Hollywood Strike Will Cost '$600 Million' Annually For Media Companies in New Deals

Hollywood is currently facing a major upheaval as actors and writers go on strike; marking the first time since 1960 that both unions have simultaneously taken such action. The crux of the dispute lies in streaming compensation and the potential threats posed by technology, including artificial intelligence (AI). A recent report from Moody's sheds light on the financial impact of these strikes, estimating that media companies could incur an additional cost of $450 million to $600 million per year, reports Yahoo. This article will delve into the details of Moody's report, examining the sectors most exposed to a prolonged strike and identifying the companies that are best positioned to weather this storm.

The cost of strikes in Hollywood

Moody's report highlights the significant financial consequences of the ongoing strikes in Hollywood. With the current Directors Guild of America contract and anticipated contracts with actors and writers, media companies could face a hefty financial burden. The projected cost is estimated to range between $450 million and $600 million annually. This substantial increase in expenses will undoubtedly impact the profitability and financial stability of many studios.

Sectors at risk

Moody's report also identifies the sectors within the entertainment industry that are most vulnerable to a prolonged strike. Movie theater companies are particularly exposed due to their reliance on new content. With the strikes impeding the production of fresh movies and TV shows, theaters will suffer from a lack of compelling content to attract audiences. Additionally, diversified media companies in the process of transitioning from linear TV to streaming face risks associated with the decline in traditional television viewership. Studios like Paramount, which also operates CBS as a network, may struggle to survive an extended strike. Paramount's dependence on fresh content and potential loss of advertising revenue due to the absence of new shows would place it in a precarious position.

Companies that can withstand the strike

While many media companies are at risk, certain players in the industry are better positioned to withstand the impact of the strikes. Streaming-focused companies, especially those with minimal exposure to linear TV declines, have a distinct advantage. Platforms like Netflix, Comcast, Fox, Sony Group, Apple, and Amazon are among the companies Moody's identifies as being better equipped to weather the storm. Netflix, in particular, is viewed as a formidable player in the industry. The company's profitability and an extensive content library make it less vulnerable to the strike's long-lasting effects. 

Divisions and potential deals

The divide between tech companies and traditional studios adds a layer of complexity to the ongoing dispute. While studios like Paramount and Warner Media may be open to striking a deal, streaming giants such as Netflix, Apple, and Amazon could remain holdouts. These tech companies, boasting substantial financial resources and content libraries, can sustain a prolonged strike. However, the longer the strikes persist, the more challenges they will pose to the overall ecosystem.

Barry Diller's suggestions

Barry Diller, a prominent figure in the entertainment industry, recently made headlines with his suggestions for resolving the dispute. Diller proposed a deadline of September 1 for reaching an agreement, warning that failure to do so could result in the collapse of the industry. He also recommended that executives and top-paid actors take a 25% pay cut to address the compensation disparities. While such a proposition may help narrow the gap between high and low earners, it remains uncertain whether it will gain traction. The skepticism lies in the assumption that top-paid actors would willingly accept a significant reduction in their earnings.