Moody’s Investors Service is expecting the strike by the Writers Guild of America and SAG-AFTRA to last a relatively long time and result in incremental costs of between $450 million and $600 million to media companies when it is settled.
The strike will have the most immediate impact on the movie theater companies, credit-rating agency Moody’s said in a report Monday, but next on the chopping block are the media companies making the transition to streaming from broadcast television and pay TV channels, Moody’s said.
“The studios, networks and streamers were preparing for potential strikes by increasing production and accelerating deadlines to saturate and lengthen their finished content pipelines,” Moody’s said. “The benefit of doing so equally prepared the studios for the walkout by the actors.”
Nevertheless, having both the writers and actors on strike at the same time has shut down production and increased the pressure on the business. This is the first time that the actors have gone on strike since 2000, Moody’s noted, and the first time both the actors and writers have picketed at the same time since 1960.
“Production in the U.S. has halted at a time when the sector is under pressure to mitigate the secular decline in linear TV and show it can operate streaming platforms at a profit to mitigate linear decay,” Moody’s said. “We estimate the newly ratified Directors Guild of America (DGA) agreement, together with potential new WGA and SAG-AFTRA contracts, will ultimately cost Moody's-rated media companies $450 million to $600 million more per year.”
Two unions on strike highlight the stresses on both sides of the bargaining table. It is not just the revenue share at stake, but how compensation has evolved in the streaming ecosystem. Also at issue are technological advancements such as artificial intelligence (AI) and compensation surrounding the use of artificially generated digital likenesses, Moody’s said.
A long-lasting strike will most affect companies that have little or no financial flexibility, such as those that are highly leveraged and have low single “B” or “Caa” credit ratings; those very weakly positioned relative to their existing credit ratings; those already facing secular pressure; and those that rely heavily on studio output for the bulk of revenue, the credit rating agency said.
The companies covered by Moody’s least at risk include Comcast, Fox, Sony Group, Apple and Amazon. More under the gun from having streaming costs cut into profits are The Walt Disney Co., Paramount Global, Warner Bros. Discovery and Lionsgate Entertainment.
“Television will bear the brunt of a long strike as the implications of the two striking unions will play out more noticeably for TV networks, stations, cable channels, and streamers,“ Moody’s said. “TV networks, particularly broadcast networks, consistently schedule new primetime shows to begin in the fall. Cable networks vary in their exposure to original scripted content and, therefore, only some are exposed. Cable networks that typically air original scripted programming sometimes release new series in the fall as well, but have historically been less consistent and have rotated their smaller original lineups more evenly throughout the year, and may have partial or shortened series releases.”
The least at risk would be global streaming platforms. Moody’s said streamers are well-positioned financially, have little or no exposure to the declining linear ecosystem and have diverse sources of content — both in terms of production and libraries.
Streamers, film producers and premium pay TV networks also have more schedule flexibility but may need to stretch, Moody’s added. “Longer term, premium pay TV could come under pressure, as completed original content for serialized programs and feature films dries up.”
