Netflix, YouTube, Hulu: Why Hollywood resists disruption.

Hollywood Is Just Like the Roman Empire—but Not for the Reasons You Think

Hollywood Is Just Like the Roman Empire—but Not for the Reasons You Think

Forecasting today’s biggest business and tech trends.
Feb. 11 2014 4:17 PM

Why Hollywood Resists Disruption

It doesn’t fight off invaders. It sits down and does business with them.

Netflix's House of Cards, season 2.
Netflix's green-lit the first two seasons of House of Cards, sight unseen, for $100 million.

Screenshot via Netflix

The Roman Empire never fell. Not really.

It’s true that Alaric, king of the Visigoths, sacked Rome in 410. But he didn’t bring the barbarian hordes to the gates of the great city. The barbarians were already inside, and they had been for years.

In the preceding centuries, Rome had pretty much gotten out of the business of conquering Germanic tribes and into the business of bribing them. It paid this Goth to fight that Goth, or perhaps to govern a regional territory instead of torching it. Before long Rome had outsourced at least one-quarter of its military, and most of its borderlands, to the uncivilized and unwashed. By the time Alaric showed up, the leader of the Roman army was a Vandal. And Rome, for that matter, was no longer the empire’s capital. The siege was largely symbolic, and surprisingly little in the life of a Roman citizen changed when it was over.


I offer this brief history lesson in service of an analogy. Hollywood is the closest thing the business world has to a Roman Empire: a largely self-sustaining, self-contained industry, reigning supreme over most premium content in most media channels. And like Rome, the entertainment business has plenty of enemies who’d love to watch it burn. They probably won’t get their wish.

Prominent among those enemies is Paul Graham, founding partner of famed startup accelerator Y Combinator, and one of Silicon Valley’s heaviest hitters. In an essay bluntly titled “Kill Hollywood,” Graham declared open season on Tinseltown:

Hollywood appears to have peaked. If it were an ordinary industry (film cameras, say, or typewriters), it could look forward to a couple decades of peaceful decline. But this is not an ordinary industry. The people who run it are so mean and so politically connected that they could do a lot of damage to civil liberties and the world economy on the way down. It would therefore be a good thing if competitors hastened [its] demise.

Graham drafted the essay in 2012, in the immediate aftermath of the Stop Online Piracy Act and the PROTECT IP Act: legislation—which media conglomerates lobbied for, and which would have had drastic consequences for free enterprise and expression. Graham’s urgency and force of tone had a lot to do with the perceived stakes of the SOPA/PIPA battle. Fortunately, the bills died in vitro. But Hollywood’s still alive and kicking.

Sales of movie tickets, in per-unit quantities, have held steady over the last 20 years, while inflation-adjusted revenues have grown. Certain sectors of the TV business, particularly broadcast networks, are having a rougher go of it. And as cable subscriptions decline, subscriptions to streaming services like Netflix are climbing rapidly. Research firm NPD Group notes that, as of last August, 32 percent of American households had cable TV subscriptions, and 27 percent had subscriptions to an on-demand, streaming media service.

From the outside looking in, it certainly looks like disruption. But very little inside the Hollywood system is being shaken up. Netflix isn’t eating the TV industry’s lunch; it’s paying for it. Its commercially and critically successful moves into original content—fantastic shows like Orange is the New Black and House of Cards—were commissioned in Los Angeles, created and produced by studio-system veterans, and packaged by Hollywood agencies. In fact, Netflix paid slightly above the going rate for Hollywood scripts and talent. It green-lit the first two seasons of House of Cards, sight unseen, for $100 million. For the sake of comparison, a broadcast TV network spends about $60 million to $90 million to bring eight to 10 pilots to the air every fall. The cost of one season of, say, Breaking Bad was about $50 million—but AMC only spent that sort of coin on a proven winner.

Yes, Netflix is cannibalizing one side of the entertainment business: distribution. But in doing so, it’s propping up another: development and production. In effect, it’s the barbarian invader who took the Roman payout.