As Hollywood celebrities graced the red carpet in early January, a pressing concern loomed over the glitz and glamour: Hollywood is undergoing a significant contraction.

Seventeen industry insiders, including entertainment executives, agents, and bankers, have shared their perspectives with Reuters, collectively painting a picture of a shifting landscape in the television and film industries.

From a reduced number of original series and movies to increased scrutiny of budgets and mounting pressure on cinema profits, decision-makers acknowledge that the entertainment sector is adapting to challenging economic conditions.

Notable reduction

“The great contraction is upon us,” commented one anonymous veteran television executive. “I anticipate a notable reduction in both the quantity of content and the expenditure on content.”

The ongoing contraction will be a focal point as companies like Walt Disney (DIS.N), Warner Bros Discovery (WBD.O), and Fox release their quarterly results this month.

It also sets the stage for discussions regarding potential media mergers, including recent talks of a sale between the owner of Paramount Global (PARA.O) and Skydance Media CEO David Ellison, whose studio co-produced “Top Gun: Maverick.”

Analyst TD Cowen predicted a 7% decline in broadcast and cable television advertising by the end of 2023 compared to the previous year, with Disney experiencing an 11.7% drop in total advertising, as per LSEG.

Warner Bros Discovery reported a 13% reduction in advertising during the first nine months of 2023.

Digital advertising

Traditional TV, alongside print and radio, has faced challenges due to the rise of digital advertising.

The outlook for 2024 remains unfavorable, with TD Cowen projecting another 7% decline in broadcast and cable TV ad revenue. Despite media companies expanding their digital advertising ventures, traditional TV advertising still constitutes 80% of their total advertising revenue.

Streaming services, once hailed as the future of the industry, are grappling with profitability concerns after years of extravagant spending.

As the industry enters the “third act of the streaming wars,” production spending is expected to dip below 2022 levels, signaling a shift from the previously “unsustainable” investment, according to MoffettNathanson.

Subscription fees

Most streaming platforms have increased subscription fees while offering fewer new content, raising doubts about their long-term strategies, as noted by TD Cowen.

The number of scripted series is expected to witness a significant reduction from the peak of 633 shows in 2022.

A combination of Hollywood strikes and budget constraints led to a decrease in production, resulting in only 481 U.S. series released in 2023, as reported by market research firm Ampere Analysis.

Even industry leader Netflix (NFLX.O) reduced its scripted series output by more than one-third from 2022 to 2023, according to Ampere.