With economic indicators flashing red, Hollywood is taking steps to prepare for a possible recession in 2023. Company priorities are shifting away from building market share and driving up stock prices towards making a profit.
The most obvious example is Netflix, whose stock tanked by more than 70% in the first six months of this year, after reporting back-to-back quarters with a declining number of U.S. subscribers. The streamer has attempted to address investor concerns with a multi-pronged strategy, including increasing revenue by cracking down on password sharing and reducing costs by spending less to produce or acquire new content. It has also increased its partnerships with exhibitors, who are now beginning to play Netflix movies for limited runs in their theatres.
Warner Bros. Discovery has also embarked on a program to reduce its expenses significantly. In a Monday filing with the Securities and Exchange Commission, the entertainment giant reported plans to write off between $3.2Bn – $4.3Bn in restructuring charges related to its content. These cuts were far greater than the number that most analysts had expected, and will go deeper than the already publicized cancellations of movies such as BATGIRL and WONDER TWINS and series such as FULL FRONTAL WITH SAMANTHA BEE.
In addition to content write-offs, CEO David Zaslav has been pushing cost cuts through layoffs and by combining the company’s HBO Max and Discovery+ streaming services. These movies are driven by the need to increase profits in the near term, a shareholder priority during financial hard times.
A possible silver lining is that exhibitors have a track record of doing well during economic downturns, with the box office increasing in six of the last eight recessions.
See also: Warner Bros. Discovery to Take $2B-Plus Writedown on Content and Development Amid Restructuring (Hollywood Reporter)