Big media companies gave up early share gains from hopes of an end to screenwriters’ strike on Monday as focus shifted to an ongoing strike by actors, whose resolution is crucial for a full return to work in Hollywood.
The union representing roughly 11,500 film and television writers entered a tentative three-year deal on Sunday, which now needs an approval from the guild leadership and union members.
But a strike by a larger guild of actors is still on.
Nearly 160,000 film and television actors, stunt performers and other media professionals walked off the job in July, demanding higher wages and protection against artificial intelligence use.
Investors of the media companies have been concerned about the financial fallout of the strikes that had initially boosted cash flows due to lower spending, but has now started eating into earnings.
The deal with writers “will also mean the studios and streaming services will now focus fully on actors’ demands,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“Already it’s likely that the big studios will face a significant hit in 12-18 months time, with so little in the pipeline and bosses are now desperate for new content to attract eyes to big and small screens.”
WBD, whose CEO David Zaslav played a key role in contract negotiations with the writers, had earlier warned that the company’s full-year adjusted core profit would take a hit of up to $500 million due to projects delays from disruptions.
Its shares have dropped nearly 14% since the writers’ strike started on May 2, while Paramount, Disney and Netflix have lost between 20% and 45%. In comparison, the benchmark S&P 500 index has risen nearly 5%.
Netflix (NFLX.O), however, was up about 1% as analysts have said the streaming giant was better placed than its media rivals as it has production operations and staff in regions outside of the U.S., which are not impacted by the strike.
Media reports said the agreement with writers includes increased royalties, mandatory staffing for television writing rooms and protections over the use of AI.
“The total spend on shows will be little changed, as studios will either cut spending from other elements of show production, or reduce the number of new shows they produce (a process already underway) to pay for increased costs from writers,” said Rosenblatt analyst Barton Crockett.
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