The rise and fall of Hollywood: How it all fell apart
The video narrates Hollywood’s evolution from its early 20th‑century origins—when filmmakers fled Edison’s patent wars and built a vertically‑integrated studio system—to its mid‑century golden age, and then traces a series of disruptive waves that first expanded and later eroded its cultural and economic supremacy. Key milestones include the 1948 Paramount Decree, the rise of television, the home‑video boom (VCRs, DVDs), and the streaming revolution. The presenter explains how each technology was initially feared as a death knell but instead generated new revenue streams, reinforcing Hollywood’s dominance through a powerful geographic cluster effect in Southern California. Starting in the 2000s, the internet began to reverse this trend: cord‑cutting stripped away cable carriage fees, younger audiences migrated to TikTok, YouTube, and gaming, and global box‑office share shifted to China and other markets. The narrative then details structural pressures—political polarization, costly California living, tax‑credit competition from Georgia and overseas, consolidation under finance‑driven “suits,” and the 2023 writers/actors strike—that accelerated production decline. Finally, the video warns that emerging AI‑generated content could eliminate the need for traditional directors and studios, suggesting Hollywood’s era of dominance may be over. The presenter closes by inviting viewer commentary on the industry’s future.
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Hollywood went from a small group of filmmakers who moved to California to escape the long arm of Thomas Edison to a region that was at one point producing over 90% of the global box office revenue. Fast forward to today, and the region has lost nearly a third of the people that were employed in the film industry just in the last 5 years alone. And the region is, well, headed towards cultural irrelevance. This video explains the rise and fall of Hollywood. After inventing much of the technology behind moviemaking, Thomas Edison formed a company that had a bunch of patents, and he went and filed tons of lawsuits against folks who were making movies in an attempt to monopolize the entire industry for himself. To escape the long reach of his lawyers, Benny moved west out to Hollywood and planted the seeds for what would become the new filmmaking capital of the world. And early on, moviemaking functioned much like a factory did. These were vertically integrated companies that did everything from write the stories to hire the staff to own the lots. And these things were controlled by the famous studio bosses of the time. From the 1930s to the 1950s, names like Zanuck, Louis B. Mayer, and folks like that, they controlled Hollywood. Besides controlling the production of movies, they also controlled a lot of the delivery from the distribution companies to sometimes the theaters themselves. And it worked splendidly. Just after World War II in 1946, Hollywood was at its peak. In that year, over 4 billion movie tickets were sold. And visited by over 90 million people. To show you how dominant Hollywood was then, in the 1940s, an estimated 60% of Americans went to a movie at least once a week. Then something went bad for the movie industry. Well, at least depending upon your perspective, the U.S. government issued something called the Paramount Decree, and this mandated that the trusts, i.e., the monopolies that these studios were, needed to break up. And that meant the first thing was they had to give up the theaters that they owned. And the second thing that happened, in this period was that the TV was invented and popularized, and suddenly people didn't need to go to a movie theater in order to see moving pictures. The impact on the movie business was sudden and brutal. While in the 1940s, 90 million people a week had gone to the movies, uh, by the end of the 1950s, that number had cut in half with only 45 million people a week going to the theaters. Hollywood's response was to compete with the small black and white TVs that a lot of people had by offering bigger and more diverse kind of colorful technical experiences inside the theaters. Things like CinemaScope and Technicolor. Is the most revolutionary screen effect since talking pictures began. And the types of movies you could do in that situation, that's what showed up around this time. But TV kept coming. By 1955, over 70% of American households had one, which prompted studios like Warner and Columbia to get into the TV production business. And by that, I mean content for the TV. Hollywood learned during this time and had to adapt its business model. It was no longer a monopoly, so it had the necessity of producing content across film and television. Through the 1950s and 1960s, Hollywood's share of consumer spending rebounded. Major films like Ben-Hur, which came out in 1959, grossed the equivalent of $600 million in today's money. Technology at the time meant consumers still had few options. For television, if we wanted the news, we had to watch Walter Cronkite. If we wanted entertainment, we got to watch I Love Lucy. And if wanted to watch late night, we watched Johnny Carson or Ed Sullivan, who could make or break an artist because they had such dominance over the airwaves. From the 1970s to the 1990s, the Hollywood machine kept cooking. During this time, actors and directors, they had all the leverage. Guys like Spielberg, Coppola, Scorsese, they could command big budgets and get the money to produce whatever pretty much they wanted to produce because, well, they were the talent. Similarly, actors like Marlon Brando, Tom Cruise, Paul Newman, They could make or break a film, and the studios bent to their wishes, and kind of interesting stuff got made. I'm going to make him an offer he can't refuse. This was a golden era of moviemaking. A lot of really interesting stuff that we all love today got made during this time. The Godfather, Tootsie, Star Wars. It's because basically the power rested in the hands of the talent and the directors, and well, we all benefited from it. Then a new threat arrived in the 1970s: the videocassette recorder. The program you want when you want it. And Hollywood initially saw it as a threat to its business. MPAA, the Motion Picture Association chief, a guy named Jack Valenti, said famously that the VCR is a threat to Hollywood like a strangler is to a woman who is home alone. He would say stuff like this. Studios even famously took the VCR manufacturers to court, the infamous Betamax case, with fears that the VCR would actually kill the movie theater business. What was initially feared as something that would kill Hollywood turned out to be an enormous boom, a cash cow rather than a coffin for Hollywood. In 1985, global home video revenue surpassed theater revenue at $2.1 billion for the first time ever, adding a very valuable and very interesting secondary revenue stream for Hollywood. In other words, by the 1980s, Hollywood was making more money from people watching their content at home than they were at the theaters. Then the late 1990s brought DVDs. Bitch. Is DVD, which meant that the home viewing experience was even better with higher quality. And that did what you imagine— it increased profits for Hollywood even more. By the early 2000s, consumers were spending billions of dollars buying and renting DVDs, over $20 billion a year, and that was dwarfing what they were spending just in movie theaters at the time. At their peak, DVD and home video rentals comprised nearly 60% of Hollywood's revenue, showing how much the business had totally changed in terms of making money on content. But underlying all of this was a change coming that was gonna revolutionize the business again, which was the internet. In the early 2010s, we started to see folks like Netflix and those sort of things pivoting from DVDs to online streaming. By the late 2010s, online streaming and those sort of things were clearly taking a huge bite out of DVDs and physical media. That era had ended. Digital tipping point happened in 2019 when for the first time online streaming spend of about $49 billion a year globally surpassed the live, like, ticket prices and ticket sales, which at the time were around $42 billion. And as many had predicted at this point, it was clear that the future of Hollywood rested in selling content online, much less selling content to people in person at box offices and DVDs. And for decades, Hollywood had been the winning place because of a thing called the cluster effect. And in economics, this is the idea that an industry grows really strong by having a lot of the service providers and the people involved in it all located in one place. Let's say you're a great producer of movies. Where are you going to go to produce movies? Do you want to go to a place like San Antonio where I am today? Well, no, you got to go out to Hollywood because that's where all the funding is. That's where all the actors are. That's where all the, the lots are and so on and so on. The lawyers who know how to do movie production, they're all located in that one area and they all clustered together there in Hollywood. And in a non-connected world, this made total sense. So much so that at its peak, this cluster effect meant Hollywood And the area there in Southern California was 90% of the global revenue for film production. And to show you how impactful it was, the number 2 export of the United States for decades was movie and film production that came out of this region. Uh, it was second only behind aerospace. But starting in the early 2000s, while people weren't really noticing it, things had really started to go wrong for Hollywood. Hollywood had actually cemented its dominance by riding these successive waves of technology that each one had been feared they were going to kill the business, actually helped it. Television, VCRs, DVDs, they had all actually made Hollywood even bigger than it was before. But unfortunately, the internet was fixing to do the opposite to Hollywood. First thing the internet was killing was the ability for cable systems to demand so much in terms of revenue. People in the early 2010s started to, quote unquote, cut the cord en masse. From 2011 to 2023, cable subscribers went from 100 million to just under 60 million. Hollywood had been dependent upon cable systems for carriage revenue. This meant that it wiped out over $30 billion in annual revenue for Hollywood alone. The internet is also causing a generational shift in terms of the way people consume content. Whereas their parents and grandparents used to go to the movie theater, sit down and watch appointment TV, today's teens and 20-somethings, they're spending more time on places like TikTok, YouTube, and Facebook, places where, well, basically user-generated content is much more valued compared to big produced Hollywood content. Viewers aged 13 to 24 now spend 24% of their time on these sites versus 16% on Hollywood content and traditional sources. In fact, by 2023, YouTube, where you're probably watching this video, is now the most watched television network by far, showing how much people are tired of overproduced slop coming out of Hollywood and more interested in stuff that looks raw, like a guy walking around with a cowboy hat in a park in Texas. And the Gen Z audience discovers their content through social media and feeds like that rather than seeing what's on the cable system. People are so sick of kind of overproduced AI slop and highly crafted messages that don't feel real that they're going more and more to these social media platforms where they feel like they can trust the content. And movie theaters are almost barren. If you go drive past them, it's rare for the parking lot to be full. In 2015, 31% of Gen Z folks said that going to the movie theater was their preferred way to watch content. That number is down by more than half by 2023. Only 15% of them say movie theaters are their preferred way of consuming long stories and films. The worldwide gaming industry in 2023 is now a $200 billion a year market, which is more than 5 times what's spent on Hollywood content by young people. Young people are now more and more spending their time in these games, showing how much more Hollywood is losing the battle for their attention. And as domestic theater attendance has stagnated, Hollywood increasingly looked abroad for revenue growth and opportunity. Back in the 1990s, Hollywood produced about 10% of the world's films but garnered nearly 70% of the worldwide box office revenue. The death of movie theaters in the United States has been so stark that by 2019, only 27% of global box office revenue came from North America, US and Canada. The rest is coming from places like China. In 2019, China had a box office revenue of $9.3 billion, making it the number 2 market in the world behind only the United States. But sadly, this need to tailor its content to appeal to everyone in the world and piss nobody off meant that the decline of Hollywood is actually accelerated because of it. You see, if you're having to produce milquetoast content that won't get the CCP and other makes folks mad. Well, it turns out you can only do a few types of films: big Marvel-type spectacles and reruns of stuff that, well, worked before. That's why today the chance of seeing a breakthrough film like The Graduate or Tootsie or something that challenges conventional norms and feels, well, unique— those days are over. That's why today so much of what you see coming out of Hollywood feels like milquetoast slop designed not to offend anybody. And this Creative deficit was made worse by the suits being in charge. One example there was in 2018, AT&T decided they wanted to own Warner Brothers, who owned obviously the studio, CNN, and other different types of media outlets. But that was a total failure between culture clash and, well, frankly, the telecom guys just not understanding how to make good movies and content. And they ended up throwing in the towel just 4 years later, spinning off WarnerMedia, combining it with Discovery Inc. And losing over half of AT&T's investment. Similar consolidation rippled through Hollywood. Disney famously bought 21st Century Fox, and other groups just consolidated together in the hopes that being bigger would help them survive. The finance guys squarely in charge, they wanted to produce safe stuff that would work— reboots of the Marvel Universe, another Top Gun. And that stuff worked for a while. People were happy and nostalgic to see it. But it turns out, fast forward to today, and consumers just aren't that interested in seeing Marvel Universe movie number 82. Or a preachy version of Star Wars that really doesn't have a good story to it at all, just designed to maximize and milk as much as they can out of an established franchise. All those mid-budget adult-oriented or kind of unique dramas and comedies that you used to see 20 or 30 years ago when the directors and actors were in charge, those things aren't getting made anymore. With the suits and the bean counters famously in charge in Hollywood now, good luck finding something creative or interesting. Because it ain't out there. So here we are with the rise of the internet, the change in tastes, and the mistakes done by these bean counters. And you end up with a Hollywood-like industry that is in huge crisis now. These legacy studios, TV networks, and production houses were famously profitable, but without the revenue coming in, they're not. And so you're seeing tons of layoffs happening. Disney alone slashing nearly $6 billion from its cost basis in 2023. Repeated layoffs at all these places. That's what's happening. But it's funny how on this channel, when we look at things that are dying, oftentimes it is the actors and people inside of those industries that hasten the demise. And just like we've seen so far that, you know, Hollywood itself has been shooting itself in the foot, the actors, producers, and folks like that, they stepped up and started to help the decline as well. And fearing all this stuff that was coming, they went on strike in 2023 from November to April 2023. They were on strike for over 6 months, grinding all Hollywood production to a halt during that period of time. Subsequently, this strike caused another blow to the Hollywood business, which was, well, they're even more irrelevant now because during the period of time when there was no production, well, people went elsewhere for content and they've gone to YouTube and TikTok and other places, and it's unlikely they're coming back. The next thing to go bad for Hollywood is the recent change in politics. As you can see, you know, Hollywood has long leaned very liberal. And in 2023, a survey of Republicans showed that they believed that 61% of them thought that Hollywood was a net negative for the United States. And when Democrats were asked the same question, only 17% of them thought Hollywood was bad. And if you ask Republicans, they'll tell you that a lot of them eschew Hollywood now because, well, it's just basically felt like they were having Hollywood values pushed on them through things like race, gender, and identity. And look, whatever your side of the spectrum is on all this thing, it's not good for an industry when half of the people feel like your industry is a net negative, or everything they watch coming out of it is speaking against their core values. I don't care what your views are, uh, for me personally, like, I'm tired of watching every single movie or TV show feel like it needs to preach to me about something. You know, I'm interested in good stories and being entertained and having basically like, you know, interesting thoughts about stuff, not getting a lecture every single time. And you can see as more and more productions coming out of Hollywood have felt like they needed to preach on stuff, those things have started to fail. A lot of the recent blockbusters, everything from Star Wars to Marvel that people felt were made too preachy, well, they kind of flopped. Today, if you look at a conservative slice of the United States, a lot of folks feel like Hollywood is just out of step. With their worldview. It's only getting worse by the current outrage cycle that happens on social media and television, all that kind of stuff, uh, and it's going to continue to hurt the Hollywood business. And the film and Hollywood business has not been immune from the housing crisis going on in California. Because it costs so much to live there, salaries have to, have to be higher, and that means a typical film production done in Southern California is 20 to 30% more expensive than done overseas or in a place like Georgia or New Mexico. And an interesting competitor for Hollywood has emerged in Georgia. They've basically brought so much of film production to the Georgia area by issuing tax credits. In 2023 alone, they did $1.3 billion in tax credits, which lured over 250 productions from Southern California to Georgia. And that's not even counting productions that have moved overseas to places like Vancouver or in the UK. But wait, it gets worse. Uh, the current frictions with China, which is the number 2 box office market, means that the Chinese are now throttling more and more the types of productions that come out of the United States. Whereas the US used to dominate a lot of the box office there, it now accounts for less than 5% of the movie consumption that happens in China. And that's why we look where we are today, which is soundstages and production in California is stunningly quiet compared to history. Productions are fleeing Southern California in droves. Filming and production there is down by 30% over the last 5 years alone. Only 1 in 5 television productions made for North American audiences now films in Southern California. A stunning fall. Without productions, that means there's no jobs. Uh, for example, the main union for stagehands said that 18,000 members, uh, have left over the last 3 years because there's no work. And it's crazy that Hollywood maintained its cultural dominance, its economic dominance, and all that stuff for over a century. But now you look up and everything's turning against it. Each previous wave of technology, it looked like things were going to end Hollywood. And I talked about that before, but this time I think it's actually different because every time I look at technology, it's getting worse for the region. One thing I noticed is Taylor Swift just released a new album, and one of the things she did, which was fascinating, was release some of the promo videos were done completely by AI. And you can imagine a world where, well, you don't need even directors at all because the computers and the AI are generating the content you need. All these trends that are going against Hollywood, the internet, AI, user-generated content, the change in options that people have, the high costs in California, none of those trends seem to be going the other way, which for me, leading me to believe, well, the era of dominance for Hollywood, it's over. To paraphrase Mark Twain, he had a great line in some of his writing, which basically went like this, which said, "It's not the things you kind of believe or you're uncertain about that kill you. It's the things that you really believe that just turn out to not be true that really are the things that come back to bite you and bring your demise." And in this case, Hollywood had a century-long, like, period where technology helped it at every turn. And here we are that things have changed after a century where technology is actually killing it. And I think to me in business, that's a huge thing. You have to be really careful about things you absolutely positively believe are true and you're betting your business on, because if one of those turns out not to be true, well, that's where you get in a lot, a lot of trouble. Let me know what you think, where Hollywood's going, and also what you think about this video versus some of the other ones I've done. Which are mostly about single companies, but this one's about a whole industry. So curious if you liked it or not. And, uh, let me know what you think in the comments below. If you did like it, tell me, because really I wake up in the morning and that causes me to make more videos when people say nice stuff. So catch you next time.
