HollywoodZero
"The future is already here – it's just not evenly distributed." William Gibson
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I love movies. I was a film school kid, and being a PA on cult horror movie C.H.U.D was my first job out of college. I climbed up on the Hollywood Sign and changed it to Hollyweed with bolts of fabric when I production managed “Hollywood Hot Tubs”. For years, I’ve been fascinated by how the movie business interfaces with economics, technology, and culture. In my seven years as Head of Business at Letterboxd and the CEO of GoWatchIt before that, I had the catbird seat for great conversations—talking daily with distributors, agencies, production companies, artists, exhibitors, festival organizers, streamers, dreamers, and Letterboxd members around the world. And I took notes.
They often asked the same question: where do we go from here?
The movie business is different. As William Goldman famously said: No one knows anything. That truth still governs the industry. Except for when the movie business is exactly like every other business.
Movies break Econ 101. Thousands are still made every year — many more than commercially viable audiences could ever watch. And although most lose money, unlike restaurants or housing, which fluctuate via demand and supply in a predictable feedback loop, the movie market never self-corrects. (This is a topic I’ll explore in a future post — it’s partly a legacy of the tax-shelter era of the 1960s–80s, when investing in movies was almost a no-lose proposition for the wealthy.)
Is the future of the movie business more like the opera, a vinyl record store, The Sphere, Reelshort — or, my preference, Singin’ in the Rain (a story about a successful technological transition)?
Quick note: When I use the terms Hollywood and the movie business I mean the current movie and TV business. And by movies I mean big blockbusters as well as Sundance indies. I’ll talk more specifically about indies another time.
Past Panic » Future Shock
In 1982, Jack Valenti, head of the Motion Picture Association of America, sat before Congress and compared the VCR to an instrument of murder:
He was wrong. The VCR didn’t strangle movies — it fueled the home-video boom that drove Hollywood for decades.
Today, the new “Boston Strangler” is AI-driven short-form video. Investors are pouring capital into companies designed to carve off more of the attention pie, while many in the industry fear AI itself will destroy the movie industry altogether.
The underlying problem is simple: Movies compete for a fixed pool of attention that only grows slowly with population—and as new generations come online, that pool keeps shifting in taste. And now a massive slice of that finite reservoir of attention is being siphoned away by challenger mediums whose AI-enabled supply is set to grow exponentially.
The Battlefield
Hollywood is fighting YouTube and TikTok for the same scarce resource: attention. But it’s an asymmetric war: tanks versus drones.
The Tank: a $200M blockbuster, years in development, with a global marketing push that can cost as much as the film itself. Independent films, too, are often multi-year projects. Tanks are powerful but slow, costly, and vulnerable—and one failure can cripple a studio or kill a career.
The Drones: millions of cheap, disposable YouTube and TikTok clips, created at near-zero cost, released by the thousands every minute, algorithmically tested—when one fails, another instantly replaces it.
For years, Hollywood executives dismissed YouTube as a dumping ground for cat videos and pranks. Today, those same executives spend their mornings scrolling social media to spot trends, scout creators, and study formats. What was once mocked now sets the cultural agenda.
The Poverty of Attention
The economist and computer scientist Herbert Simon — who won both the Nobel Prize in Economics and the Turing Award in AI — helps explain why. Simon argued humans don’t optimize like machines; we “satisfice”, choosing what’s “good enough” within our limits of time and information.
Hollywood has long struggled with this. Music executives once dismissed MP3s and streaming as low-quality compared to CDs and vinyl, failing to see that for consumers, convenience trumps fidelity. “Good enough” portability beat pristine sound.
The same dynamic plays out today: why commit to a two-hour movie when a five-minute video feels good enough — and the phone is already in your hand? Platforms like YouTube and Tik Tok are engineered for this “satisficing” impulse — autoplay, feeds, instant gratification — and the results have reshaped culture.
The Innovators Dilemma. Again.
The lesson is the same across industries: survival means fully absorbing disruption, not resisting it or nibbling at the margins, thus allowing it to grow without creating enterprise value for yourself.
The Pentagon is studying not just how to defeat drones, but how to fully integrate them into its own force structure.
Netflix, too, thinks this way. In 2011, it tried to split DVD-by-mail and streaming into two services with a price hike. Customers revolted, investors fled, and the stock plunged from $300 to $75. But the crisis forced Netflix to fully commit to streaming — a pivot that let it scale globally with rising margins. The stock is now up more than 4,265% since then.
This isn’t the first time Hollywood has faced a disruptive rival. Television once looked like an existential threat — and it was. U.S. box office attendance dropped sharply, from about 90 million weekly admissions in 1948 to around 46 million by 1955. The timing matched the rapid adoption of household televisions.
But film and TV eventually formed a continuum, feeding each other with content, marketing, and talent, merging into one ecosystem. The same is possible with short-form video — if Hollywood can co-opt it into the ecosystem.
Paramount + Skydance trades around a $20B market cap. TikTok parent Bytedance? Estimated at $300B. This time Hollywood can’t simply M&A its way out of that gap.
How can money spent there stop being a one off campaign expense — and start becoming an investment in the enterprise? Instead of thinking of those platforms as advertising channels, is there a more creative way to use them as engines that enhance and extend Hollywood’s IP? What can a true value exchange look like? How can Hollywood leverage these platforms as talent and IP development factories instead of being bystanders?
From a PR perspective, Hollywood will keep a cautious stance on AI. Most of that caution centers on AI companies that threaten to replace talent and employment — cost-saving tools that squeeze the front end of the business.
What Hollywood talks about far less are the AI companies that could embrace and extend its IP — the ones that could generate whole new forms of value. Ironically, those will likely be the most transformative partnerships.
TikTok is too expensive for Paramount — or any studio — to buy. But the next wave of emerging AI tools won’t be. These companies will need Hollywood’s IP to differentiate themselves and scale, and that alignment could create the actual M&A opportunities — deals that are both financially viable and strategically transformative.
Do you have someone on your team acting as an AI scout — identifying which of these tools could become the next M&A opportunity or tool for strategic transformation?
Topics for Future Posts
Too much data, and not enough
Netflix’s real competitive advantage
Why for some, the movies doesn’t matter when deciding to go to the movies
The next technological frontier - movie theaters
How COVID globalized audiences but not the industry — and how to leverage that
Why the movie industry should be more like baseball
Why a 3.2 on Uber/Yelp is a deal breaker, but 3.2 on Letterboxd might be fine
The history of film as an alternative investment asset
There’s a lot more — like I said, I’ve been taking notes.
Hollywood’s problem isn’t physics — it’s legacy code.
And like a script, code can get a rewrite.
Let’s start from Zero.