Content Creation is a Semi-Glamourous Business

“They worship everything, and they value nothing.” – Sebastian, “LaLa Land,” Lionsgate, 2016

One of the toughest jobs in the world is to be a boss/CEO of a company.

Worse?  Being a CEO in the Americas.

Worse yet?  Being a CEO of a tech/entertainment company in the Americas.

How did we arrive at this epiphany?

Logic! because you have to pay some idiot an exorbitant amount of money along with a huge backend payment to take the job.

According to the Booth School of Business, the average salary of a CEO at a Fortune 500 company is about $15M and entertainment CEOs get … a lot more.

The job is so tough that when Sheri Redstone (family fortune so it sorta’ doesn’t count) and the board blew out Bob Bakish, she had to convince three guys to share the blame job – Chris McCarthy, George Cheeks and Brian Robbins. Then she could focus full attention – along with the board – to decide if they’re going to keep the old girl together, sell her as a single diamond or cut her up into smaller gemstones.

Safe Landing – A “for hire” CEO always needs a well-crafted exit package or golden parachute because well, paying boss gigs are tough to come by.

In addition to having some small consolation knowing it took three folks to replace him, Basich was given time to clean out his desk and got his monthly stipend ($258K/mo.) until the end of October.

Oh yeah, he had a soft landing like most CEOs who get “fired” with a $48.5M ++ severance package.

Hollywood may be a tough business, but it pales in comparison to tech firms.  Elon Musk is so broke he asked (demanded) that his $56B compensation package be reaffirmed. Wonder how much he gets paid every time he goes to the bathroom?

It’s Tougher – While we have a world economy, it’s obvious that being a boss in the US is tougher than anywhere else so you have to pay the guy (most of the time it’s a guy) because, ah well … because.

Sorry, got sidetracked, but being CEO for an American company really has to be tougher than anywhere else in the world.

After all, they have to get paid so much more than their counterparts in other parts of the world to be convinced to take the thankless job.

According to Bloomberg analysis, US CEOs average $14.3M annually–more than double their counterparts north of the border and 10X more than those in India.

There are a lot of different reasons for the discrepancies – many of the world’s largest companies are located here, there’s a higher cost of living (you know about that, right?) and well … stuff.

Of course, their jobs – making their numbers – were made even tougher by all of the strikers (actors, auto workers, etc.) who wanted a living wage, healthcare, holidays (EU folks get a month) and simply drug the strikes out, quibbling over “little things.”

According to the US Bureau of Labor Statistics, the median US worker made about $31.43/hr. last year but actors were paid $17.94/hr. 

While the negotiating bosses still got paid, folks on the picket lines lived off savings (?), the kindness of others and union health plans.

Most actors aren’t stars, most creators aren’t Tarantino or Nolan; stunt folks have it a little tougher than Fall Guy’s Gosling; production folks only get in front of the camera to clean the lens and most postproduction folks grind away hours on end in dark rooms staring at screens.

Sorry to crush the kids’ dreams of heading to Hollywood, getting discovered serving coffee, becoming instantly famous, living in a Beverly Hills mansion and wallowing in money.

That s*** doesn’t even happen in the movies!

But ever since the golden era of Hollywood, media industry executives have always been highly paid. And over the past bunch of years, these tormented executives have been through the grinder.

There was the “MeToo” period, the pandemic, those troublesome worker strikes and the total upheaval of the show/movie food chain.  But through it all, top executives at Disney, Warner Bros and others got paid an average of $34.8M last year (more than double their counterparts in other US industries).

Salary Plus – Executives – or their agents – may have to negotiate how much they get paid but there’s an entire industry built around executive compensation that helps them ensure they get theirs … first.

True, stock awards make up most of their compensation packages and they’re granted at the beginning of the year.

So, it probably doesn’t count that all of those shelved video projects (regardless of how far along they are) that create tax savings and folks being layed off rather than “adjusting” their salary, are important management decisions.

After all, the pandemic was behind us and obviously, people were going to flock back to theaters even though they had been cutting back on high ticket prices and expensive popcorn for years.

Not Going – Certain segments of the entertainment industry don’t like to admit that the cost (time/money) of a movie makes it less attractive for a lot of people to go to movie houses today–especially since they have … options.

In fact, according to most research, only eight percent of folks consider themselves frequent movie attendees while 59 percent say they rarely or never see movies in the theater.

And we hate to break the industry, but that just ain’t gonna change!

The other change, which has been equally as slow and insidious, has been the petering out of the pay TV gold mine.

Folks have options … lots of options.

Past Prime – Prime TV viewing is past its prime as the cost of the payTV bundle continued to grow along with the number of ads networks/services packed into each hour. Consumers have begun switching to economic and quality options.

Actually, FX CEO John Landgraf coined the term “Peak TV” a few years after Netflix switched from sending folks DVDs by mail and asked them to stream them directly to their screen when they wanted them.

Of course, Tellywood executives and the cable company bosses knew that was a stupid idea because…

Crap!

Consumers Vote – With the introduction of low-cost anytime, any screen streaming services; consumers quickly moved to the newer, better option. Streamers offered lower-cost ad-supported options. Studios quickly found out though that the new distribution method isn’t as easy or as economic as it looks from the outside looking in.

Being smart executives and knowing the creative content ins/outs better than the techies, they first licensed their “extra” content to the new streamers.

When they saw the techies might have something, they decided maybe there was more money in doing their own streaming service. How difficult could it be since content is king and Hollywood bosses know how to make creative stuff?

Flip a Coin – Regardless of how much the studio boss, director or actors “know” a project is going to be a winner, most will be terrific losses that only great accountants can make red ink turn green.

As we’ve said before, Hollywood has some of the most creative accountants in the world of business. 

Despite what the bosses say to Wall Street and institutional shareholders (individuals don’t have much say in the matter), they know good projects when they see them, know how to deliver the goods and know how to turn a profit.

After all, that’s why they’re paid the big bucks.

Of course, according to film industry researcher Stephen Follows:

• 11% of the movies made a profit equivalent to more than twice their original budget
• 11% made a profit equal to between 100% and 200% of their original budget
• 28% made a profit equal to less than their budget
• 34% lost the equivalent of less than their budget
• 9% lost between 100% and 200% of their production budget
• 7% lost more than twice the value of their original budget

Or, more simply stated, before the accountants get ahold of the data more than 50 percent of the content they greenlight wouldn’t make a buck.

Okay, that wasn’t exactly true.

That **** red envelope company had a little more control (guidance) over the creative beast with a secret weapon … data.

Global Profits – As Netflix expanded its reach outside of the Americas, the company increased its attention on global/regional content interest and production, continuing to deliver for subscribers and investors.

Born in the heart of Silicon Valley where data capture/analysis/mining is a thing, they knew how to use the viewers’ data to get a solid picture as to what people watched, how long they watched it, when and on what screen.

Some project idea people think building a show/film based on that information is restrictive while others (most) find they’re able to develop a show/movie built on their ideas that people watch and enjoy.

And next to a statue, that’s what everyone in the video creative industry wants … audience acceptance.

That acceptance also means they attract more subscribers in the Americas as well as around the globe so their subscription base can steadily grow … profitably.

It ain’t rocket science … you find out what people want to watch, develop it, offer it at a “reasonable” price, they watch, you make more money to repeat the cycle.

End of Chase – WBD has done an excellent job of delivering profitable results for shareholders by shelving projects – regardless of their stage – and writing off long-standing franchises to produce excellent tax write-offs.

It’s true that WBD did make a sliver of profit thanks to killing off Wile E Coyote and other projects like Batgirl in addition to reducing their headcount.

Those were all management’s strategic moves which produced the illusion of profit and didn’t really affect their $43.6B plus balance sheet debt.

… later!

Wild Ride – Like the world famous wooden roller coaster at Knoebels Amusement Park, today’s content creation industry is exciting to watch and gives folks a helluva’ ride.

But it’s true.  The creative product industry is extremely complicated and uncertain today. It has more ups/downs, more twists/turns than a rollercoaster.

Just look at the landscape … diminished theater attendance, shifting ad spending, continued weakness of linear TV, increased competition from global and regional streaming service providers and general macroeconomic uncertainties. There is sound logic in institutional shareholders paying a “little more” for strong individuals who can safely/profitably navigate their organizations in the rapidly changing content industry.

It’s lonely at the top and the decisions they make are ultimately theirs and theirs alone.

It’s little wonder they’re looking hard at the new tool – AI – as a way to enhance their success.

AI can potentially help them streamline production to produce video content more efficiently, more effectively.

It has the potential in helping bosses in a number of ways–create/test teasers and trailers, flush out ideas/write content flow, access visual effects at a lower cost, eliminate entrance barriers, improve localization/dubbing and in general, improve the creative process.

Sure, it may result in the elimination of some jobs, but they’re also pretty sure it will create new, different, better ones … tomorrow.

After all, Wall Street and institutional investors need folks who are proactive, not reactive like Sebastian when he said, “I’m letting life hit me until it gets tired. Then I’ll hit back. It’s a classic rope-a-dope.”

Sacrificing a few jobs rather than taking a salary cut and getting paid in long-term stock gains because you have faith in your decisions is a smarter move. It’s why you make the big bucks!

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