be a permanent shift. Right? Obviously, a lot of people get their entertainment now from, from YouTube and TikTok, which means they're spending less time watching Netflix and Disney Plus. We haven't talked at all about the factor of tax credits. A lot of jurisdictions give very generous tax credits, which I think a better word for your audience to understand what is a tax credit is just a subsidy, just a government subsidizing making movies and TV shows. And the UK and Canada, just to take two examples, give very generous tax credits. So generous that pretty much all big budget movies shoot outside the US now it's no longer affordable to shoot them here. So even when there is a comeback, how much of that stuff is going to get made in the United States? So for all those reasons, I think people are concerned that things might get a little better. But it's hard to believe in the foreseeable future they're going to get back to what they were at just three years ago.
- [15:44]
B
And just for my edification then, that's been happening for a while, right? I mean, Canada and the UK and, I don't know, Australia and even other states within the US like Georgia have been offering quite lavish subsidies or tax credits, whatever you want to call it, to television and film production that has pulled a lot of it out of Los Angeles, which is already a rich city with an elevated price level to start with. Right? But that's, that's been a relatively long standing story that might be exacerbating this current recession that we're seeing in Hollywood. But it's been happening for a while. Yeah.
- [16:16]
C
Yes. That's been a long term trend that's going on for like two decades, give or take. It was sort of papered over. La didn't have to worry about it because of this huge boom in streaming production, sort of that made up for the exodus because there was so much stuff being shot that a lot of stuff was still being shot in LA anyway, because you can't make everything overseas, you can't make everything in Georgia. So now that the streaming bubble has popped, the problem of tax credits in other places has become way, way more alarming for Los Angeles and for California. And it's just one more factor that makes it tougher to believe that there's going to be a roaring comeback anytime soon.
- [16:57]
B
I feel like I have a pretty good understanding of why Hollywood or the film and movie industry doesn't make as many original TV shows as it did maybe 10 years ago. Because the when the US was making 600, as you said, 700 original scripted shows a year, that wasn't sustainable. I mean, those shows were being produced effectively at a loss. You could even say that we mentioned the term subsidy before that public investors were subsidizing Netflix to make, quote, too many TV shows. Netflix didn't have to demonstrate a profit in the 2010s, and now that it has a demonstrated profit and other companies have demonstrated profit, it feels like there's been a pullback in TV production. Feel free to correct that if you don't agree with.
- [17:43]
C
No, no, it's exactly right. I think a lot of the good analogy is we all remember when an Uber ride was like $5.
- [17:49]
B
Exactly.
- [17:49]
C
An Uber ride is like $15. Right?
- [17:51]
B
Yeah, I remember I called it the millennial consumer subsidy. That if you were like a 25 year old living in a downtown city in say like 2012 and DoorDash was being subsidized for you, it was being priced below what was optimally profitable. And Uber was being subsidized for you and Lyft was being subsidized for you. Like Airbnb for X, things are being subsidized for you. I mean, zirp, the era of zero interest rates was just a. It was a really, really strange time that saw some unsustainable trends. So what I mean to say there is. I feel like I understand why we don't make as many TV shows as we did in the 2010s. It was just an unsustainable business model. And now we're moving towards something that is More sustainable. What I don't understand as well is this. Americans bought between 1.2 and 1.5 billion movie tickets every year for the last 30 years, essentially. And since 2020 and 2021, we're just not even close to that. We're closer to like 700, 800 million. Like, we're down significantly from the 2019 peak. And it feels, when you look at the graph of movie tickets purchased in America over the last 30 years, like we're just never going to get back to the 2000 and tens. Never say never, I get. But like, what's going on there is the explanation you're hearing in the industry that Covid just changed household calculations about leaving the home to watch movies now that there's so much to do on the couch at home and it's just kind of an expensive schlep to get out. Or is there an editorial critique that for whatever reason, movies aren't good enough to elicit that consumer pull them out of their house and put them in the movie theater?
- [19:37]
C
Yeah, it's definitely an all of the above. There are many factors. One is definitely, as you said, people started watching a lot more entertainment at home during the pandemic. And some people have just never gotten back in the habit of going to movie theaters, that's for sure. Another factor I want to point out is that the foreign box office in many markets has disappeared, like, since the Ukraine war started. American movies don't play. They don't play legally, at least in Russia. There's zero box office coming from Russia. Russia used to be a pretty substantial source of money. In China, there's. The interest in American movies has plummeted partly due to our tension with them and also because Chinese are making much better movies themselves. That's also true in Japan. We obviously don't have the political tension, but the Japanese market has gotten way better at making movies for their own audiences. And they don't watch American movies so much. That's a lot of money that's disappeared that helped pay for your big budget films. But there is this editorial problem for Americans, I think, which is that Hollywood in the 2010s, as we said, was relying on these big franchises. And this seemed like they couldn't go wrong. Even when the movies were bad. There were bad Marvel movies. There were good Marvel movies. They all grossed 800. A billion. A billion five. People have actually gotten tired of them. They overdid it. And we all know Marvel is in a big slump. Fast and Furious is in a slump. There's Kind of this. There's this saying in Hollywood now that 700 million is the new 1 billion at the box office. So these big franchise movies just don't gross as much as they used to. That's a lot less profit for the movie studios. And you can feel it. They're making fewer movies, they're being more conservative, they're spending less money on the movies they make, et cetera.
- [21:15]
B
I could imagine an optimistic spin on this that goes something like this. In the 2000 and tens, excellent blockbuster filmmaking lost its way because we stopped making movies for Americans. We made movies that translated into the global language of explosions, which explosion is the same language in Russian and Chinese and Japanese and American English. And so when the horse of international box office was dragging the cart of Hollywood decision making, we were making movies for an internationalized them that was so broad that our movies became broad and unsophisticated. And now that that international box office is starting to dwindle, you're starting to see maybe more interesting movies being made, whether it's sinners or weapons. And some people love those movies, some people didn't like those movies. They're big hits this year and they're very strange compared to say, Captain America. And it makes me think like maybe there's something a little bit optimistic if you're in Hollywood looking for green shoots to say, well, look, we had a wonderful time in the 2010s making movies that were almost more for people in Beijing and Moscow than they were for people in Cincinnati. But now it's changed and we need to make movies for folks who, who are discerning American consumers. And there's something optimistic about that. Are you hearing anything like that from folks in Hollywood, like at least trying to put a happy face on this?
- [22:50]
C
Yes, absolutely. I think from a creative standpoint, you're right. There's a lot of hope that we could be at the beginning of a period like the 1970s, which is certainly the creative peak of Hollywood movie making in a lot of people's opinions ever. And the reason the 70s Renaissance happened was because the studios didn't know what else to do. All the stuff that was working in the 60s stopped working when the baby boomers were becoming the dominant generation. And they didn't like all these old fashioned musicals and stuff that Hollywood was making. So Hollywood didn't know what else to do. So they gave these young filmmakers like Spielberg and Lucas and Coppola pretty free reign and De Palma. And we got all these interesting movies. And it was ultimately first a creative and then an economic renaissance for the movie industry. And since the studios, their franchise formula is running out of gas and they don't know what else to do, there is hope that we could, that maybe they'll be like, okay, we're just going to give interesting, cool young filmmakers the opportunity to do the next Sinners, to do the next Weapons, to become the next Chris Nolan and hope that happens. So I think there definitely is the possibility that we could be entering another golden age of filmmaking. But, you know, obviously that's far from a certainty.
- [24:17]
D
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- [24:40]
B
Learn more@WhatsApp.com who's thriving right now? I mean, Netflix Stock is up 70% in the last 12 months. So, you know, from a bottom line standpoint, clearly they're doing quite well. YouTube is eating culture, they're eating podcasts, they're eating late night, they're eating everything else. Surely there are other studios that aren't cathedrals like Netflix and YouTube that are also thriving. Where would you say the Juice is right now in Hollywood?
- [25:08]
C
Well, as far as movie making, I would say that Warner Brothers is having an extraordinary year. They made Minecraft, they made Sinners, they made Weapons, they made Superman, they made the latest Conjuring, which was a big hit. They've had a number of hit movies and they've actually had a much more filmmaker first approach than say, Disney's, which is very, very carefully managed properties, kind of like, you know, Procter and Gamble managing their, their brands. So that is very interesting. They've been the most successful movie studio this year as far as, as far as streaming. I mean, it's, it's Netflix and, and it's Amazon. Although, you know, they're in streaming for different reasons than most entertainment companies are. But all of the traditional Hollywood companies, especially when in streaming, are to various degrees, really struggling to get their footing because it's very hard to make a big profit in streaming. And certainly it's nowhere close to the kind of profits they used to make from cable tv.
- [26:11]
B
One thing that strikes me as difficult, if you look at movies like Sinners or Weapons and say, okay, that's the future, that's what we have to do, this is Just my personal judgment, thought Sinners was wonderful. Didn't really like weapons. So let's just start with. Let's go with Sinners. That movie is very strange. It's a very unique and strange movie. It's musical and it's horror and it's artsy, but it's box office. If you say, oh, the future of filmmaking is incredibly strange. High concept pitches that are brilliantly executed by once in a generation directors like Ryan Coogler. Well, I'm sorry, that's not a formula. That's just you saying Ryan Coogler's a genius and we need to find one or two other people who are like him, which is going to be its own very difficult endeavor. It seems like what was great about the franchise world was that you didn't need to rely on otherworldly talent in order to execute something like Marvel 17, right? The franchise was the star. So it does seem like Hollywood might be entering a world with more creativity, but also much more risk and much more how to put this much more variance, right? Like if something, if something like Sinners works and then five other directors get a green light to make like Sinners, but for X, three of those movies are going to suck. Maybe one of them is going to be great and one of them is going to be mid. But like, that's a really high variance strategy. It seems to me that Hollywood is walking into it is.
- [27:48]
C
Well, you mentioned the word, the word execute, and that's the key word. There's a term in Hollywood called execution dependent, meaning you don't know if the movie is going to be good until it's made, where you don't know if the movie's going to be successful until it's made. Whereas, you know, again, back in the 2010s, the Marvel movies were not execution dependent. Even the worst ones grossed like 4 or $500 million. They couldn't bomb, and now anything can bomb. So if you're going to try to make the next Sinners, you've got to be really financially disciplined. You can't be spending obviously 100, $200 million consistently on those movies because you're going to lose your shirt. In order to do that, you've got to have a really disciplined strategy where you're taking very small, measured bets. And then if it seems like this is a movie series or this is a director gaining heat, then you start to spend more money and turn it into something bigger that can generate even more profits and build from there. And hopefully we still have a few franchises Left with some steam that can also generate big profits along the way. That's why Warner Brothers has had such a good year. They had sinners and weapons. They also had Minecraft. Minecraft gross a billion dollars. That movie threw off massive profits. And if that's really the ideal for a studio is to have one or two tent poles that hit huge and then take a bunch of like mid budget risks. And if you're smart and a little lucky, one or two of those will pay off and generate some momentum.
- [29:15]
B
The other trend that's coming down the pike is artificial intelligence. Just last week, OpenAI released Sora 2, which is its video production AI. There's a lot of talk right now about AI actresses, and some human actresses are responding to what they think about these AI actresses. Um, all I can see as someone living in Washington D.C. looking from the outside, is that people are talking about Sora and people are talking about AI actresses. I have no idea whether these things are actually being incorporated into filmmaking right now, or whether they present a threat to folks working on special effects or to actual actors and actresses who are worried about being replaced by something that's cooked up on some data center that currently lives in the Dulles corridor in Virginia. Start wherever you wish with Sora or with AI actresses. What is an actual real threat opportunity for Hollywood right now?
- [30:18]
C
Sure. Well, first I should say the reality is that Hollywood is very slow moving, doesn't change easily. So when you look at the professional filmmaking world, there's not a lot of AI actually being used yet. It's not really being integrated into the workflow yet. People are scared. People don't know how to fit into the workflow. There's also a lot of restrictions from the guilds as to what they can do with it. So when you look at what's happening with movie making at Disney or Warner Brothers, there's not much in the filmmaking workflow. A lot of filmmakers, a lot of marketing people are using it for brainstorming when they're coming up with their pitches for what poster should we do, what trailer should we do? Here's a pitch for a new movie I want to sell. They're definitely using AI all the time, but that's unofficial because it's not the actual filmmaking. So that's the state of things right now. Of course, a lot of people making stuff for YouTube are totally using AI and you can find it all over the place. And a lot of it's crappy and some of it's decent. If you look at the future, there's an optimistic and a pessimistic scenario. It is inevitable that AI is going to take jobs in visual effects, in animation, and a lot of these sort of apprenticeship jobs that exist, like the assistant editor, the assistant to the agents, the people who do this rote tasks. But those rote tasks are how you learn. And if those apprenticeship jobs go away, then how's anybody going to learn to become the next great craftsperson? That's scary. Here's the positive thing. We were talking just before about how you can lose your shirt when you take a creative risk. But AI might make it possible to make a movie that today costs $100 million, and you can produce it for 60 or the 50 million movie for 20 or the $20 million movie for 2, which means you don't even have to have studio money. You can just raise a little bit of money from your relatives and one investor and make an independent movie that looks really good. So, yeah, the pessimistic scenario is fewer jobs, fewer apprenticeships. There's fewer and fewer people working to make movies and TV shows. The optimistic scenario is it's so much easier to make stuff that there'll be a lot more content getting made, and the quantity of content will make up for the decreasing quantity of jobs. And that will be good for filmmakers, and that will also be good for audiences. There'll just be a lot more interesting stuff getting made.
- [32:38]
B
Right. I mean, both things could happen at the same time, right? The bigger production projects could get smaller as these departments of Visual Effects and Animation and Illustrators and Cartoonists and Assistant to the Editor, as those jobs are automated, the bigger projects can get smaller, but the smaller projects can, as you said, become more numerous. Because if the sort of barrier to entry right now is a 10, $20 million film, and that's brought down to 1 or $2 million because you're using AI to do all these things that were previously done by people. Well, maybe you get more small projects along with smaller big projects, if that makes sense. I mean, I like how you sort of like you laid the table here. What do you think is going to happen in the next five years with the introduction of these kind of AI tools to Hollywood, the film and TV process?
- [33:26]
C
I think that it's my. My guess is it'll sort of be the. The bad news first, followed by the good news. I think that. That somebody in the world is going to make a really impressive movie or online video project using AI and it's going to be a huge hit, and Hollywood's going to See that and they'll react. Hollywood's a very reactive industry, and once they see, holy crap, somebody made a movie that looks almost as good as a DreamWorks or Pixar film, and they made it for 30 million bucks and it's a huge hit, we gotta be doing that. And they're gonna start doing it rapidly, and you're gonna see a bunch of jobs disappear, you're gonna see a bunch of budget cuts, but then these tools are gonna be out there, and maybe the people who have been laid off from the studios or who are not getting the opportunity to work on a studio project like they had hoped, they're gonna start being like, well, what else can I do? And if they can find this, a little bit of money from other places, you're going to see a lot more green shoots, a lot more experiments, a lot more people trying stuff, and a lot of small studios may be coming in and being like, hey, we can never go up against Warner Brothers before, But we raised $100 million, we can make three or four, five, six movies, and then hopefully we'll start to see this growth of independent level budget filmmaking that actually looks like studio filmmaking.
- [34:48]
B
Do you think consumers care about AI? Because I have no personal read on this, but I would find it shocking, frankly, if in 10 years, 20 years, some of the biggest musical artists were essentially AI artists. I find that very hard to imagine that there would be a ton of people actively rooting for silicon. And in the same way, I wonder about the ability of AI art that announces itself as AI art to be successful in the marketplace. Now, that's interpretation that says that the project is announcing itself as AI. It's just as likely the same way that I said in a previous episode that artificial general intelligence, that the arrival of superintelligence, it could be loud, like, oh, my God, we just cured cancer, or it could be very quiet, where a handful of companies are using super intelligent programmers for months and months, and only later do we realize, oh, we had breakthrough AGI. In the same way you could have a quiet breakthrough where there's a huge blockbuster film, the K Pop demon hunters of 2028, and then someone goes digging and realizes, oh, this movie was made for like $1.9 million, because all the Illustrator jobs that would have cost millions and millions of dollars were actually automated by so. Right. The latest offering from OpenAI. So, I mean, tell me exactly how you think that's going to work, this sort of breakthrough of artificial intelligence into the marketplace.
- [36:25]
C
I think it's going to be Kind of what you're saying, which is that it's going to be AI powering a human artist or artists. People don't want to go see a movie, especially a movie that feels like it has a creative voice that they know was made by AI. People have an attachment. They care about being a Taylor Swift fan, about being a Ryan Coogler fan. Right. But in 2028, what you could see is the Ryan Coogler movie, which is made by Ryan coogler and like 30 humans and like. And then the rest of it was made by Sora as opposed to ryan Coogler and 500 humans. Right. The next Taylor Swift's producers might be AI agents. Right. You can imagine that. So people, I think there will almost always be a human who is the creative vision, who is guiding the AI or a team of humans. But the core I want to get, the thing I really care about, the reason I wrote the story that provoked our conversation, is that there is a huge middle class of people who are the craftspeople behind the scenes who make these TV shows and movies and work on music and everything. These are hundreds of thousands of humans who get both their financial livelihood and the meaning of their life from doing the work. And they are the ones who are who. There could be a lot fewer of them making all this stuff in the future.
- [37:43]
B
And this is the core of my concern as well, that you're looking at this group, the middle class of film and television production work. You're already dealing with this recession coming out of 2020 and 2021, as you've reported a 40% decline in the number of production workers in LA County. But that's before we see the introduction of artificial intelligence. As you said, Hollywood has been slow to adopt these tools. So yeah, I find it quite concerning what's going to happen to this industry. Right. You've already seen, I think the stat from your piece is that the number of people working behind the scenes in film and TV has gone from 148,000 to 100,000 in just the last three years. That's enormous. You could see it fall by a lot more if artificial intelligence just starts to eat away at these jobs like assistant to the editor, assistant to the agent, assistant to fx. That strikes me as a very, a very plausible near term future. That is a little bit scary. I mean, how are folks in LA thinking about the imminent arrival of artificial intelligence?
- [38:56]
C
People are freaked out, especially again if they're middle aged and established in their career. I think if you're a young filmmaker you might start to think, what are the opportunities here? Right? But if your people, if you're in your 40s or 50s and you're really established assistant director, let's say you're not ready to like, sort of learn how to use Sora for filmmaking. You're also not used to being the person who's orchestrating the filmmaking. You're used to being like, there's another director who's making this and they hire me to help implement their vision. And there's clearly going to be a lot of disruption. And that disruption is going to be damaging to a lot of people who are reliant on the old way of doing things. And that is really the danger. That's what people are petrified of, frankly. I mean, I don't know any other way to describe it. People, if they know a lot about AI, then they're freaked out. But a lot of people are also putting their fingers in their ears and closing their eyes and just being like, I can't think about it. I just hope it takes longer to completely change our industry than some people are saying.
- [40:01]
B
I want to close on a note of hope. As you said, Hollywood has been through many crises that seemed utterly existential. I mean, if you go back to the 1940s, 1950s, and you look at the introduction of television, home television, and you look at a graph of movie tickets bought per year per person in America, it is a straight line down from like 35 to 5 in a matter of a decade. That seems like an existential event for Hollywood. And Hollywood survives 1960s to 1970s. It seems like there's this generational handover where young people are completely uninterested in the kind of movies that Hollywood has taught itself how to make expertly. And what do we have? Oh, we have a renaissance of brilliant American filmmaking. As you said, Spielberg, Coppola, De Palma. It's possible that we could be at the beginning of a renaissance whose shape we just can't quite see yet. It is, on the one hand, I think, harder to find work as an assistant in film and tv, but it is easier in many ways to be a sole proprietor. Right, because the cost of distribution have fallen to zero. And so it's easier to be a one or five person YouTube show. What do you see as an optimistic way forward for some of these folks who have the nimbleness to be ready for sort of the next generation of video entertainment?
- [41:31]
C
Well, there's a lot of reason to be optimistic, I think, for the medium to long term, because there's going to be so much content being made. And as you say, distribution is free. There are a lot of YouTube creators in LA who have their own mini studio and they employ 100 people, 150, 200 people. And you know, I think YouTube, as it eats the world, there's going to be more and more professionalization of the elite YouTube channels. They're going to employ more and more people. They're going to be making content that is just as good as what we're seeing on HBO Max today, and especially with the help of AI tools, frankly. And they're going to employ hopefully a healthy number of people. But also it's going to be so much easier for anybody with a good idea to just go out there and make it and get it out there. So in the future, if you're hoping to break into Hollywood, you don't have to start as an assistant. Work your way up slowly and hope you get lucky and you're able to sell a show to Disney or whatever. You can just learn your skills, utilize AI tools, get a small number of people together, make something, get it out on YouTube and in success, you can make real money doing it. There's real money to be made from successful content on YouTube. And then maybe if you want to, from there, maybe you'll make movies that will go into theaters. I think there will always be a theatrical experience. So I think for the next generation of filmmakers, people who want to be creators with a combination of free distribution and much cheaper production thanks to AI, there'll be huge opportunities for it. And I just hope that in the process of getting there, the disruption to the old way of doing things to people who relied on those behind the scenes jobs, that it's not too painful to get there. But I think on the other side of the hill that we're slowly trudging up right now, there really is a lot of opportunity for a new creative renaissance.
- [43:27]
B
Yeah, My optimistic gloss on that would be that if the advice in entertainment in the 20th century was work your way up, the advice in the 21st century is work your way down. Right? Work your way up is start in the mailroom, start in the executive assistant. The executive assistant and then hope to become a producer, hope to become a director in the 21st century, work your way down, it's no. Establish your talent at the top of some sole proprietorship with a YouTube channel, with a podcast, with a newsletter, with something that's independent, build a little, even a little mini company that maybe it's just you, maybe it's three people that shows off your talent and then get absorbed into something larger or build something larger. And so I think that the sort of operating wisdom of someone getting a foothold in Hollywood has totally changed direction from work your way up to work your way down.
- [44:22]
C
I think that's the thing. That's a really smart analysis. Yeah. You just start doing it yourself on YouTube, show that you can do it well, show that you can generate an audience. And then Warner Brothers will come calling and they'll want to write you a check to do the same thing for them.
- [44:36]
B
Ben Fritz, thank you very much.
- [44:38]
C
My pleasure. It was great to talk to you, Derek.
- [44:40]
B
Thank you for listening. Plain English is produced by Devin Beraldi and we are back to our twice a week schedule. We'll talk to you soon. And Doug Limu and I always tell you to customize your car insurance and save hundreds with Liberty Mutual. But now we want you to feel it. Cue the emu music. Limu. Save yourself money today. Increase your wealth. Customize and save. We save.
- [45:39]
C
That may have been too much feeling. Only pay for what you need@liberty mutual.com Liberty Liberty.
- [45:43]
B
Liberty. Liberty Savings. Very underwritten by Liberty Mutual Insurance Company and affiliates. Excludes Massachusetts.