Despite producing the vast majority of billion-dollar blockbusters, Disney's film studio profits have collapsed 60% since pre-pandemic levels. This reveals that box office success is not a reliable indicator of financial health. Disney has become a theme park company where the film division, despite its cultural impact, is no longer the primary profit driver.
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Judd Apatow posits the disappearance of culture-defining comedies is a business model problem. Previously, a film like 'Anchorman' could double its box office with DVD sales, ensuring profitability. When streaming killed that secondary revenue stream, mid-budget comedies became a much riskier investment for studios.
The traditional Hollywood production model, with its bloated crews and high costs, is unsustainable. AI will drastically lower production costs while audience preferences shift to short-form video. This dual threat will force a brutal economic reckoning and consolidation.
High-stakes bidding for legacy media assets like Warner Bros. is driven by status-seeking among the ultra-wealthy, not a sound bet on the future of media. They are acquiring prestigious "shiny objects" from the past, while the actual attention economy has shifted to platforms like TikTok and YouTube.
Hollywood's current crisis is self-inflicted, stemming from a decades-long failure to adapt its business models and economics. Instead of innovating to compete with tech-driven services like Netflix, the industry persisted with inefficient structures and is now blaming disruptors for inevitable consumer-driven changes.
Disney could create an unbeatable moat by purchasing a theater chain like AMC and offering exclusive perks to Disney+ subscribers, such as $1 tickets and private screenings. This transforms theaters into a physical extension of their digital subscription, boosting loyalty and attracting top creative talent who value the theatrical experience.
Netflix is launching its 'Netflix House' theme parks inside former department stores. This capital-light strategy of leasing and repurposing existing retail space allows it to chase 'experience dollars' without the massive upfront investment Disney makes in building parks from scratch.
While Six Flags blames bad weather for poor performance, its struggles are an outlier. The broader theme park industry, including Disney, Legoland, and Universal, is experiencing record highs. This contrast suggests Six Flags' problems are company-specific operational issues, not market-wide trends, attracting activist investors.
Disney is uniquely "breakable" because it lacks common defense mechanisms like a poison pill or a staggered board. Its annually elected board makes it highly vulnerable to activist campaigns seeking to replace directors and force a sale.
A merger would combine Disney's irreplaceable parks and legacy IP with Netflix's streaming dominance, modern IP ('Stranger Things'), and strong leadership. This synergistic deal would create a company that dominates both at-home and in-person entertainment, making it highly defensible against AI and other disruptors.
The entertainment industry's resentment towards Netflix is misplaced. Swisher argues that studios are in decline because they failed to modernize, lean into technology, and listen to consumers. Netflix simply capitalized on the industry's inefficient and outdated business models by building a product people wanted.
