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Saturday, Dec 9, 2023

Growth Spurt

More than a century old, Hollywood has suddenly become a growth industry.

In television, salaries and employment opportunities for creative talent continue to skyrocket due to strong demand from the programming boom ignited by Netflix Inc.

The industry is producing more than 500 scripted series annually today, up from 182 in 2012, according to FX Networks. Emblematic of that TV boom, Netflix is spending $17 billion this year on content, up from $2.4 billion in 2013, and expanding its offices in Hollywood.

Recently, the company made splashy production deals with Ryan Murphy (“The People v. O.J. Simpson: American Crime Story”) and Shonda Rhimes (“Grey’s Anatomy”), each valued at about $300 million over five years. Netflix’s torrid spending is pressuring rivals to keep pace.

In music, the world’s leading concert conglomerates — Beverly Hills-based Live Nation Entertainment Inc. and downtown-headquartered AEG — are locked in fierce competition to consolidate the live music industry and expand globally, driven by a 72% increase in gross sales for the world’s top 100 concert tours since 2010, as reported by researcher Pollstar.

Last year, Live Nation bought controlling stakes in fan-experience outfit Groot Hospitality and Mexico’s leading concert promoter. AEG took full control of ticketing service AXS and is developing entertainment districts in Nashville and Bangkok.

Also primed for dealmaking is Playa del Rey-based Peter Chernin, a former studio executive-turned-digital entrepreneur. His TCG fund closed $700 million in funding late last year and plans to invest in a range of consumer businesses. So far, TCG has committed $200 million to deals. The Chernin Group holding company, of which TCG is an affiliate, also has multiple film projects, including Oscar Best Picture nominee “Ford v Ferrari.”

Still, a dark cloud hangs over the industry, with the Writers Guild of America locked in a bitter war with the town’s talent agencies.

The guild is trying to force agents to abandon their practice of extracting so-called packaging fees from select TV and film deals. Agencies claim the fees for assembling and selling projects with the major talent attached saves clients money.

WGA contends the opposite, asserting the fees constitute a conflict of interest that could harm individual clients. A massive number of WGA members have already fired their agents, and a potentially decisive court battle is scheduled for early 2021.

In the lead-up, look for recriminations from what surfaces during legal discovery; expect the WGA to try to sign more agencies to franchise agreements eschewing the fees; and anticipate that talent agencies will encourage writers to defect, even though writers decisively reelected their union leadership in September.

For Endeavor Group Holdings Inc. a loss of packaging fees could be an especially difficult blow. The company withdrew an initial public offering in October because of concerns about its debt load and also due to market conditions. The disappearance of the fees, a pillar of big-agency profits, would cast a shadow over any attempt to revive Endeavor’s IPO.

Meanwhile, December’s remerger of Viacom, parent of Paramount Pictures, with broadcaster CBS Corp. could spark a TV program production reunion. Before the media giants split in 2006, CBS Television’s shows filled Paramount’s soundstages.

After the divorce, the studio rented to all comers. For the moment, ViacomCBS Inc. remains mum on reintegration plans for Los Angeles.

Return to the 2020 Money Issue.

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