Merchant: How the Silicon Valley Mindset Sparked the Hollywood Strike

Merchant: How the Silicon Valley Mindset Sparked the Hollywood Strike

In one respect, the Hollywood actors and writers uniting at the picket lines in a historic strike that shook the industry it’s a tale as old as time: one of the workers fighting the bosses for better wages. However, the reason this battle is becoming so uniquely intractable and important — as you might have gathered from all the headlines about artificial intelligence and the streaming economy — is very much of our moment.

But ultimately, it’s not the technology that’s at the root of the problem. It’s that studio execs, new and old, have embraced the powerful – and ultimately disastrous – magical thinking pumped out of Silicon Valley over the past 10 years.

Studio heads are touting the disruptive properties of digital streaming, the transformative power of AI, a brave and unpredictable new world for large-scale entertainment — and how writers and actors must adapt to that new future. But, as with his exit from the tech sector in the 2010s, that conversation often amounts to a smokescreen that allows executives and investors to line their pockets and risks leaving workers holding the bag.

“These companies destroyed a successful business model that the public enjoyed, which was hugely profitable, and replaced it with the mess we have now,” Adam Conover, star of “Adam Ruins Everything” and a member of the negotiating committee of the Writers Guild of America, told me. “And now they are refusing to update the contract to reflect these changes.”

We hear a lot about the ways studios want to reserve the right to use AI — to create infinitely usable digital replicas of actors, to generate scripts that writers lower rates will be paid to repair. We also hear about the new economic landscape introduced by streaming, about an industry in full swing and the need to tighten belts as a result.

We hear from Disney Chief Executive Bob Iger say that SAG-AFTRA’s demand for fair pay in the new digital landscape is “unrealistic” and we hear how Netflix has seen declines in user sign-ups and share prices over the past year. However, Iger reportedly does $27 million a yearwhile Netflix Just Raked in $1.5 Billion in Net Income in the Last Quarter.

So what’s really going on? And how did we get here?

First, we need to understand why the 2010s may come to be remembered as Silicon Valley’s great decade of magical thinking. Intoxicated by a truly transformative first decade of the 21st century – which saw Google, Amazon, the iPhone and social media storm the world stage – tech investors have turned their attention to the next generation of start-ups, eager to see them do the same.

The formula for looking for the next multibillion-dollar “unicorn,” in hindsight, was pretty simple: the next wave of start-ups had to promise that they would revolutionize an obsolete industry with a newer alternative based on high-tech applications, promise the potential for massive scale, and promise that they could do it quickly. Then we saw the rise of Uber and Lyft, each of which promised to revolutionize commuting, and we have companies like WeWork, which was intended to usher in the future of coworking, and Theranos, which would do the same for at-home blood tests.

We know how it ended. Uber and Lyft were never sustainably profitable, WeWork collapsed dramatically when it became clear that it was just an extremely leveraged real estate company, and Theranos’ futuristic medical technology was downright fraudulent.

Unlike many of the first-wave technology companies and products of the 21st century, which found markets and paths to profitability, these were pipe dreams, sustained by a hose of cash investment, talkative and very real founders – and at the time, quite understandable! — to feel that Silicon Valley was the place that determined how the future was made.

In the early 2010s, Netflix was somewhere between the old guard and the new. It introduced online streaming in 2007 and had a real product with real demand, as well as an established business in its DVD-by-mail rental service. However, its ambitions were hypercharged by a modern sense that it could disrupt the old-school Hollywood industry and scale endlessly – there was no reason why everyone in the world with access to a screen couldn’t apply.

big investors sunk hundreds of millions into Netflix’s new vision. When it started producing original content in 2013, it applied an ethos that was distinctly Silicon Valley’s next wave. It would make big upfront investments, financing major productions like “House of Cards,” directed by David Fincher and starring Kevin Spacey, paving the way for the prestige TV package, promising not only to compete but also to do it better: It would offer all the episodes at once, on demand, where viewers could consume them whenever and however they wanted. The cable would become obsolete. The future was cutting the rope.

Like Uber and Lyft, whose bottomless chests of venture capital allowed them to conquer new markets previously dominated by stale old competitors — in their case, the taxi cartels and taxi companies, price was no object.

Right off the bat, episodes of Netflix original shows like “House of Cards” and “Orange Is the New Black” it cost $4 million a pop. (So ​​were episodes of shows few remember today, like “Hemlock Grove.”) $15 billion a year on new content – but, as with the Valley’s magical start-ups, the strategy “worked”.

“What happens is Netflix becomes the darling of Wall Street, and all these other companies,” like Amazon, Disney, Apple, HBO, Paramount and NBC, “run to adopt the Netflix business model,” says Conover.

Herein lies the problem. In the midst of this boom, which for a few years led to a gold rush for writers and talent, Netflix & Co. adopted another key ingredient of the Silicon Valley approach: secrecy. Data on program performance and viewer habits have been kept proprietary; we only knew what the streamers wanted us to know. That goes for clients, artists, writers, and investors. Streaming is an inscrutable black box, about which so many stories can be told.

It’s a sticking point in the negotiations — actors and writers on streaming series want a better way to calculate the value of their work, as the residuals they earn are much smaller than for network or cable shows. The studios resisted. “The reason nobody really wants to open the books about this is because if Wall Street takes a look,” a Hollywood source said. told New York magazine“they would have a collective stroke”.

What we’re seeing now is the fantastical thought that Netflix and its following could continue endless expansion against real-world physics – there are now 238 million Netflix subscribers, but those numbers dropped for the first time last year, and the company has had to get them back by nibbling corners, cutting password sharing and rolling out new, cheaper tiers that run ads.

The boom times are over. Executives know this. Wall Street knows this. And the story that we are in a revolutionary moment of technological transformation will end soon. So bosses are using this momentum to do what Silicon Valley ended up doing when its other big changes didn’t pan out: squeezing out manpower.

Just as Uber and Lyft, which promised rich rewards and flexible fares to drivers, began slashing fees and making it harder to earn those rewards, Netflix and the mold-cut streaming group are now trying to make good on their promises of world conquest by slashing workers’ wages under the fog of magical thinking.

It has been noted, and rightly so, that labor disputes in the entertainment industry often arise when there is a shift in technology – from movie theaters showing projected movies to the cathode ray tube of home television, say, or the rise of the consumer internet in 2007 – and this happens for a reason. Historically, executives and managers have used a disorienting new technology to try to justify lowering their workers’ wages, and they have been doing so since the days of the Industrial Revolution.

“Old CEOs knew they had to work with the unions, negotiate with us,” says Conover. “The new ones don’t. So part of the point of the strike is us as workers showing tech CEOs that no, you really need to deal fairly with unions.”

Conover notes that it is shocking to see streamers citing poverty as an excuse for not negotiating with talent in good faith as the show’s budgets and profits have increased.

“Netflix lied to the public and to Wall Street,” he says, telling them “’you can watch every show ever made in perpetuity, ad-free, for $15.99 a month forever.’ This is like Movie Pass.” (The much-hyped app that allowed users to watch unlimited movies for a monthly fee, before quickly going out of business.) “This is ridiculous.”

Ridiculous if you want to pay the people who actually create these shows for you anyway.

What Netflix and streamers are trying to do now is seal a new standard under which writers and actors are treated the same way Uber and the show app companies treat their independent contract drivers.

“Uber is a perfect example,” says Conover. “Your drivers need to fill their own cars, their own fuel, their own insurance, and so on.” Drivers are on their own, with little or no benefits or protections, and are expected to maximize company profits. “And Netflix is ​​trying to do the same thing.”

Unlike Uber, Netflix really It is quite profitable. But in order to sustain the mythical levels of growth it has promised investors, it is resorting to similar tactics – cutting workers’ hours, making work more precarious and unpredictable, and cutting wages. It’s a far cry from the sleek, automated futures promised by studio execs.

As with the biggest companies of Silicon Valley’s era of magical thinking, it’s often difficult to analyze whether those touting the revolutionary technologies believe these visions – do studio execs really think consumers want to watch a parade of digital replicas of their favorite actors repeating lines from an AI-generated script? Or are they simply aware that the mere threat of such a future gives them influence and power over today’s workers?

In the end, the answer is irrelevant. Hollywood’s invasion of Silicon Valley brought with it sci-fi notions of growth for the industry, a penchant for secrecy and irresponsibility, and the expectation that it could get away with treating workers like robots or invisible codes. We are seeing what happens when these notions meet, for the first time, powerful and organized resistance.

Personally, I hope this one has a Hollywood ending — not the ending that so many Silicon Valley startups have had over the past 10 years.

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