I’d rather get kicked in the groin than show sympathy for the Hollywood writers and actors strike. Well, at least the A-List types.
It appears I’m not alone, as empathy is in short supply for the CEO’s of Tinsel Town as earnings season is about to kick off. The often cesspool of filth and immorality that flows out from Hollywood to America and the rest of the world is causing damage that not only corrupts the minds of viewers, but is also taking an economic toll.
Nobody is losing sleep over the woes of the A-List actors, but it’s those in the trenches and the downstream stockholders that grab our attention.
An Artists vs. Hollywood studios strike will have an enormous economic impact. It’ll be the first time in 63 years that both SAG-AFTRA and the WGA simultaneously strike. Following four weeks of intense negotiations between SAG-AFTRA and the studios, two sticking points remain at the forefront, AI and residual pay for streaming. With no resolution, Hollywood has now officially shut down.
The closer-to-home impact in Southern California will obviously be felt the most. It’s been said that studio bosses will attempt to wait out the strikers, forcing many to lose homes and apartments, causing real financial hardship. According to the Los Angeles Times, this writers’ strike will be much more costly than the one in 2007.
The trickle-down effect could touch every facet of the Southern California economy, including the housing market. If people stop buying houses, rents increase. Pile on the rising interest rates and high inflation and you have a prescription for disaster taking a human toll.
This strike could lead to an economic fallout surpassing the estimated $2.1 billion lost in the 100-day strike 16 years ago. That strike solely included the writers, so you can see how this could be worse. Data released from the Milken Institute pursuant to the 2007 strike estimated that 37,700 jobs were lost. This time around it is estimated that the total costs of striking could exceed $3 billion.
If you want to know what investors think about the Hollywood strikes and the media sector right now, just take a look at stock prices. Stocks like Disney didn’t need more piling on in regard to bad news and publicity to drive its stock down to yearly lows around $87 off its buoyant highs around $176.
During the same time frame, the Redstone family’s Paramount Global empire has plummeted from around $40 to $15, off some 40%. Leading the charge to the bottom is Jim Dolan’s AMC Networks, sliding from a high of $52 to around $13, a magnitude of some 65%. Even factoring in the Netflix correction of last year, entertainment stocks are still down an additional 30-50 percent during the period. The following chart shows that Disney alone is down some 8% since the beginning of the current strike.
CNBC reports that a near term settlement is not likely, with dates like September first and November first being thrown around. Actor Bryan Cranston and Disney’s Bob Iger are both passionate about their respective positions, not willing to give an inch at the moment.
Iger said today that the WGA and SAG-AFTRA have unrealistic expectations. It sounds like the studios expect the writers and actors to bend more in the negotiations. Financially speaking, the shorter the strike the better.
According to Wedbush Securities research analyst Michael Pachter, “Higher pay might be difficult to endorse, but protections for residual uses of content and against AI make perfect sense to most people, and the media companies are intransigent and unapologetic.”
According to James Dix, analyst with CryptoOracle, a New York based investment advisory, “The fact that share prices are down indicates concerns about the overall model. Cord cutting has come to streaming.”
If new content is hard to come by, consumers are likely to shift to non-scripted programming, like sports and reality TV. Remember that the genesis of reality TV was the last writers’ strike in 2007, and God knows we don’t want that to happen again.
The impact to Southern California ripples through the region. Each film and television series employs roughly 300 crew members who will be out of work, from carpenters and caterers, to accountants and transportation services. As for the trickle-down effect to consumers in general, streaming services are likely to increase in price, as studios have to pay more for content.
Streaming forced cable cords to be cut, now it faces competition from social networks. TikTok for instance has a projected user base of 834 million subscribers by the end of this year and is expected to grow to a billion in the next two years, according to Insider Intelligence.
There are signs its growth is eating into traditional media coffers. It is projected to take $6 billion in ad revenue this year. Wait, I thought TikTok was a Chinese company that was using its technology to spy on us!
Oh well, I guess there are more important things to worry about now.
