Rushfield: A Tortured Business of Flops
An open letter to Wall Street on the irrational model of Hollywood
Another week of earnings reports and another season of hair-on-fire reactions. Every time the new numbers come out, the mood on this or that company swings from “They’ll rule to world!” to “They are doomed!” with little space in between, and little reflection of the complicated reality of building a business based on entertainment.
Will the Zaslav plan work or is Netflix on the right track? That depends a lot on how things they are putting into production today emerge at the other end of the pipeline two to five years from now. And not too much about this quarter’s report will give you insight into that.
These streaming-age conversations about the quarterly earnings tend to treat entertainment companies like giant utilities, where entertainment flows through the pipes but is not of much importance itself.
Would that it were that simple, but in our hearts we know it’s not. (In our guts, we know it’s nuts, to paraphrase a political zinger from long ago.)
Specifically, we're becoming accustomed to judging the success or failure of our great entertainment companies solely through the prism of CNBC. The quarterly earnings report has become a Hollywood set piece bigger than the rollout of any star-studded film spectacle.
Like the way of every other company on Earth — financialization has come to Hollywood by way of the tech world.
And we've become accustomed to seeing this as normal and no longer are squirming at how strange the fit is, seeing entertainment companies present themselves like they are… Xerox or something. And people’s lives, careers and creativity are now all at the whim of a stock price.
A Terrible Investment
But it's not normal, and it's not the clear-headed, hard-nosed thinking that it pretends to be. Because any attempt to value an entertainment-based company on the same investment standards as other companies will sooner or later come to one conclusion: entertainment is a terrible investment.