• by Andrea Katz , Columnist, January 31, 2017

Unsuspecting Angelinos awoke New Year’s Day to find their iconic “Hollywood” sign altered to read “Hollyweed.” Amidst the coverage, an astute few noted the exact same stunt had been pulled on Jan. 1, 1976. In Hollywood these days, it seems, even the pranks are reboots.

La-La Land hasn’t lost all its creative spark, but its once glimmering brand could certainly use some rebuffing. Hollywood owes its former “golden age” glory to a host of enterprising innovators. Charismatic studio heads like MGM’s Louis B. Mayer expertly coordinated talent and capital and then leveraged their executive power to enforce strict quality standards. This strategy helped early studios build iconic, recognizable brands. MGM was synonymous with lavish musicals; Paramount was beloved for idolizing American glitz; Universal, for popularizing the “American Dream”; and Warner Bros., for gritty American gangster stories and film noirs.

Today’s major studios still coordinate film production, but their unique brand positioning, for the most part, has faded. What does a Paramount or Warner Bros. picture mean to today’s moviegoer? Endless mergers have transformed major studios into mainly legal and financial entities trading entertainment as a commodity. Reliance on stack-financing (where funding is secured for multiple movies at a time) has placed primacy on predictability. 

This has resulted in Hollywood’s current reliance on sequels and reboots—which represented 74 of the 100 top movies of the decade—and acquisition of properties with existing global fan bases (like Disney’s multibillion-dollar deals for Pixar, Lucasfilm, and Marvel). A strategy of catering the lowest common denominator may have earned big studios short-term gains, but they are not a sustainable business. Complicating this equation are the multiplying challengers dividing audience attention.

“Netflix and chill” is the new “dinner and a movie,” and markets are reflecting these changing tastes. With entertainment dollars flowing away from traditional film and towards streaming services, Hollywood is struggling to keep pace with the current. The threat posed by streaming was manageable when platforms relied on studios for rights to content. But piles of new cash and extortionate licensing fees have accelerated streaming’s expansion into independent content production.

This thorn in Hollywood’s side transformed overnight for one simple reason: the industry finally woke up to the fact they were in a bubble. In panicked response, eight establishment players partnered to launch Hulu. Yet seven years on, this countermeasure has largely failed (prompting Hulu to pivot towards competing with cable). Hulu could not effectively push back streaming rivals because it only replicated the technicalities of Amazon and Netflix, while failing to incorporate the disruptive strategies the technology enabled.

Successful challenger brands are subverting unwritten rules and resetting the competitive landscape. Barriers to entry and lines between industries are evaporating. For example, Netflix and Amazon shattered the sacrosanct “90-day window” between a film’s theatrical and video release: a separation that existed only because each was once controlled by different industries. Similarly, Netflix pieces together concepts from user data, and Amazon is still toying with crowdsourcing scripts via open application—flipping studio exec’s “we know best” attitude on its head.

What lessons can be learned from Hollywood’s stagnation and the opening it’s provided upstarts? Blurring of market verticals has allowed savvy organizations to chase opportunity wherever it leads, meaning your next competitor might come from a completely different industry. Milk Makeup is shaking up the cosmetics industry and came completely out of left field. Milk Makeup is an offshoot of parent brand, Milk Studios, a respected New York photography studio. Energy drink brand Red Bull performed a similar crossover when it established an independent in-house publishing company, to cover the extreme sports community.

In business, there is no such a thing as a comfortable lead. Underdogs best-established rivals by upending the state of play and forcing the competition to engage with new rules. Success built atop the status quo is fleeting, and complacency blinds front-runners. Like Hollywood, brands must innovate in anticipation of change before they no longer have a choice.