FLIX FLOPS
the perils of stonks, plus: a park full of photocopiers
Metaverse Denizens,
We lost another one. The Landmark — the sleek arty theater in inland Santa Monica — is closing. This isn't a shock. The place was too fancy & too empty. Never a personal fave, The Landmark was a schlep across town to a series of little theaters where I always felt like I was sitting above the screen, looking down, rather than up, which I prefer! So I went to the Landmark more in my first few years out here. I cried at Beasts of the Southern Wild. I was taken aback by Birdman. I fell hard for Rust and Bone. A few weeks back, I got to experience Petite Maman on their biggest screen, and well... now there's literally nowhere left in Los Angeles to see a new foreign flick in a setting like that. So while I have more affection for the Indian restaurant across the street (Nizam) than I do the theater, The Landmark was good to have in the rotation.
Welp… Onwards, to the future…
Have y'all seen Dall-E 2?
It's an AI thing. You type a description of an image in plain English. It spits back an image that it thinks fits the description. And it's pretty good! This image, from an odd prompt, is pretty intriguing…
You can see more from "Xerox park" here.
And here's another one I kind of like…
Most of the images I've seen are more like ~~~Digital Art~~~ ...which is whatever.
Nonetheless, this is the first "web3" art thing I've seen where I actually want the tasteful people to spend time fucking with it. And I've gotta assume that this sort of AI will be used to build worlds for movies in ways that are cheap & genuinely strange. Tentatively into it?!?!
NFLX
Netflix's stock has gone down 75% in 6 months. When I mention that to my friends, most of them just sort of shrug, because unlike me, they aren't fucking losers who want to talk about the stock market... let alone the sort of intense losers who bought stock in Netflix. On the other hand, Max... is fallible.
To wrap my head around this precipitous decline, the future of the business, and my own financial loss, I've read a lot and asked Finance People some very basic clarifying questions. Here's what I think Wall Street is saying: "We're breaking up with Netflix. Yes, we wanted the rest of you to chase Netflix and ditch theaters & cable for streaming. But now we're panicked — in general, about everything — and so we've got cold feet about streaming too."
Here are some basic things about stocks that I wish I understood before I lost money in Netflix:
Don't buy them.
Your broader, humanistic instincts about the world might not correspond at all to the markets — which are mostly determined by a horde of guys named Jason who all have so many computer monitors and just don't see things the way you do. At the beginning of the pandemic, I told my dad that a lot of people were going to start dying and that democracy was at stake and that he should sell his stocks. I talked him into it. I was so wrong. The world shut down, edged towards collapse... but the markets rose. There is no Why. There's just: The Jasons Were Into It.
Definitely don't buy a stock if its "P/E ratio" is really high. That's a measure of how much the company's stock happens to be worth v.s. how much money the company actually makes in a year. So if the ratio is really high, that means the company is overvalued. Netflix was amazingly overvalued. (I actually knew that... but I also thought that Netflix had the infrastructure in place to carpet the globe & race to a billion subscribers & that it was basically unstoppable, so the stock would just keep going up anyway.)
Just as a rising tide lifts all boats, a falling tide lowers them. The markets are all in free fall, and a lot of companies are taking hits they wouldn't otherwise. Netflix losing a tiny fraction of its subscribers triggered a panic. But if the broader market wasn't plummeting — if all the Jasons weren't in a frenzy to begin with — the stock would've only declined moderately.
What does Netflix’s stock plummeting actually mean for Netflix?
Netflix's revenue last year was about $30 billion. Netflix still has 220 million subscribers. It’s not Theranos. It's a real, giant business.
The stock price is Not the company's bank account. They can still pay everybody who works there. They don't need to shut down productions.
But they're definitely going to lay people off. It's just a question of how many & when...
That's because the stock plummeting mostly affects the people who run the company. Their compensation is tied to the stock. They'll always always always do what Wall Street wants them to do. Otherwise, they don't get paid. Wall Street doesn’t know what it wants, but it will want to see MATURITY, which means: saving money by firing working people. (CEO compensation being so tied to stock price… which is really just a projection from the fickle Jasons… as a key organizing principle of our society? Bad!)
Before the stock cratered, Netflix knew that subscriber growth was slowing and as such started adjusting tactics already. That's why it capped scripted episode budgets at $4MM for new American-centric shows a year ago (as opposed to shows it felt were inherently international — whatever that means). Netflix was pretty universally recognized as the worst option for highly-sought-after projects. The company had to outspend to get them. (I knew that. I bought the stock anyway. Idiot.)
My instinct is that Netflix will double-down on stuff like Selling Sunset and doc series about scammers & missing girls. I have no fucking idea what its scripted film & TV slate will look like in three years.
So… why is this possibly good for the rest of us who don't work there & the industry at large? Because it allows the industry to divert from Netflix's tactics. Till the stock cratered, Wall Street essentially forbade its rivals from trying anything but The Netflix Model — a regime that is dreadful for art & the vast majority of people who actually make it....
In short, The Netflix Model — total commitment to streaming — turned studios from normal restaurants (serving dishes a la carte) to buffets. In buffets, individual dishes don't matter. You just need a few to be good enough to keep your customers. That's how Netflixian streaming treats movies, shows, and subscribers. And that's why their stuff was conspicuously worse than any other company's.
Netflix was also a"Walled Garden." The company only wanted to stream stuff they owned 100%... and, in the true monopoly hellscape scenario, that's the only stuff that would've been made at all. Creators wouldn't have had any ownership, ever. Gunslinging third party companies would've stopped financing riskier projects. We were headed towards a future that wasn't so far off from that. We're still headed there, but more slowly, maybe with time for course adjustments…
So while we don't know what the future looks like, it probably won’t be quite as Netflixian. Common sense could come back into fashion...
The lessons from Netflix's troubles are that these companies really do need movies & shows that people love, which Netflix forgot. You can't just load up your slate by paying creators already in the back nine of their careers to do their worst work. You also can't rely on "laundry folders" — content designed for people to watch while they're folding laundry that doesn't ask much of them. And you can't only greenlight shows that seem like they'd appeal to certain niches you call "psychographics." The industry is being reminded that our movies & shows actually have to be good. Instinctively good, not just "fits an arbitrary box, with familiar-if-ill-fitting names." Things were so bad that this reminder was vital.
The walls around the Walled Gardens could start coming down. Today, the conventional wisdom is that it’s best to sell your series pitch directly to the streamer, because they want to own everything. I suspect the streamers will cap their budgets and accept that that won’t be possible. That gives more opportunities to co-financiers like Sony, Lionsgate, MRC, Bron, A24 in TV, Skydance etc., which I think is good for anybody pitching…
Co-financiers protect creators’ underlying ownership. In the long run, this is good for everybody’s wallets & hearts.
Streaming execs wouldn’t be the only ones with development spending & greenlight power. A couple years from now, there’ll probably be more places you actually want to pitch to, at least for development.
Hollywood Forever Y'all,
Max
P.S. This is the company that financed Kevin Spacey's new movie.