Aside from a booming North American box office that hit $11.9 billion in 2018, this past year wasn’t kind to much of the entertainment and media industry. Over the past 12 months, 31 of the 50 media stocks tracked by THR are down as of the close of trading Dec. 28. Notable exceptions include Netflix, which benefits from cord-cutters who ditch expensive cable and satellite for streaming, and 21st Century Fox, which was buoyed by the $71 billion sale of most of its assets to Walt Disney Co.
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In 2019, mergers and acquisitions also will help some larger conglomerates more than others, and the shift to streaming will keep up unabated, though there will be more competition, as Disney and WarnerMedia each join the fray with new products. If the U.S. enters a recession, as some economists are forecasting, it could be a period marked by layoffs and cost-cutting at the Hollywood majors. THR looks into the crystal ball at what could happen in the year ahead. — Paul Bond
1. Netflix subscribers actually will notice missing Disney content
Expect the gradual withdrawal of Disney and Fox content to impact Netflix late in the year. New movies will disappear first, followed by a lot of television content, and by year’s end, Netflix is likely to see a reduction in available content of as much as 20 percent of its total hours. The impact on viewing hours is likely more significant than that, and Netflix subscribers in the U.S. may start to say “there’s nothing on.” Should Disney launch a competitive service that has all of the content pulled from Netflix, it is likely to tout that fact, and my guess is that Disney’s new service will come at the expense of Netflix’s growth. This is likely to be far more pronounced in the U.S. than overseas, but because domestic subscribers fuel Netflix’s ability to grow internationally, it is likely to have a pretty big impact on overall profitability and growth. Of course, Netflix will not have to pay for the content withdrawn, so it’s possible that its spending will stabilize; however, I expect the investment in owned originals to grow dramatically instead. We’ll see whether Netflix is able to self-produce content as compelling as the Disney and Fox content that will disappear from its service. — Michael Pachter, Wedbush Securities analyst
2. Amazon, Apple or Netflix will (finally!) buy a major studio
Amid speculation about the long-term future of individual executives (Warner Bros.’ Kevin Tsujihara, Fox’s Emma Watts, the entire Fox Searchlight team), a giant question mark looms over the movie business: Which studio will be gobbled up by an internet or streaming behemoth? Disney’s acquisition of Fox sent gravitational waves across the entire media landscape and put a target on every major and mini-major not affiliated with a larger media corporation. Whether it’s Sony Pictures Entertainment, Paramount Pictures, MGM or Lionsgate, one of these companies likely will become the target of acquisition by Amazon’s Jeff Bezos, Apple’s Tim Cook or Netflix’s Ted Sarandos — or even by another studio conglomerate like AT&T-owned WarnerMedia, seeking to ramp up its library. The question is not so much who will fall as when and for how much. — Stephen Galloway
3. CBS and Viacom won’t merge …
It’s practically a given in media circles that when the mess with former CEO Leslie Moonves is settled, CBS will merge with Viacom, as both companies are controlled by Sumner and Shari Redstone. Likewise, after Rupert Murdoch sells most of 21st Century Fox to Disney for $71 billion, many presume he’ll merge what remains — Fox News Channel, Fox Business Network, Fox broadcast and Fox Sports (collectively to be known as “Fox”) — with News Corp, as he controls both. Neither will happen, though, as Murdoch balks at bogging down his electronic news and sports company with print properties like The Wall Street Journal, New York Post and dozens more worldwide. As for CBS, its board of directors, while loyal to the Redstones, ultimately will determine that Moonves was correct when he fought to prevent a merger with Viacom, a slow-growth cable TV firm that posted a 2 percent dip in revenue in 2018 and a 10 percent slide in earnings due to sluggish ad trends and competition from streamers. — Paul Bond
4. … But Verizon will buy CBS
Imagine this series of events: Observers hardly will be surprised when the D.C. Court of Appeals in late January upholds the decision to allow the merger between AT&T and Time Warner. The Justice Department could then immediately announce that the government will review its options, though no petition to the Supreme Court will come. What’s more, DOJ Antitrust chief Makan Delrahim could then quit, and his division would scuttle quiet plans to seek a breakup of Comcast-NBCU. Meanwhile, another scenario may emerge: Verizon, sensing AT&T’s growing strength and taking advantage of Sumner Redstone’s incapacitation or death and the controversy circling CBS’ possible decision to pay Leslie Moonves $60 million in a settlement, could come forward to make CBS’ board an offer it can’t refuse. Upon the announcement, Verizon may tell customers that all NFL games broadcast on CBS won’t count toward mobile users’ data caps. — Eriq Gardner
5. TV’s war for talent will go nuclear
Though at least a few more traditional cable outlets will exit the scripted business, the streamers (led by Netflix’s insatiable appetite for content) will ensure we won’t reach the peak of peak TV in 2019. Expect the frothy market for eight- and nine-figure overall deals for the town’s hottest television producers to get increasingly competitive, with traditional entities beyond simply Warner Bros. forced to step up with huge upfront sums. (Of course, if these producers deliver a true juggernaut, the studios will be thrilled that deals now are being structured this way.) As for series dealmaking, the TV business is likely to start to see some pushback on the cost-plus deals (where a premium is paid upfront in lieu of backend) pioneered by Netflix. Finally, as the streaming giants focus their attention overseas, look for more U.S. writers and producers to prove key to that expansion process. — Lacey Rose
6. Broadcast TV hits will become fewer and farther between
As the TV audience fragments, the definition of “hit” will be further adjusted down. In 2017-18, eight non-sports series — seven broadcast shows and The Walking Dead — finished the season with 18-49 ratings above 3.0 (in live plus seven-day ratings), the mark of a hit in the current climate. As 2019 begins, there are just five: This Is Us, The Big Bang Theory, The Walking Dead, Manifest and Grey’s Anatomy. Manifest is a decent bet to drop below 3.0 by the end of its run, and next fall? Don’t be surprised if the number dwindles to two or three. When 2020 rolls around, a 2.5 demo rating after a week may well set a show apart from the pack. — Rick Porter
7. The $1 billion box office club will become less exclusive
The 2019 box office will be even bigger than the record-setting 2018. Look for an unprecedented number of Hollywood tentpoles to amass $1 billion or more in global ticket sales (the record is five, set in 2015). Shoo-ins include Disney’s Avengers: Endgame (April 26), The Lion King (July 19), Toy Story 4 (July 21), Frozen 2 (Nov. 22) and Star Wars: Episode IX (Dec. 20). That would be five from one studio. Billion-dollar wild cards include Captain Marvel (March 8), Dumbo (March 29) and Aladdin (May 24) — all three are likewise from Disney — Universal’s The Secret Life of Pets 2 (June 7), and Spider-Man: Far From Home (July 5) and the Jumanji sequel (Dec. 13), both from Sony. Studios need another record year in their battle to remain relevant in the age of streaming. — Pamela McClintock
8. Major digital players will merge to fight Google and Facebook
As venture-backed online publishers struggle amid an industrywide downturn, consolidation is a given. With smaller brands like Mic, Mashable and Uproxx selling in 2018, it is time for the larger publishers like BuzzFeed, Vox Media, Group Nine, Refinery29 and Vice Media (which all have more investment money, bigger valuations and higher expectations) to find an exit strategy. An IPO is largely off the table for these companies after many of them struggled to meet revenue projections. Instead, the most likely outcome is a merger — or several. BuzzFeed CEO Jonah Peretti suggested as much in a Nov. 19 interview with The New York Times when he proposed that the best option for these companies would be to join forces. While it’s unlikely that all five would merge, there is potential for a publisher like Group Nine to scoop up another property like female-focused Refinery29 and then, ultimately, sell to minority investor Discovery, or for BuzzFeed and Vox to merge under some kind of NBCUniversal deal (the Comcast-owned conglomerate has invested in both companies). Meanwhile, Vice might find the willing partner it has sought in a more diversified media company like AT&T. — Natalie Jarvey
9. Sean Hannity will part ways with Fox News
In 2019, Sean Hannity will finally become too big for Fox News, the network that launched him back in 1996. While Hannity, 57, remained the top-rated host in cable news (averaging 3.3 million total viewers in his time slot) in 2018, he crossed a line in early November when he appeared onstage with the man he informally advises, President Trump, after his network said he’d only be appearing at the campaign rally as an interviewer. “This was an unfortunate distraction and has been addressed,” Fox News scolded at the time, delivering a rare rebuke to the network’s biggest star. He increasingly has become a media empire unto himself, replete with a radio show (listened to by 14 million people a week) and his own news website (not to mention a real estate empire). This year, Hannity likely will keep pushing the boundaries of the Fox News-White House relationship as he lends his star power to his friend’s bid to retain the office. Fox News won’t move to oust Hannity, but the host likely will grow tired of getting his wrist slapped and break free, a possibility that has been rumored since April 2017, when he said that the departure of his boss Bill Shine (now White House communications director) would be “the total end of the FNC as we know it.” — Jeremy Barr
This story appears in the Jan. 4 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
