Drescher and Iger Both Say TV Is Broken. Is The Doom Loop Looming?

Disney CEO Robert Iger and SAG-AFTRA President Fran Drescher may not agree on much amid the actor union’s first strike since 1980, but they agree on this: the legacy broadcast and cable business models that made them and many others in Hollywood wealthy are fundamentally broken, and there’s no going back.

The question is what the industry will look like in coming years, and how fast that transition will be forced on companies and workers amid strike-fueled dislocation across the business.

“We have to be open minded and objective about the future of those businesses,” Iger said in a CNBC interview a day after Disney’s board announced his contract had been extended two years to 2026. Disney has reported its linear networks revenue (which includes its cable operations) dropped 7% percent while operating income dropped a painful 35%.

No surprise, then, that Iger called the broadcast distribution model “definitely broken.” It’s just that he said it out loud, on CNBC, which went on to replay that and other choice Iger quotes for many days afterward.

A few hours after Iger’s interview, Drescher had a fiery and equally public response as the actors joined the screenwriters on strike lines for the first time since 1960. Back then, the unions secured transformational additions to their contracts such as health care contributions from the studios and residual payments as their work, once restricted to what was seen in movie theaters, was helping drive the growth of television and, eventually, much else.

But that golden era is passing, Drescher said, and the new era built around streaming video needs a new kind of contract.

“The entire business model has been changed by streaming and digital and AI,” she said. “This is a moment in history. If we don’t stand tall now, we’re all in danger of being replaced by machines.”

Drescher’s not wrong about the implacable secular forces transforming what was called Hollywood, now a global industry with an increasingly global audience, reached through new distribution, production and even creation platforms and methods that are upsetting forever How Things Are Done.

The most pressing issue is what happens to the legacy broadcast and cable operations that have enriched both creative talent and “suits” in Hollywood for the past six decades. Cord-cutting has been slowly eroding the revenues that studios were receiving from advertising and, on cable, carriage and retransmission fees. Now, it’s accelerating.

The number of U.S. cable subscribers plunged from around 100 million households just a decade ago to somewhere around 60 million, depending on how you count the so-called virtual MVPDs such as YouTube TV, Hulu Plus Live TV, bargain operator Philo, and sports-focused Fubo.

All of those vMVPDs provide subscribers some of the cable experience, without downsides such as equipment hassles. But prices, initially a big differentiator from traditional cable, have crept much higher and in most cases are no longer a bargain.

Regardless, none of the vMVPDS appear to be the answer to the real problem facing broadcast and cable networks: As they’ve shifted more of their best programming to streaming, they’ve strip-mined the best of their still lucrative operations from their legacy businesses.

Now that strikes have shut down fall-season productions, what will be left to watch on what’s left of broadcast and cable that you can’t get on demand from your streaming services of choice?

News and sports have been reasons to stick around for their respective hard-core (and aging) fan bases, but even there, the encroachments of Amazon
AMZN
(NFL) and Apple
AAPL
(MLB, Major League Soccer) into sports (and Netflix
NFLX
into sports-adjacent shows such as Drive to Survive) are starting to matter.

And much as the networks would like to run the NFL 24 hours a day (the league’s games have routinely been most of traditional TV’s most watched shows in recent years), that only emphasizes how little else there is to watch on legacy TV.

In that same CNBC interview, Iger said Disney still wants to be in sports, but even there, the Mouse House is looking for partners to shoulder the costs of ESPN, which has an admirable but painfully expensive array of rights to some of the best leagues in the United States. ESPN too will have to cross the Rubicon of streaming in a more substantive way at some point soon, Iger acknowledged, without saying just how soon.

Now we have two strikes. Absent a highly unlikely resolution in the next few weeks, prime-time will be mostly a creatively barren wasteland of game shows and reality competitions, unlikely to keep many customers paying for cable to tune in. (They can get much of it on Netflix, Max and Peacock already).

Wait long enough on resolving the strike, and a doom loop will emerge. Lesser cable networks will be killed off quickly, but even bigger operations may be spun off to private equity, a repeat of the kinds of deals that have characterized newspaper consolidation for three decades. Trends that have been unfolding for years will accelerate to a harsh new reality within months.

Over at NBC, the network has dropped five(!) shows from super producer Dick Wolf from the fall schedule because of production interruptions. Wolf-made shows have been part of the NBC lineup for more than three decades, dating to the 1990 debut of flagship Law & Order.

But the stalwart cops and courts procedural and its spinoff Special Victims Unit won’t be part of the New Fall Season. Nor will Wolf’s Chicago trilogy (that’s Chicago Fire, Chicago Med, and Chicago P.D.), which collectively held down NBC’s entire prime-time Wednesday night for the past several years. Whenever the strike resolves, will NBC have the resources to restore all of Wolf’s shows and all the other programming it had before?

As IndieWire put it, your dad is about to have questions about the strike.

With both sides hunkered down for a strike standoff that seems likely to last through beyond Labor Day, everyone else will have questions too. The big one will be, “What’s left of Hollywood?”