"Why do we have to grow up?" Walt Disney once asked himself. The Walt Disney Company will celebrate its 100th anniversary on January 27, having retained its appeal among the young and those who feel young at heart. Hollywood's biggest studio will invest more in original content this year than any other company. He dominates the global box office, with four of the top 10 hits of the past year, and has more streaming subscriptions than anyone else. It has turned its intellectual property into products ranging from lunch boxes to lightsabers; and it exploits it in theme parks that generate great profits, despite the persistence of covid-19. More than just a business, Disney is perhaps the most successful culture factory the world has ever seen.
Therefore, the turmoil that is shaking the company today has relevance well beyond its empire. Uncertainty about the future profitability of Disney's massive entertainment portfolio has caused a roller coaster ride on stock prices. In November it removed its CEO and will soon replace its president. He is also facing rebellion from an activist investment firm that wants a seat on the board, in what could become the biggest showdown since former CEO Michael Eisner was forced to resign in 2005. The Trials from Disney are not just a boardroom drama. Similar crises are rocking other big cultural factories, from Warner Bros. to Netflix. The reason is a technological revolution that is turning Hollywood upside down.
The continued supremacy of a century-old company like Disney has debunked many predictions. Since the days of Steamboat Willie, the first appearance of Mickey Mouse in 1928, there has been an explosion in the supply of video entertainment. Television, cable, home video, and then the Internet have offered more and more choice. Anyone with a phone can record a video and make it available to billions of people, for free. Every hour more content is uploaded to YouTube than Disney has in its entire streaming catalog.
Many predicted that this niche content boom would kill off the mainstream hit makers. To a large extent, they were wrong. The infinite offer of entertainment has ruined the companies that produced mediocre content, which was seen because there was nothing else to see: there is the collapse of the audience ratings of television broadcasts. However, the companies that are at the top of the business have prospered. When anyone can see anything, viewers flock to the best. Global streaming companies like Netflix and Amazon have more than 200 million direct subscribers, a number that was once unimaginable.
Those who have best weathered the box office contraction have been the owners of intellectual property that was already liked before. Moviegoers are going to the movies less and competition is intensifying, so studios are pouring money into movies that people who only come to theaters three or four times a year will want to see. In 2022, the top ten highest-grossing films in the United States were either sequels or parts of a franchise; Impending Disney releases include an 80-year-old Harrison Ford returning for a fifth installment as Indiana Jones. It has not been a golden age for cinema, but for those at the top it has been profitable.
Now, technology is shaking things up again. Online distribution has attracted technology companies that make the hardware and software used for streaming. Silicon Valley is on a different scale from Hollywood (Amazon's growing ad business is already three times that of Disney's), and its moguls have no need to make money from streaming, which they see as an addition to their core business. At first, Hollywood wrote off Silicon Valley nerds. Now, nerds have enough money to take creative risks. In 2022, less than three years after entering the movie business, Apple won the best picture Oscar with Coda, a dramatic comedy that takes place partly in sign language. The more quality content these new producers produce and sell below cost, the greater the risk that older studios will fall from the top tier of media to the dangerous middle rung.
At the same time, new technologies allow those further down the “long tail” of the demand graph and the multitude of niches to have a better chance of reaching the profitable top. Inventions like game engines, which help create virtual sets, are lowering the barriers to entry. Generative artificial intelligence, already capable of creating rudimentary videos, may reduce them even further. The first beneficiaries have been the non-US film studios, which until recently had difficulties in achieving top-notch special effects. Now it is no longer the case. Last year, two of the world's highest-grossing movies were Chinese; and it is expected that this figure will increase when the covid subsides in that country. China has yet to convert foreign audiences to hits like Wolf Warrior 2 (film catchphrase: "Anyone who offends China, wherever he is, will die"). However, it will not always be so. It already has a globally successful social media app, TikTok, and produces video games that are international hits, such as Tencent's Honor of Kings, which is the world's highest-earning mobile game.
Perhaps the most drastic way that technology can alter the culture business is by creating new categories of entertainment. Young adults in rich countries already spend more time gaming than watching television. It's been hard for Hollywood to catch on, but its Silicon Valley rivals are grabbing the intellectual property of the games. Microsoft's proposed acquisition of Activision-Blizzard, whose games include Call of Duty and Candy Crush, amounts to nearly ten times what Amazon paid for Metro-Goldwyn-Mayer, home of James Bond and Rocky Balboa. Game-based movies are becoming as popular as movie-based games. The series based on The Last of Us, a post-apocalyptic game, seems to be a critical success. Sonic the Movie was among the highest grossing films of last year, and the same is likely to happen with Mario this year. Nintendo is opening a new Mario-inspired theme park in March... in Hollywood, no less.
The big creative factories of Hollywood will have to adapt if they want to survive. A new era of success is not something that is out of reach. The Disney century has been, in both business and artistic terms, a century of constant reinvention throughout which the company has moved its production from projectors to cables, then to videocassettes and now to bytes. Will surely continue to innovate. However, there are already signs that much of the popular culture of the next century will not be conceived in Hollywood but elsewhere. For sequel-weary audiences, it might be a welcome change.
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Translation: Juan Gabriel López Guix
