Hollywood won’t bat an eye at the prospect of a recession, but viewers might
The Future. Persistent inflation, supply pressures from the war in Ukraine, and the Federal Reserve’s rate-hike program all boost the likelihood of a coming recession. For Hollywood, that could spell losses, not just in theater ticket sales but streaming subscriptions and ad revenue. If there is an economic downturn, the entertainment industry may have to revise its entire business model.
JPMorgan CEO Jamie Dimon recently warned of an approaching economic “hurricane” that could severely curtail consumer spending. Many disagree with his forecast, but if it does come true, the entertainment industry has done little to prepare for it.
- The optimist’s take. Cinema and video game industry professionals both scoffed at the idea that a recession could hurt their businesses, claiming that people lean on entertainment during hard times to keep their spirits up.
- The cynic’s take. As food and gas prices skyrocket, people probably won’t consider entertainment expenses essential — including streaming subscriptions and movie tickets. With subscription sales and theater turnout already faltering, the industry needs a new way to either boost revenue or cut costs.
- The bitter pill. Ever since Snap released its Q2 guidance, tech and media stocks have both tanked on a large scale. The reason is that digital advertising is faltering even without a recession, partly because some products, like cars, are flying off the shelves without help from ads.
Recent weeks have seen the longest streak of losses for tech stocks since the dot-com bubble in the early 2000s. Thanks to streaming and digital advertising, the entertainment industry is deeply tied to tech, so even if there’s not a widespread recession, Hollywood may still suffer.
Land of the free (streaming services)
So far, this is all theoretical. Some signs that a recession has actually arrived would be hiring freezes, especially when followed by wider layoffs — in other words, short-term cost-cutting measures.
But if things get bad enough, some big players might have to take more drastic measures. According to The Hollywood Reporter, this might mean transitioning away from paid subscriptions in favor of free, ad-supported streaming (“FAST”) services, which would appeal to those who feel they can’t afford to pay. Any big streamer to adopt this model could force its competitors to follow suit.
Welcome to the golden age of… cable TV, basically.