Hollywood strikes put pressure on streaming companies: 'The stakes are high'

Alexandra Canal
·Senior Reporter
Fri, July 14, 2023

Hollywood's double strike will likely pressure major media companies as the production pipeline grinds to a complete halt.

SAG-AFTRA — the union that represents approximately 160,000 actors, announcers, recording artists, and other media professionals around the world — joined writers on the picket lines early Friday after the guild failed to negotiate a deal with the Alliance of Motion Picture and Television Producers (AMPTP), which bargains on behalf of studios including Disney (DIS), Netflix (NLFX), Amazon (AMZN), Apple (AAPL), and NBCUniversal (CMCSA).

It is the first time SAG-AFTRA has gone on strike in over four decades and the first time since 1960 that both actors and writers are striking concurrently. The Writers Guild of America (WGA) strike is currently in its third month with no end in sight.

Third Bridge analyst Jamie Lumley, who interviewed a number of executives in the entertainment and streaming space, wrote that the two strikes come "amid the increasing pressure on traditional linear distribution models and the ongoing rise of streaming, which continues to change how content is consumed and monetized."

"We’ve been hearing that most streaming companies won’t feel the pain from strikes until 2024 given the pipeline of content that has already been locked in. However, streamers could be in trouble as soon as the velocity of content slows," he warned. "Our experts emphasize that content is still king and if streamers want subscribers to keep coming back, they need to have a steady feed of new movies and shows being released on their platforms."

SAG-AFTRA is fighting for more protections surrounding the role of artificial intelligence in media and entertainment, in addition to higher streaming residuals as more movies and TV shows go direct to streaming. These demands are similar to those posed by the writers guild.

"We had no choice," SAG-AFTRA President Fran Drescher said on Thursday following the strike announcement. "We are the victims here, being victimized by a very greedy entity. They stand on the wrong side of history. We stand in unprecedented unity. At some point the jig is up, you can’t keep being marginalized and disrespected. The business model has been changed by streaming and AI. If we don’t stand tall right now, we’ll all be in jeopardy."

Michael Pachter, managing director of equity research at Wedbush, said he agreed with Drescher's sentiments, telling Yahoo Finance Live, "I think the studios are just completely wrong on this one. I'm not suggesting that they cave, but I'm suggesting that they compromise and they just haven't even begun discussions with the writers. ... Content is their lifeblood. They're being really foolish about this."

He warned studio heads, such as Disney CEO Bob Iger, who called the unions' demands "unrealistic," risk creating "permanent damage" with the actors and writers they closely work with: "[Iger] is just completely wrong," he said.

'The stakes are high for everyone'

SAG-AFTRA president Fran Drescher from left, Duncan Crabtree-Ireland, SAG-AFTRA national executive director and chief negotiator, and actor Frances Fisher, right, take part in a rally by striking writers and actors outside Netflix studio in Los Angeles on Friday, July 14, 2023. (AP Photo/Chris Pizzello)

The media and entertainment industry today is being dramatically reshaped by the impact of streaming services. Streaming shows often have fewer episodes and less residual income compared to traditional network television, which often means less money in the pockets of both actors and writers.

At the same time, the majority of studios are no longer just "pure play" production houses. Rather, they have their own streaming divisions, which have brought on a new set of challenges as direct-to-consumer losses mount.

"Streaming companies have been feeling the heat from Wall Street to push towards profitability," Third Bridge's Lumley said. "This has put a number of players on challenging footing as they weigh content costs, strategic decisions, and the growth of their audience. With actors and writers seeing contracts and royalties heavily impacted by streaming, the stakes are high for everyone at the negotiating table."

Insider Intelligence principal analyst Paul Verna added, "While video advertising and subscription revenues are expected to grow by double digits this year and next, the dual strikes could threaten that economy, especially if the standoffs run deep into the fall season."

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