A drastic slowdown in the streaming business has delivered a major blow to Hackman Capital Partners, the largest independent owner and operator of soundstages.
Now, whatever the outcome of Netflix’s and Paramount’s battle for Warner Bros. Discovery, it is likely to make matters even worse for the Los Angeles-based real estate company.
Hackman owns more than 60 soundstages—spaces for making films, television programs and audio recordings—at six sprawling studio properties in the Los Angeles region. Hit television shows like “Seinfeld,” “Parks and Recreation” and “Big Brother” were made at studio space now owned by Hackman.
But these days, the company is suffering through the most bruising correction in decades for the city’s entertainment business.
“The whole ecosystem is really under distress,” said Michael Hackman, chief executive of the company that he founded in 1986.
Hackman’s studios face high vacancy rates and depressed rents. He also needs to restructure hundreds of millions of dollars in debt borrowed when rates were much lower.
Whether Netflix’s agreement to buy Warner or Paramount’s competing hostile bid prevails, either combination is likely to accelerate industry consolidation. That would probably further curb demand for soundstage space, in part because Warner’s vast library reduces the need to generate fresh programming.
Warner also controls a substantial amount of its own studio real estate. So a merged company—whether led by Netflix or Paramount—would likely shift production from leased stages to its owned facilities.
The Los Angeles entertainment economy has been reeling as production of movies, TV and other content has dispersed throughout the globe partly because labor is cheaper overseas and governments in Europe, Canada and Australia have dangled big incentives.
Hackman is banking on the Trump administration’s support for the U.S. entertainment business through tariffs and tax breaks. “A lot is going to depend on support from the government helping to offset some of these advantages they have outside the U.S,” he said.
For now, Hackman said, his company remains on solid financial footing. The firm has nearly $500 million in cash on hand, and roughly half of its portfolio carries no debt, he said.
The streaming boom started about 15 years ago and unleashed a surge in film and TV production. Netflix, Walt Disney Co. and Amazon commissioned record volumes of new content.
A number of property developers seized on the streaming movement. Between 2017 and 2019, they raced to build and convert soundstages across the U.S.—especially in Los Angeles—adding millions of square feet of studio space in just a few years.
A second, even more fevered wave of studio construction took place during the pandemic, when homebound audiences sent streaming viewership soaring.
The production companies “were shooting money out of a cannon,” Hackman said.
The surge attracted some of the most prominent industry names—like Blackstone and Bain Capital—which collectively poured billions into buying, expanding and developing soundstage campuses across the country.
Others also are feeling the sting. For example, rising vacancies and softer rents have hit a venture between Hudson Pacific and Blackstone that is one of the largest owners of soundstages in Los Angeles.
That venture has debt coming due next year, a potential problem given that Netflix is the largest tenant at one of its high-profile properties—the 15-acre Sunset Gower complex, which has been home to the likes of “Bewitched,” “The Golden Girls” and “Scandal.” Refinancing could get complicated if Netflix plans to leave, analysts warn.
But no company moved as aggressively as Hackman, which began as an industrial and real-estate developer before pivoting into studio ownership with its 2014 acquisition of Culver Studios. Hackman added more than 2 million square feet of production space mostly in the Los Angeles region but also in New York, Toronto, the U.K. and Ireland.
After the writers’ and actors’ strikes ended in 2023, the streaming economy suffered a sharp slowdown driven by studio cost-cutting, a shift from subscriber growth to profitability, and intensifying foreign competition offering more-lucrative production incentives.
When it comes to U.S. film and TV projects with budgets of $40 million and more, nearly 30% fewer began shooting in 2024 compared with 2022, according to data firm ProdProp. That dropped another 12% through November compared with the same period in 2024.
“We all thought that when the strikes ended, there would be all this pent-up demand for Hollywood production,” said John Kim, an analyst with BMO Capital Markets. “But it’s spread out. Even though [content companies] are based in Los Angeles, they can produce anywhere globally.”
Hackman is restructuring debt on a number of its studios and has curtailed some expansion plans. It has scaled back the first phase of a major campus it is planning south of Dublin.
The company faces an even bigger problem with a $1.1 billion Goldman Sachs–held loan on Radford Studio Center, the historic Studio City lot that Hackman acquired in 2021 as part of its $1.8 billion purchase of CBS’s studio assets. That historic Studio City lot is known for shows like “The Mary Tyler Moore Show” and “Entertainment Tonight,” as well as sets imitating Central Park and a New York street.
Hackman failed to pay off the debt when it reached maturity earlier this year and has been in restructuring talks.
Hackman said that he and Goldman Sachs are “at the finish line” on an agreement. Goldman Sachs declined to comment.
As for the battle for Warner, Hackman sees it as evidence that investors still prize high-quality content.
But if the glory years of content production don’t return, Hackman said, studio landlords may need to devise alternate uses for their sprawling soundstage campuses. He cites live events and themed attractions based on hit movies like Warner’s Making of Harry Potter tour outside London.
“The industry is evolving,” he said. “We can’t stay passive.”
Write to Peter Grant at peter.grant@wsj.com