Daily Digest: Let's Talk About Stocks, Baby
➕ The Ankler himself forecasts the SAG-WGA-AMPTP war games
Week Nine of the strike seems a quiet one in the lead-up to the 4th of July, no? The Big Rally was last week, the Big Holiday is next week, and folks from all sides are starting to trickle out of town.
If SAG-AFTRA really doesn’t close a deal with the AMPTP by Friday’s end when the actors’ contract expires, does that mean that picket lines will be activated on… Monday, July 3? Seems an ineffective time to begin a major work stoppage. (Plus, from the studio execs I’ve spoken to, my understanding is that work has slowed down a great deal on the inside since the strike began, which makes it likelier that the suits will leave town sooner, and for longer.)
The Ankler himself, Richard Rushfield, has some new calculus on the so-called war games between the guilds (SAG, WGA) and the studios (all of them) in this week’s column.
Occam's Razor on how this turns out remains if SAG makes a deal, AMPTP then returns to the table with the writers. The writers at that point are on their own. On the other hand, concessions to the DGA and potentially to SAG for big-hit residuals, plus the concessions the studios agreed to on the first round of talks, give everyone a starting point for haggling on most, if not all, of the major issues. Haggling splits the difference on most of the rest, including potentially more concessions on AI and even on staffing.
Prognosticating aside, Richard brings up something that I’ve heard in various fashion, ad nauseum, since the start of the strike: Hollywood cares an enormous deal about what Wall Street thinks.
Looking at the studios, there are a lot of declarations from writers that they've been brought to their knees, and that they are feeling the pain of the shutdown. Again, there is one metric that studios care about in these times: stock price. I think that is a terrible short-sighted way for CEOs and boards to view the future of the industry — maintaining allegiance to those who dragged the industry at gunpoint into the Streaming Wars.
But these are our leaders’ leaders — the one force they quail before in the age of quarterly earnings calls.
Productions shut down, the PR narrative is against them, though we are seeing how hard it is to stay focused on a staring contest. The submersible, James Cameron’s quotes about the submersible, the Putin saga… everything is suddenly more interesting. The Flash debacle is its own distraction.
But by the one metric, the studios and streamers care about — stock price?
Broadly, the sense is that the town cares what investors and bankers think far more than it did over 15 years ago, the last time the writers put their collective foot down.
At the start of the work stoppage in early May, one showrunner — who was around for the 2007-08 WGA strike — told me that “It’s about the whole corporate dominance of America. We never talked about Wall Street in ’07. Now it’s all about the stock price, it’s all about the earnings calls.”
I spent nearly five years in the 2010s as a reporter covering Wall Street and stocks and quarterly earnings calls (so many 5:30 a.m. earnings calls), and I can tell you that corporate Hollywood has always cared what the Street thinks, particularly when shareholders were happy to reward a growth-at-all-costs, Peak TV, Netflix-chasing programming model. Conversely, institutional investors have always been fairly quick to chastise a company when they felt that profits weren’t being squeezed out effectively enough.
Just look at what happened in Aug. 2015, when Bob Iger (the CEO of Disney then, now, and probably forever, at this rate) made a three-word remark about the state of linear cable cash cow ESPN — it was experiencing “modest sub losses,” he said on Disney’s quarterly call — and triggered a full-on media sector meltdown, sinking the stock price of pretty much every other major publicly held entertainment company for a spell.
“One sentence from Disney and nearly $60 billion in market value gets wiped out. Can you say panic?” Cowen equity analyst Doug Creutz told the Los Angeles Times back then.
But the sea change in the early 2020s seems to be that the money has an even tighter grip on every twist and turn in the Streaming Wars. As analyst Michael Nathanson and his team at MoffettNathanson put it on May 3 in a note to clients, a day after the strike began (emphasis mine):
The advent and mass-adoption of streaming revolutionized many things. It changed how we watch content, where we watch it, and how we pay (or don’t pay) for it. It threw out the old norm of 24 to 26 episodes per TV season and made us content with as few as six installments of our favorite shows every other year. It changed some investors’ expectations that media companies should be measured on near-term profitability, instead making them comfortable with a more capital-intensive model requiring years of losses to work. And with the inflow of capital came a massive appetite for content requiring an equally massive pool of writers, directors, and producers to satisfy.
As one head of a leading Hollywood Talent Agency told us, “Streaming turned an industry with a profit pool that looked like New York’s Skyline into the Los Angeles skyline.”
Amid the secular decline of the TV cable business and the pandemic’s devastation to the movie theater business, one of the latest inflection points came early in 2022 as Wall Street darling Netflix fell out of favor. The company was once the grand beneficiary of the Street’s love of the Streaming Wars, at least before investors began to demand results (which, as I’ve previously reported, prompted a shift in Netflixian culture.)
And if shareholders weren’t happy with Netflix anymore, who could they possibly be happy with? Cue the promises of profitability from the major streamers. 2024, 2025, 2026, they say.
As it relates to the ongoing strike, the big question seems to be, “When will the strike begin to impact studios’ bottom lines and hit them where it hurts: their share prices?”
The answer probably isn’t one writers want to hear. As MoffettNathanson surmised in May:
The sorry news for writers is that, in declaring a strike, they may in fact be helping the streaming giants and their parent companies. The last time we saw widescale production stoppages was in 2020 at the outset of the pandemic. That year also happened to be the only year many of these services were able to grow free cash flow (see Exhibit 1). In a time when every media company is under greater scrutiny than ever to prove they can deliver returns to shareholders, any excuse to cut back on content spend may be a welcome one.
And that, of course, will make Wall Street pretty happy.
Today in Strike News
Over 300 actors — including A-listers like Jennifer Lawrence and Meryl Streep — signed a letter directed at the SAG-AFTRA Leadership and Negotiating Committee that demanded they not settle for an unsatisfactory agreement. “We hope you’ve heard the message from us: This is an unprecedented inflection point in our industry, and what might be considered a good deal in any other years is simply not enough,” the letter says. “We feel that our wages, our craft, our creative freedom, and the power of our union have all been undermined in the last decade. We need to reverse those trajectories.” (Rolling Stone)
Los Angeles Mayor Karen Bass and California Governor Gavin Newsom both issued supportive statements at the beginning of the strike, but haven’t since done anything to push for an end to it, likely due to worries over timing. “It’s not a science,” says former DreamWorks government affairs executive and current California Film Commission member Wendy Greuel. “During the 2007 strike, while I was on the Council, you saw that the restaurants were hurting, the hairdressers and the dry cleaners. There are [indirect] consequences that add up. Those stories filter out and can push people to the table.” (The Hollywood Reporter)
According to former Last Week Tonight writer Greg Iwinski, late-night comedy writers face a future that’s no laughing matter should the WGA lose the strike. “Friends (and sometimes reporters) ask me why the writers are still so fired up, so visible and so united two months into the strike, and my answer is easy: When the alternative is oblivion, what else can you do but fight like hell?” he said in a message sent to guild members today. “And sure, comedians are prone to hyperbole, but oblivion is what late-night writers are facing without a victory in this contract.” (Deadline)
Equity, the 47,000-member U.K. union that includes actors, has been in constant contact with SAG-AFTRA over how they would handle a potential strike. The verdict: British actors will likely be advised to avoid productions governed by SAG-AFTRA contracts. (Variety)
Picket Sign of the Day
A look into the Futurama.
Additional reporting by Matthew Frank.
2020 wasn’t profitable because production stopped.. streaming services had record subscription numbers (Netflix’s biggest net subscriber add year ever) because people had nothing else to do but watch TV... The pandemic obviously stopped production and it (just as obviously) drove people to stream more
Do you pay $2,500 a year to read, The Optionist???? What???