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Hollywood writers returned to work this week feeling pleased about their new contract after five sweltering months on the picket lines. If the striking actors can reach an agreement with the studios in the next week or two, as many hope, the floodlights will soon be shining over Tinseltown again.
However, any celebration in Hollywood is likely to be short-lived. Traditional studios like Disney are still struggling to make profits with their streaming services, and their once-mighty TV businesses are in decline.
For the writers and actors, studio cost-cutting means that while they will earn more from their new contracts, there will likely be fewer shows given the green light compared to the “peak TV” era from 2009 to 2021.
One senior Hollywood executive stated, “The writers did really, really well” in the contract negotiations, but added that there will be “repercussions” from the deal.
“The streamers are going to be more conservative” with their budgets, the executive explained. “They’re going to be more cost-conscious . . . They’re going to develop less content.”
The writers have secured higher pay across the board in their new three-year deal, along with the potential to earn royalties from successful streaming shows. The new package will cost an additional $233 million a year, which is less than the $429 million they initially sought but still significantly higher than the studios’ initial offer. The new actors’ contract will undoubtedly add more costs for studios as well.
Despite industry headwinds, members of both unions insist that the studios can afford the pay increases. They point to high executive salaries and the companies’ long-term profitability records as evidence of their ability to pay up.
However, after investing billions into streaming, the studios are under pressure to control content spending. Even Netflix has kept its budget steady at around $17 billion since 2021.
The difference is that Netflix is profitable, unlike the streaming services launched by studios such as Walt Disney, NBCUniversal, and Paramount. Warner Bros Discovery has reported a profit in its streaming business this year, but Disney’s streaming operation has incurred losses of over $11 billion since its launch in 2019. They do not expect the business to break even until next year.
In their rush to reach profitability, most streaming services have raised prices and even introduced advertising, which was once taboo in this subscription-driven industry. Old ideas about how to make money from TV are suddenly back on the table.
Some of the retro strategies making a comeback include streamers licensing shows to each other and canceling expensive or underperforming shows. Streamers have been particularly ruthless about cutting shows in recent months.
There has also been discussion about releasing shows in a different format, reducing the binge-watching trend. HBO has been a pioneer in this regard, releasing weekly episodes of popular shows instead of dropping entire seasons at once.
“Will some of these streamers say: Hey, we’re wasting all our bullets at the same time,” the executive questioned. “Will some start to [release] their shows in a different way, and will that mean they don’t have to make as many shows?”
With cost-cutting measures becoming popular again in Hollywood, this idea could potentially receive approval.
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