In honor of the Actors’ union (SAG-AFTRA) and the writers’ union (WGA) strikes, I think we have a new opportunity as creatives to reflect on the industry we are a part of. Truth be told, Hollywood is not the be all end all to filmmaking but it sure is the Mecca. It is still the system that grants the highest accolades from Oscars, Grammys and Emmys to public affirmation in the form of box office revenue and big budget productions. Thus Hollywood sets the global tone on the types of stories we get to see. Thus as the Vatican is to Christianity, Hollywood is to the business of Film and Television. One of the major legacies of the Vatican to the christian faith is the concept of the Seven Deadly Sins. These seven vices were said to bring one’s soul into damnation and would require serious spiritual intervention (intercession) in order to be delivered from their demonic claws. The church has evolved, the faith has evolved but given the nature of these vices, one may still find value in the advice to watch out for to avoid being at the behest of any or all of these vices. There is a biblical saying which goes: “The wages of sin are death“. Fortunately, or unfortunately, we often find that when in the throes of passion at the mercy of these sins, carnal death does not come soon enough. We find sometimes, that we are presented with warning markers along the way that could be used as outs. But like in every tragedy, man often falls victim to what he could have either defeated or avoided altogether. In this piece, I would like to make a correlation of Hollywood as a creative body and its current descent due to its level of ensconcement in the seven deadly sins in terms of how it operates and in what it promotes.

The first sin on the chopping block is GREED. We see greed in a lot of the entertainment on our screens. The most noble form of it is the deification of moguls. As we have them on podium asked to shed light on what is going wrong in the economy as they gobble up profits across industries which strangle workers’ earnings. On the other hand we see the promotion of spending culture over earning culture. The idea that success is what we can buy over what we can build. Pop culture, tabloids and reality television programming are quite the psyop. As the famous character in Oliver Stone’s classic movie, WALL STREET says; “Greed is good!” Now, not only is the messaging of Hollywood insidious but the model of business in Hollywood unfortunately worships at the altar of greed. We hear the term bottom line, box office, international market. Responsible terms if you are sincere but when you work in Hollywood, you quickly find that it has a compensation and aggregation model that was bound to set up some players for huge wins at the expense of other either losing or barely winning at all.

A very popular word in Hollywood is “production”. This often refers to making of projects; movies, television and short form content. Production is crucial to the accrual of property but mostly occupies about a third of the industry’s economic cycle. Despite the fact that most of the decisions we get to witness are ones that were made in production, the money is usually generated and multiplied after distribution. In fact, most people who invest in Hollywood are more likely to refer to their role in production. This part of the cycle, though crucial, is not often where the most money is made. However it is where the most money is paid. So investing in a production will often yield as much as can be provided upon acquisition for distribution. The real stakeholders make their money after distribution. The yield for distribution often comes in much later than went the expenses for production were registered that it often makes good enough sense to pay as many players through production as possible. But when the final tally of distribution comes in, there revenue generation often outsizes the production costs even in movies that are generally considered flops. Now there are in fact flops where the revenue generated does not even but for the most part, production expense is specific while revenue pot comes into a larger size pot that distributes to the studio stakeholders. Hence why studio executives can see pay raises when productions from a few months before do not seem to be doing that well.

In production, you spend write off. In distribution you earn and retain and both parts of the process are kept as far apart to prevent consequences of a production flopping or the excesses of a hit turning into a lottery for the production. In compliance with the United States Business bureau and tax system, Hollywood productions are often registered as ventures subsidiary or separate to the studios that will eventually distribute them. Thus the productions are meant to optimization tax-friendly expenditure while distribution is meant optimize revenue generation. Production companies make money from the profit but usually not as much as the distribution company. When productions take on risk, they are bound to lose money and so can never quite compete with the studio in terms of profit retention. So how do we explain star salaries?

Top talent and top performers are paid out of the expense of the production. Their salaries no matter how high are kept within the production cost. This can often be supplemented by several other capital streams independent of the distribution studio. Paying a celebrity $20M out of $150M production is considered smart accounting if it means the production can earn $300M and the star does not get to ask for his cut of the box office revenue. There are several instances where the films make 3x and 4x the cost of production and the stars are not recompensated. Some stars (including actors, directors and writers) know to get less money in production and secure stake in the distribution so they can get access to the revenue share later in the fiscal schedule. So the business model of hollywood already veers towards greed such that no matter how much your product wins, who gets the biggest slice is predetermined regardless of the revenue. For years, several performers and creatives have swallowed this arrangement for the prospect/reward of fame. Who will turn down the $20M and fame when they may be right worthy of $100M but a bad name? Do not be surprised at how many fall for this offer and spend the rest of their days trying to keep up their fame. But all good things come to an end… or do they?

With streaming, actors and writers were told, the revenue generation model was still in its infancy as it was tackling both movies and television without box office and ad revenue. Thus production was cornered into absorbing the cost of disruption. However, the revenue grew enormously in the last few years as we saw the streamers pour in huge sums of money into high concepts shows and movies in order to cater to its primary revenue generation method; subscription. However, the legal business/tax framework from the previous model remained. Keeping cost of production immune to revenue generation and vice versa. However, this has created a trust gap. With the studios, box office and ad placement was discernable evidence of revenue generation. But with subscriptions, the players in the industry who often got paid through the production stage have not been privy to the revenue generated even though there are way more metrics available to determine exactly how impactful a production is. One can tell how many households, how many views, how many episodes, what shows led to increase of decrease in subscribers and most of all how much revenue has been generated overall in order to negotiate for more capital allocation to production. With the streamers, a lot of this information is retrievable but withheld.

Thus the disruption was not only a change to the revenue generation model but it was an excuse to neglect the principle that was established with the unions on how to hire, retain and sell the work creative people often give their lives to. How do we tie this all in? Hollywood, an establishment run by moguls have found a way to grow the revenue pot of the entertainment industry but are refusing to allow the perks of this growth to extend to the workers who are the foundation of the industry. Actors choosing to strike over working means they are growing weary of settling for fame over fortune. A long enough strike could lead to another disruption but who will bear the cost of it is to be determined.

*This post was written upon the reflection of the seven years I spent working in feature production for one of the major Hollywood distribution studios.