'We’re in pretty good shape': Hollywood studios are enjoying an unlikely profit bonanza from the ongoing strikes shutting down production
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 Inc. 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 Inc. 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.
“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 Corp., 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.”