The economic fallout from the coronavirus pandemic could lead to the end of the “Peak TV” era and force consolidation among major film studios, analyst firm MoffettNathanson said in a gloomy report released Friday.
“We believe the linear TV industry should emerge in an even weaker state post this period with fewer subscribers, lower spending on original scripted content,” the report — titled “Say Goodbye to Hollywood” — read. “John Landgraf’s concept of ‘Peak TV’ will finally move to ‘post-Peak TV’ as cable, premium and broadcast networks look to rein in their spending.”
“When this is all done, the top streaming platforms – Netflix, Amazon and Disney – will emerge with the lion’s share of scripted content creation,” the report continued.
The impact on the film industry could be even greater, as the coronavirus figures to accelerate the shift in movie-going from the theaters to home streaming. While MoffettNathanson said that consumers will eventually make their way back to the theater, studios will need to prioritize large tentpole films for box office, with the rest being shuffled off to streaming.
“There will likely be fewer movie screens in the U.S., even fewer DVDs purchased and, thus, fewer films made for those long-optimized and windowed release cycles,” MoffettNathanson said. “Studios will limit their investment in traditional theatrical releases.”
That could mean that, just like the music industry consolidated as CDs were replaced by streaming, the industry could see another round of major mergers, this time between film studios. “Going forward, we think only a handful of studios will have the proper mix of assets to profit from this shift in OTT behavior. Aside from Disney and their control of Disney+/Hulu and Warner Bros. with HBO Max, the three other majors (Sony, Paramount, Universal) and the two minis (MGM and Lionsgate) will likely need to consolidate to increase selling clout and accelerate cost savings. Indeed, this is what occurred in the recorded music industry over time as six once mighty global recoded music companies merged into three healthier ones,” the report said. “The film industry should emerge from the post-COVID-19 shutdowns in a different place.”
John Stankey, who will take over as AT&T CEO in July, said during the company’s quarterly earnings call on Wednesday that they were “rethinking our theatrical model.” Incoming WarnerMedia CEO Jason Kilar shared a similar view with TheWrap, predicting “there’s going to be further invention” in how film studios handle the traditional release windows.
Live sports and other events will make up the bulk of linear TV’s programming and drive the majority of its revenue, but the shutdowns will likely mean that more consumers will cut the cord in the meantime, MoffettNathanson argues. It’s not clear if they will come back when sports return to the field.
“We believe Disney is the only company with a big enough lifeboat and the organizational will to come out of these secular changes in a strong position while Fox’s focus on live news and sports remains the right strategy,” the report said.