Big media companies faced a turbulent trading day on Monday, surrendering early gains amid lingering uncertainties surrounding the ongoing screenwriters’ strike. Warner Bros Discovery, Paramount Global, and Walt Disney all witnessed declines ranging from 0.3 percent to 2.1 percent. Despite the tentative three-year deal reached with the union representing film and television writers on Sunday, the strike by actors, involving nearly 160,000 members, continues to loom large.
Investors of these media conglomerates have remained anxious about the financial repercussions of the strikes, which initially bolstered cash flows due to reduced expenditures but are now beginning to erode earnings. Furthermore, with the resolution of the writers’ strike, the companies must now shift their focus towards addressing the actors’ demands.
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, commented on the situation, stating, “As productions remain on hold, the major studios are poised to face a significant blow in the coming 12-18 months, with a scarcity of projects in the pipeline.”
In contrast, Netflix managed to secure a 1 percent gain. Analysts attribute Netflix’s resilience to its diversified production operations and staff located in regions outside the United States, which remain unaffected by the strike.
Walt Disney had previously cautioned that the company’s full-year adjusted core profit would take a substantial hit of up to $500 million due to project delays stemming from the ongoing disruptions. The company’s shares have plummeted by nearly 14 percent since the inception of the writers’ strike on May 2nd, while Paramount, Disney, and Netflix have experienced losses ranging from 20 to 45 percent. In contrast, the benchmark S&P 500 index has managed to rise by nearly 5 percent.
The recently brokered agreement with the writers encompasses a spectrum of changes, including higher royalties, mandatory staffing for television writing rooms, and protections regarding the utilization of AI. Barton Crockett, an analyst at Rosenblatt, offered insight, stating, “The total expenditure on shows is unlikely to see significant fluctuations, as studios will either trim expenses from other aspects of show production or reduce the quantity of new shows in production – a process that is already underway – to accommodate the increased costs incurred due to writers’ demands.”
Monday saw major media conglomerates in a trading whirlwind, relinquishing early gains on hopes for a swift resolution to the ongoing screenwriters’ strike.. Consequently, the resolution of the ongoing actors’ strike holds pivotal significance for a full-scale return to work in Hollywood.
As the industry continues to grapple with the far-reaching implications of these labor disputes, media conglomerates find themselves at a crossroads, navigating the treacherous waters of uncertainty, and seeking solutions to safeguard their financial stability in the ever-evolving landscape of entertainment production.
Source: Reuters
