Major media and entertainment companies are turning to the 1970s-era tactic of laying off thousands of employees, ostensibly in preparation for a potential incoming recession. Concerns from the wider industry are making these job cuts easier to accomplish, as headcount reductions have become almost expected. But there are more than macroeconomic factors behind these large media companies’ significant losses. The industry is reeling from a painful, initially gradual and now abrupt, transition from a legacy broadcast model to streaming-first.
The main difficulty is that media and entertainment companies are still figuring out how to make the streaming-first model profitable, a problem made harder as they simultaneously battle rapidly incoming concerns from Wall Street. So, to appease investors, media companies are doing what most major businesses instinctively do: mass layoffs to improve the company financial statements. But surely, as an industry that continues to lead the charge in creativity and innovation, there must be a realization that this is a time where more is required than simply pulling out 50-year-old tricks.
Media companies are taking a hit
Streaming-only platforms like Netflix and Amazon Prime have seen their subscription figures boom over the last few years. However, some legacy companies have found it difficult to emulate this success. AMC Networks unsuccessfully tried to offset dwindling cable services’ revenue by growing its streaming platforms’ subscribers.
AMC’s business model continued to rely too heavily on cable revenue where instead they should have consolidated efforts behind their streaming platform. The company’s chairman, James Dolan, wrote in a November 2022 memo that the company was “primarily a content company and the mechanisms for the monetization of content are in disarray.” The result: large-scale layoffs across every area of AMC Networks.
And AMC isn’t alone. Many other entertainment giants, such as Warner Bros. Discovery and Disney have responded to the current financial crisis by either laying off staff or implementing a hiring freeze on the company.
Supply chain issues
But in all of these conversations about cost reduction and optimization, there doesn’t seem to be anybody at C-level talking about the technology infrastructure. Is it ready to support the business in the new direction of streaming-first?
There’s an uncomfortable, inconvenient, and yet eventually unavoidable, truth the media industry needs to face. The media supply chain is nowhere near where it needs to be to enable a streaming-first industry. As a result, the current mass layoffs are, at best, a band-aid. It doesn’t even come close to solving the massive operational overhead of operating global streaming services.
The supply chain still needs to be staffed to maintain even its current suboptimal operations. But this requires real people — and a lot of them. So, the reality is that any layoffs will have to be covered by converting employees to contractors or hiring actual contractors.
But it doesn’t have to be this way. Media and entertainment companies have a real opportunity now to address financial economic concerns and technology readiness. C-suites should be initiating projects that assess their current tech infrastructure, deciding what’s needed to move the business in the streaming-first direction.
Top of the agenda should be supply chain unification. Many media and entertainment companies would be embarrassed to reveal the true number of supply chains they use. Instead, they should use best of breed, off-the-shelf modern tech solutions (and, yes, Ateliere would be one such company), to streamline everything under a global single supply chain. Critically, the supply chain should be fully cloud-based, leveraging next generation cloud services that introduce significant efficiencies in terms of cost and time to market. Modern supply chain options can provide some of the human resource relief business leaders are looking for by enabling high levels of automation.
These companies should also stop building in-house. Aside from supply chain solutions, there is a wealth of off-the-shelf digital products available from partner companies. While it can often be tempting to build in-house, the digital world moves at the speed of light. By the time you’ve built it, it’s already obsolete. There are whole businesses focused on doing what they do best: creating these solutions. Following the same logic, media and entertainment companies should stick to doing what they do best, which isn’t creating software solutions.
Working collaboratively to succeed
These conversations must be had at the executive level immediately to stem further losses. But they can often not do this alone. Many are still intimidated by the tech infrastructure that runs their companies, so they need to collaborate with their technology teams and outside consulting firms who have a deep understanding of the technology involved. Together, they can build a supply chain strategy that saves money, while also ensuring their tech infrastructure is secure and scalable.
The legacy supply chain is bleeding many media and entertainment companies dry. Looking ahead to understand how to optimize their supply chain infrastructure will likely be the difference between many companies succeeding or failing over the coming years.