“On the whole, the combination of online and social media viewing, on the revenue front will not increase consumer spend,” the famously circumspect Ziffren Brittenham LLP co-founder warned the Beverly Hills Bar Association in his annual lecture Friday. “I don’t know if we can reverse these trends, that we can bring them back to ancient 2020 situations where we had consumer spend and entertainment spend on a growth greater than the CPI both here and around the world.”
To that, the self-declared “pessimistic” Ziffren put a spotlight on how much programming is now viewed free on social media. Add to that the serious and seemingly unstoppable decline that has kicked in for the ad market in part with the “encroachment of tech companies” into Hollywood.
“We seem to be going in the “wrong direction,” Ziffren bluntly said. In his forensics on the industry, the lawyer focused on advertising tiers on streamers (with the exception of Apple) and the quiet but dramatic shift by such companies away from the push and pull of Wall Street. “Lower cost streaming through bundling” and a shift to unscripted and sports will not increase the consumer outlay, Ziffren predicted.
Big media is in the throes of a painful reckoning as core linear viewership and correlated ad revenue that have sustained it for decades fades.
Streaming profits are still scarce and don’t yet offset broadcast and cable declines. Massive write-downs earlier this month to right-size the value of linear assets showed just how bad things are — a $9.1 billion hit at Warner Bros. Discovery and circa $6 billion at Paramount. The stocks of these companies in particular have tanked since both are carrying near debilitating debt loads that make it even harder to emerge on the other side.
As Ziffren pointed out Friday, an overall diminished big screen box office isn’t doing anyone any favors either.
While the eleventh hour bid by Edgar Bronfman Jr.’s consortium has everything in flux for Shari Redstone, Paramount could have a second life with Skydance and its deep-pocketed backers once that merger closes — assuming it does. There’s no imminent rescue for WBD, perhaps in its darkest hour after likely losing the NBA. Shares are down about 70% since the merger.
Disney and Comcast are in much better shape although theme parks (for both) and broadband (for Comcast) hit a post-Covid plateau. First-mover Netflix and arms dealers like Sony seem to be weathering the transition the best. Ironically, the hit-or-miss film studios that Wall Street used to shun in favor of powerful cable brands are, in some quarters, the best part of the business.
As he has in previous years with his wide ranging lecture, the legal dean spoke today at the BHBA’s Entertainment Law Summit at the Skirball Cultural Center. Consolidation in the French market, growth in the Indian market, the re-privatization of Endeavor, WBD’s lawsuit against the NBA over basketball rights and the Venu debacle were among the topics Ziffren touched on at the frontend of his remarks.
“Every entertainment project will cost more than it did” in the aftermath of last year’s strikes and the agreements that ended them, he said. Those rising costs are a vital factor in the stagnant production we’ve seen this year, Ziffren said. Debt load is also hurting many companies.
Recently named to LA Mayor Bass’ newly formed entertainment advisory panel, reappointed City of Angels Film Czar Ziffren is as close to a full on mandarin that the industry has over the past several decades. In that role, he has had the full confidence of studio and agency executives, as well as political players and Wall Street in a plethora of circumstances and instances.
Which is why his words Friday carry such weight.
Citing several studies examining the steady fall in linear TV advertising and the drop in original productions from streamers, Ziffren’s remarks Friday have a potential Nixon goes to China blast radius because of his long history in the industry and his prestige.
On the slight upside: media and entertainment shares were mostly higher today on comments by Fed chair Jerome Powell indicating interest rates will start to come down at the central bank’s September meeting. That’s great news and not a moment too soon, but there are serious issues to grapple with.
Also today at the well-attended BHBA event, Shepard Mullin’s Robert A. Darwell was honored as the Entertainment Lawyer of the Year. Among attendees were Jeff Berg, Britney Spears’ lawyer Mathew Rosengart and Johnny Depp’s lawyer Camille Vasquez.
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