The entertainment industry is facing significant challenges: shrinking revenues, the decline of cable TV, and the initial unprofitability of new streaming services. Despite these hurdles, there are many reasons to be optimistic about the future.

This is a time of technology shifts, not human behavior shifts. People are still people, in any generation, and are still driven by the same needs and desires.

They just go about things differently now.

1. Streaming Profitability: While streaming services initially lost money due to heavy investments in content and technology, companies like Netflix and Amazon Prime Video have demonstrated that profitability is achievable. 

Netflix's strategic content investments and initiatives like password-sharing crackdowns have led to substantial profits. Other major players like Disney and Comcast are adjusting their strategies—raising prices, cutting costs, and exploring ad-supported models—to turn their streaming platforms profitable.

Music streaming services revitalized the declining music industry by offering affordable, legal access to vast music catalogs on platforms like Spotify and Apple Music. 

2. The Music Industry's Rebound as a Model:
The music industry's recovery from the brink of collapse due to piracy offers a blueprint for other entertainment sectors. By embracing streaming, focusing on live performances, and leveraging social media for promotion, music has become more profitable than ever. This demonstrates that with innovation and adaptation, traditional media can thrive in the digital age.

3. Acceptance of Ad-Supported Models: Consumers have shown a willingness to watch advertisements in exchange for free or cheaper content. Despite the prediction of Prof G, ads are not a tax on the poor, but rather the price of admission for multiple streaming platforms. Nobody wants 5 - 10 monthly subscription fees, so ads are a way around that. Subscribe to a few, watch ads on the rest.

Platforms like Tubi have capitalized on this by offering free streaming with ads, attracting significant viewership. Recognizing this trend, major streaming services like Netflix, Disney+, and Amazon Prime Video have introduced ad-supported tiers, creating additional revenue streams without alienating cost-sensitive consumers.

4. Rise of a New Creative Class: The proliferation of platforms like YouTube, TikTok, and Instagram has given rise to a new generation of content creators. These platforms have become incubators for talent, allowing artists, comedians, and filmmakers to build audiences without traditional gatekeepers. 

This was forecast by Richard Florida in his epic book “The Rise of the Creative Class” back in 2003. (Get the book) Hollywood is increasingly tapping into this pool of talent, bridging the gap between traditional media and digital content creation.

5. Improved Collaboration Between Hollywood and Tech: The entertainment industry and Silicon Valley are finding more effective ways to collaborate. 

Successful adaptations of video games into movies and TV shows, such as "The Super Mario Bros. Movie" and "The Last of Us," highlight this synergy. Studios are also exploring deeper involvement in gaming, recognizing its growth potential and cultural impact.

So while the entertainment industry is going through a big transformation, it's not facing an existential crisis. 

The challenges are creating the needed corrections and innovations. 

Consumers continue to spend substantial time and money on entertainment; the key for the industry is to adapt delivery methods and business models to meet changing consumer behaviors. 

With strategic adjustments and embracing new opportunities, the entertainment industry will not just survive but to flourish.