Hollywood's Rocky Road: Can the Industry Weather the Perfect Storm?

Hollywood's Struggle for Survival: Navigating Tariffs, Viewer Shifts, and the Quest for a Sustainable Future

Hollywood has faced considerable turbulence over the past year, with a collective mantra of “Survive till ’25” echoing through the industry. Optimism for recovery had briefly taken hold as the industry anticipated a resurgence in growth following a downturn linked to the aggressive spending cuts made by streaming services. However, just months into 2024, the outlook is growing increasingly bleak. With production levels diminished and the economic ramifications of former President Donald Trump’s tariffs looming large, Hollywood finds itself grappling with both external pressures and internal struggles.

Industry experts like Scott Purdy from KPMG US note that the tariffs could severely hamper economic growth, impacting consumer spending and advertising revenues vital to the film and television sectors. As discretionary spending tightens, entertainment spending readily becomes a target for cuts. As Purdy noted, the tariffs cast uncertainty over the recovery Hollywood hoped for. As a reality TV producer grimly commented, “It’s terrible out there,” echoing a sentiment of dread shared by many within the industry. The disheartened mood has been exacerbated by underwhelming film sales at the Sundance Film Festival, which usually provides a reliable pulse for the market. The industry's current status reveals a clear need for adjustment, as studios overextended themselves to keep up with the frenetic pace of the streaming wars.

The numbers tell a sobering story: U.S. orders for television shows have plummeted by 20% year-over-year, hitting just 390 titles in the year's initial months, according to Ampere Analysis data. This decline is indicative of a broader trend, with predictions from Ampere indicating that the production spending of major streaming players like Netflix, Amazon, and Disney may plateau as they seek to recalibrate their strategies. Moreover, the box office is struggling, with Gower Street Analytics recently lowering its projections for 2025 domestic box office earnings to $9.5 billion. This forecast, while reflecting a minor increase from the previous year, still reveals a dramatic decline compared to pre-pandemic averages, underscoring significant challenges ahead.

Meanwhile, Hollywood must also contend with shifting viewer habits. The rise of platforms like YouTube, which now commands over 10% of TV viewing, poses a formidable challenge to traditional film and TV consumption. The surge in the creator economy, fueled by influencer-driven content, has seen substantial investments, with companies like Dude Perfect and influencer agency Timeline making headlines. This shift in viewer preference suggests that Hollywood's traditional offerings may struggle against short-form, easily consumable content that demands less financial commitment from audiences.

The production landscape illustrates this struggle, as FilmLA's recent report highlights troubling trends in Hollywood's film permits. Historically high soundstage occupancy rates hovering around 90% have dipped significantly to just 63% in 2024. This alarming decrease reflects not only a reduction in the number of projects being developed but also the minimum shoot days recorded since 2018, excluding the pandemic's impact. Wall Street's optimistic bets on a sustained level of spending in the streaming arena have soured drastically, leading to a competition among U.S. studios for a shrinking pool of productions. Hal Rosenbluth, president of Kaufman Astoria Studios, remarked that he has never witnessed such challenging conditions over his extensive career, noting that studios are increasingly willing to discount their rates to attract projects.

Nevertheless, not all is lost in Tinseltown. Bright spots have begun to emerge, particularly with the profitability of streamers like Disney+ and Warner Bros. Discovery. This early success indicates a potential shift in how consumers allocate their entertainment budgets. As audiences might gravitate towards more economical free or ad-supported streaming options, this could reignite a spark in the industry. Tensions arising from tariffs may also lead to retaliatory measures from other countries, potentially encouraging film productions to return to the U.S., which could revitalize local film markets.

Recent data from Ampere supports a slight rebound, revealing that 43% of major global streamers’ commissions in the first quarter of 2024 originated from North America — an uptick from 36% in the previous year, though still a decline from 53% in early 2021. This metric suggests a gradual leveling-off of production that could hint at Hollywood's resilience in the face of adversity. As the industry navigates its struggles, the question looms: Can Hollywood adapt and thrive amid these evolving challenges, or will the efforts to regain lost momentum falter amid external economic pressures and evolving viewer habits?

In this nexus of uncertainty, the future remains a mixed bag for Hollywood's celebrities and creators. While some may feel the effects of the downturn more acutely, others are taking steps to strategize for a more sustainable entertainment model in a changing landscape. Ultimately, the next few years will be critical for the industry as it seeks to find balance amid the ongoing transformation defined by both competition within the streaming landscape and the economic realities facing consumers and advertisers. The vitality of Hollywood’s spirit, forged through decades of resilience in the face of challenges, will be tested as it tries to reclaim its status as a dominant force in global entertainment.