Large media companies have been reporting stronger-than-expected profits as the twin strikes by Hollywood writers and actors grind on.
While the executives who make and distribute films and TV
shows all say they'd like their workers to return soon, their businesses are
seeing a huge short-term benefit from the work stoppages: No production means
no expenses.
Netflix kicked off earnings season last month with this
nugget of news: Projected free cash flow will be about $1.5 billion greater
this year than originally forecast, due to the strikes. Warner Bros. Discovery
saved $100 million on film and TV production costs in the second quarter. That
will grow into hundreds of millions if the strikes continue to the end of the
year.
Walt Disney Co. said Wednesday the strikes will contribute
to a projected $3 billion reduction in film and TV production costs this year.
All of which partly explains why there's been so little
progress toward a settlement. The studios have vast libraries, including newly
completed films and TV shows, and will rake in in billions of dollars in extra
cash before longer-term damage from the strikes becomes evident. Similarly,
many members of the striking Writers Guild of America and Screen Actors Guild
have other jobs outside of Hollywood and face little pressure to compromise.
Paramount Global Chief Executive Officer Bob Bakish didn't
put a specific number on what his company, the parent of CBS and Paramount
Pictures, is saving. He told investors this week the company had enough movies
and shows to keep viewers watching and coming to theaters in the months ahead.
Bob Bakish, president and chief executive officer of
Paramount Global, attends the Allen & Co. Media and Technology Conference
in Sun Valley, Idaho, US, on Tuesday, July 11, 2023. The summit is typically a
hotbed for etching out mergers over handshakes, but could take on a much
different tone this year against the backdrop of lackluster deal volume,
inflation and higher interest rates.
“We're in pretty good shape,” Bakish said.
The strike by the writers, which began in May, has already
run longer than the union's previous work stoppage in 2007. New film and TV
production, particularly for scripted series, has almost ground to halt. The
actors walked out in July.
On Thursday, the Writers Guild said it received a new
request to meet from the studios' bargaining group and would do so Friday. The
union said it expects a response to its recent proposals.
There has been some fallout: Networks are rejiggering their
fall schedules, adding reality shows that aren't affected by the walkouts.
Studios are delaying some film releases because actors aren't allowed to
promote them while on strike.
Still, on conference calls with investors, executives
minimize the impact. Mike Cavanagh, who oversees the NBCUniversal film and TV
business as president of Comcast, forecast higher free cash flow and lower
working capital this year with production shut down. That will reverse when the
strikes end.
“It's all manageable,” Cavanagh said.
The writers and actors, while represented by separate
unions, have similar demands in their negotiations with the studios. They're
seeking increases in their base pay, as well as a share of revenue from
programs that run on streaming services. They also want assurances that their
jobs won't be replaced by artificial intelligence.
“We have studios really trying to squeeze us so they can get
more profit, and enough is enough,'' Darsan Solomon, an actor and strike
captain, said on a picket line in late July. “We need to be able to make a
living at this again.”
Netflix co-CEO Ted Sarandos told investors on an earnings
call that his father was a union electrician and that he understood the toll
strikes can take on families.
“There are a handful of complicated issues,” he said. “We're
super committed to getting to an agreement as soon as possible.” © Bloomberg
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