Perverse Incentives of the Poobahs
Perverse Incentives of the Poobahs
Wall Street doesn't like entertainment. But it won't stop our CEOs from trying
I’m continually struck by this paradox in Hollywood: The people who run — and own — our studios are not morons. You don’t get to the top of this pyramid and stay there by accident. They are smart, insightful people, and their understanding of the complexity of problems we face here could run circles around mine on their worst days.
What’s more, contrary to caricatures, they aren’t evil people. Most of them gravitated towards this business because they love film and TV. By and large, the ones that could have gone onto Wall Street, or into law without the nonsense of Hollywood, did so. They tend to love artistic people. Many of them love stars a bit too much even, but that’s part of the package.
So if we’re run, by and large, by very intelligent people who love what Hollywood does, why collectively does it seem like they are determined to run this place into the ground? I talk, everybody talks, endlessly about the long-term decisions we all know have to be made, but somehow they never happen. Meanwhile, things like the six-month shutdown happen.
The 2024 release calendar looks like a desert outpost abandoned before the Hells Angels rode through. The studios continue to fumble after a Netflix model that they’ll never reach. And they systematically took a sledgehammer to the greatest gusher of almost passive cash flow that business will ever know — the cable bundle — which they now seek to replace.
We’ve got the smart, well-intentioned people in charge, and yet big questions forever go unanswered. Questions like: Why are they making more shows than anyone can watch? With no plans for promoting them? Why doesn’t Hollywood make more family films? Why doesn’t every studio have its own Blumhouse?
I keep coming back to this idea: It’s not that our leaders are stupid or evil. It’s that the incentives for the people at the top have gotten so wildly out of whack with the priorities of entertainment, that even with the best of intentions they are fighting every step of the way against a rip current that wants to carry them and their whole countries out to sea. Most, if not all, of these are of a financial nature, a never-ending demand to please investors, not the viewing public. Yet, Wall Street is never pleased — turning our leaders Sisyphean, forever trying to move analysts with this move or that, warding off activist investors here or there, only for the giant boulder to tumble down again and again.
Somewhere along the way came a set of perverse incentives for our CEOs of publicly-traded companies, a game they are forced to play. Let’s run through a few of them and stop to pity the poobahs, or as the Bard puts it, “For God's sake, let us sit upon the ground and tell sad stories of the death of kings.”