Revisiting Disney’s Nightmare Scenario, Ryan Murphy’s Deal Numbers, Spotify Musician Payouts, and More
What I Got Right/Wrong - 2024 Q3 Edition
(Welcome to the Entertainment Strategy Guy, a newsletter on the entertainment industry and business strategy. I write a weekly Streaming Ratings Report and a bi-weekly strategy column, along with occasional deep dives into other topics, like today’s article. Please subscribe.)
As I like to do every now and then, it’s time to hold myself accountable. For newer readers, this exercise was inspired by a Colin Cowherd radio segment. As I’ve written before:
“Every so often, I like to write an article on “What I Got Right, What I Got Wrong”, trying my best to hold myself accountable. In trendy online circles, they call it “Updating Your Priors”, but really it just means adjusting your beliefs that an event could/would happen. Or, in laymen’s speak, changing your mind, something which is notoriously hard to do, even for me. Overall, this tends to make me more cautious and nuanced in my takes. (And I do a lot of hedging. But as I think I’ve written before, reality is hedged.)
Predicting the future is hard!"
Over the last few weeks, I’ve uncovered some old articles that held up really well, so there might be a few more “rights” in this latest edition of “What I Got Right/What I Got Wrong” than normal.
As always, I welcome feedback. If you think I’ve gotten anything wrong—mainly factual errors, not differences of opinion—find some little mistakes or anything else, please send me an email. (I read everything even if I don’t respond.) Seriously, though, it has to be an email to the address on this page; I don’t regularly (if ever) check DMs on Substack, Linked-In or Twitter.
In this issue, we’re going to talk about...
How my model predicted screenwriter’s income in 2022…
The state of animated movies, horror films, and musicals…
Disney’s nightmare scenario…
Spotify’s payouts to musicians…
And a whole lot more.
Let’s dive right in.
Right: The Disney Nightmare Scenario Came to Pass
I always get nervous about revisiting old articles, at risk that I might find myself saying something patently false. But then I re-read articles like the one I wrote after Bob Iger stepped down for the first time in 2020, and I think I nailed it.
Both my explanation of the success rate of CEOs (usually about average, and no one can predict otherwise) and the hype cycle (“Like a politician, they have two paths at the end: if they get fired, you bury them; if they retire you celebrate their run.”) perfectly applied to Bob Chapek, didn’t they? Even my slight Iger skepticism held up pretty well. (My skepticism about Richard Plepler heading to Apple held up really, really well.)
But this section really got me:
“The Disney Nightmare Scenario
Does this mean the “end of Disney’s run”? Absolutely not. The situation Chapek is walking into is about as strong as you can get. Just being average means the company will be fine. If he’s slightly above average, they’ll keep growing.
But every company has upside scenarios and downside scenarios, and the downside scenario feels a little more likely for me. If Chapek turns out to be worse than “average”, and there’s a fifty percent chance of that, then the company could regress.
But it could pair with four other potential risks:
– First, Lasseter turns out to have been crucial for animation. (Like Frank G Wells was in the 1980s.) Arguably, since Iger moved Lasseter to Disney Animation, that side of the business rebounded. (Why might this not be true? Read Kim Master’s take here.) We’ll find out in about 1 to 2 years if this is true.
– Second, something happens to Kevin Feige. He runs the Marvel golden goose, If another company poached him, that would be “sub-optimal”.
– Third, streaming isn’t profitable, and cord-cutting accelerates. This is your regular reminder that for all the value in parks and merchandise, uh, networks (specifically ESPN) actually powered Iger’s rise.
– Fourth, the studios run out of creative energy on all the non-Marvel, Star Wars and animated films, having mostly coasted on remakes of classic Disney films.”
That all came to pass. Of course, I was just painting a hypothetical scenario at the time, but it wasn’t too far off what actually happened.
On a long enough timeline, everyone returns to the mean. Keep all of this in mind as the Disney succession drama continues over the next year.
Wrong: Animation Was a Hit Genre...in 2023
Last December, I wrote about the animation genre’s troubles, then last week for the Ankler last week, I took another look. I gotta say, re-reading my article from last year, I don’t love my emphasis on Disney. It obscured how well the genre was doing for every other studio (aside from Netflix). Frankly, I think I missed the industry-wide forest for the corporation-specific trees.
Sure, Disney had a rough run there for a while, going from Lightyear to Strange World to Wish, which were all flops. But now, less than a year later, Inside Out 2 has made up those losses and more, becoming the number one animated film of all time. (And Elemental did much better than people think.) Plus, Moana 2 will likely obliterate the box office.
Safe to say Disney’s troubles are over (for now).
What matters more is why I got this wrong, to hopefully learn from it. Really, the entertainment press holds Disney to a much, much higher standard, where the bar for success is zero failures. It also probably speaks to how well Disney did in the 2010s with Marvel, Star Wars, Pixar and animated films.
Right: The Horror Genre Was Overrated
As I often warn—and just did at the end of my Ankler article on animation, despite singing its praises—fortunes for a successful genre can change at any time. Say Moana 2 underperforms and Wild Robot flops...my article on animation as a very reliable genre won’t look great, will it?
This happened with horror films just last year. There were countless articles on how horror was the most profitable genre, so I wrote three times pushing back a bit on that narrative, mainly that the ceiling for horror is much lower than other genres, people ignore all of the misses, and they don’t do well on streaming.
One year later, after an absolute parade of horror film flops (which didn’t even stop flopping until a piece of mid-budget IP, A Quiet Place: Day One, stepped in to save the day), it’s safe to say that horror was really over-rated last year. Don’t say I didn’t warn you.
Wrong: I Got the Spotify Math Wrong for Musicians (It’s Actually Worse for Them)
After Taylor Swift’s latest album came out, I ran the numbers to calculate what Taylor made when people streamed her album versus buying a physical copy.
Honestly, though, I got the math wrong on this. See, according to Variety (hat tip to Walt Hickey at Numlock) I got the split wrong...I assumed that .004% came after the split. Nope, it comes before. So the artist only makes 70% of $.004. And it gets worse!
“At the top level, the streaming service gets 30 percent, the recording side (label, artist, distributor) gets 56 percent, and the publishing side (publishers, rights org, songwriter) gets 14 percent. It’s divided even further, because of that 14 percent that goes to publishing, the performing rights organization gets 15 percent, the publisher 17 percent, and then the songwriters get 68 percent.”
But my original point—streaming music monetizes at a much lower rate than physical media—stands.
Right: My Model Perfectly Predicted What Screenwriters Made Last Year
Last year, in an “exclusive” that didn’t gain much traction from the entertainment press, I analyzed the mostly-redacted WGA annual report and calculated, based on their annual dues, how much WGA screenwriters made in 2022, the year before the strike.
In short, in 2022, more screenwriters made more than they’ve ever made before. I predicted $1.9 billion. Now, a year later, we know the number. In 2022, the writers earned $1.89 billion. (The strike dropped screenwriter earnings down to $1.29 billion in 2023.)
Related, Also Right: Streaming Residuals Look Anemic
All throughout 2023, I argued that screenwriters should focus on streaming residuals more than any other negotiating point else. Here’s why. Check out streaming residuals in 2023:
“High Budget SVOD residuals emerged as the second largest category at $57.37 million, experiencing a 45.6% increase driven by a growth in the volume of projects as well as an increase in writers receiving residuals under the improved terms of the 2020 MBA.”
I mean, run the numbers for yourself. If high-budget SVOD shows made $57 million, but only 14% of those shows will get a 50% increase, that’s something like $3 to 5 million dollars.
Basically, screenwriting TV residuals are going way, way down, not keeping up with what residuals on broadcast/cable used to do.
(One additional caveat: now that the traditional studios are licensing shows to other streamers, some of that money should go to writers...but this just shows why Hollywood needs thriving markets, especially for second windows.)
Right: Antitrust is the New Deregulation
A few months ago, after Sony announced that they were buying Alamo Drafthouse theaters, I revisited my article “Is Antitrust the New Deregulation?” It’s one of the most prescient things I’ve ever written, since almost no one in the business community or press could even see antitrust coming to dominate the M&A landscape, not just for the entertainment community but for the entire economy.
Heck, when you hear someone as plugged in as Matt Belloni openly stating that business leaders are scared of antitrust scrutiny, you know that something’s changed. Almost no one was saying this, even a year ago.
But let’s talk about the future, since it’s still murky what may happen. I see two scenarios for antitrust in the near future. In the short term...
If Trump wins, I think antitrust enforcement becomes pretty spotty, mostly geared around who kowtows to the Trump administration and who doesn’t. (Which means that Hollywood might still have a lot of antitrust enforcement!)
If Kamala wins, I don’t know what happens. Does she continue the Biden administration’s enforcement of new antitrust standards? Do Lina Khan and Jonathan Kanter keep their jobs? We’ll find out.
Long term, even if recent gains get clawed back, I don’t think they’ll be clawed back for long. On countless issues, from healthcare costs to housing, everyone seems to be coming to the realization that less competition = higher prices.
Right: We Never Got a Number for Ryan Murphy’s New Deal
Last year, I speculated that we might never get numbers on Ryan Murphy’s new deal. For those who don’t remember, during the height of the strike, Disney signed a deal with Murphy, but since it wouldn’t look great to announce a big deal during the strike, they leaked it to the press and never officially announced it. Literally, the articles announce his departure, but then say “Disney declined to comment.” (And never attached any dollar figures either.)
Well, given that Disney announced a new ABC show helmed by Murphy about a doctor on a cruise ship (which is a premise that has endless, er, limited possibilities), I think it’s safe to say that we’re never going to get a leak on this new deal.
I think we can just assume that Murphy’s latest contract was less (far less?) than his last deal.
Right/Wrong: Superhero Fatigue and Multiverses
For the last two Decembers, I’ve written up an analysis of Marvel, asking if we’re in a Marvel-cession. And in my last edition of this column, I wrote that I should have emphasized “superhero fatigue” more as an explanation for this genre's struggles.
Since then, Deadpool & Wolverine has grossed a trillion dollars (give or take) at the box office.
Was I wrong about superhero fatigue? No, not at all. One hit doesn’t discount all of the misses.
And indeed, Disney announced (for, like, the fifth time, it seems) that they’re reducing their output back down to two films a year (as Scott Mendelson noted, weren’t they already sort of at that level?) and cutting back on TV shows.
No, what I actually got wrong (possibly) is that audiences are tired of multiverses. Turns out, maybe some multiverse movies and TV shows play? At least this one did. But I’m curious to see how it goes in the future or if the MCU shifts away from multiverses.
Quick Hits
Right: In April, I doubted that Anatomy of a Fall or Zone of Interest would make the charts, and that ended up being the case!
Wrong: Conversely, in my 2023 film recap, I predicted that both Mean Girls (post-semi-successful theatrical run) and Argylle (post-disastrous theatrical run) would do well/okay on streaming. They did not.
Wrong: I got the name of the next Venom film, Venom: The Last Dance, wrong in my last update on “What I Got Right, What I Got Wrong”.
Wrong: As one journalist reminded me, post-NBA media rights articles, that it’s not “The MLB”, but just MLB as in Major League Baseball.
“Yes And...” Emily Horgan thought that Gabby’s Dollhouse merited a mention in my 2023 recap, and I can’t entirely disagree; I actually included Gabby’s Dollhouse as an honorable mention in early drafts of that article.
Still Right: Queen sold its catalogue for a record amount, but this still doesn’t change the fact that music catalogue sales are slowing this year.
Possibly Wrong: After a market correction, it appears that some podcast deals (at least for proven megastars) are back on the rise, especially by SiriusXM.
Wrong: I got feedback online that I should have focused on Baby Reindeer’s short run time as an explanation for its low hours. This is a solid point, and something I try to remember to analyze for shorter shows...but even accounting for that, this show was way over-hyped online, which was the actual point I was trying to make. If a show has half the runtime, but gets ten times the attention, it’s still getting way more attention than other shows. (I’d also add, some other measurements that focus on viewers or unique households also show Baby Reindeer’s relatively weaker performance to some big hits.)
Clarification: One point on musicals I forgot to mention when I called them overhyped: they’re expensive too. But they’re doing much better in the last year and a half (ignoring that the trailers don’t advertise these films as musicals--than in 2021/2022.