Labor stoppages, such as the ongoing strikes by the Screen Actors Guild and Writers Guild of America, are primarily motivated by financial concerns and the desire for increased compensation. Both actors and writers are seeking higher pay and are also pushing for restrictions on the use of artificial intelligence. On the other hand, the studios argue that they are unable to meet these demands due to the significant expenses they have incurred in establishing their streaming services. This impasse threatens to further reduce the overall earnings of the industry and poses a risk to movie theaters.
Throughout history, Hollywood has initially perceived evolving consumer habits as a threat to theatrical profits. However, it eventually recognized the potential of television networks and home video rentals as lucrative markets. The rise of streaming, particularly with the emergence of Netflix, coincided with a decline in DVD sales. Netflix capitalized on this shift, leveraging its first-mover advantage, extensive movie libraries, and captivating original series to generate billions of dollars in revenue. This success has led other studios to question why they are unable to replicate Netflix’s profitability.
Many studios had already planned to enter the streaming arena before the pandemic, but the global crisis hastened their transition. However, their transition hasn’t been smooth, with mixed results for most studios. For example, NBCUniversal’s streaming service, Peacock, has managed to attract subscribers and generate revenue but is still experiencing significant financial losses. Most headlines about streaming services, aside from Netflix, focus on the limited losses they incur each quarter, rather than substantial profits.
The main challenge faced by these studios lies in their spending rather than revenue. More money has been allocated to producing television shows and movies than ever before, leading the studios to question the demands of writers and actors. However, during the streaming boom, the number of Writers Guild of America members reporting earnings increased significantly. The WGA also collected higher fees in 2022, indicating that writers received greater pay. This prompts Disney CEO Bob Iger to argue that writers and actors are being unrealistic and contributing to the industry’s disruption.
As a result of the strikes, studios have started postponing movie releases, which could lead to a scarcity of films in theaters. This scenario resembles the previous impact of the COVID-19 pandemic, where release dates were repeatedly pushed back. The decline in theater showings during the pandemic has already resulted in a 5% decrease in the number of screens in the United States. Despite audiences slowly returning to theaters, box-office earnings remain below pre-pandemic levels, posing a threat to the survival of theaters.
Theatrical releases are crucial for monetizing films and remain the most reliable way to generate revenue. While some movies may earn more from nontheatrical sources, such as streaming or home video, the theatrical release still plays a significant role in profitability. Even newly implemented distribution methods, like Universal’s premium video-on-demand window, rely on the prestige and audience interest generated by a theatrical release. The theatrical experience entices customers to pay a higher price to rent a movie.
In conclusion, the entertainment industry is currently facing a disruptive period, and a prolonged strike could have devastating consequences for everyone involved. The studios’ desire to replicate the Netflix model and diminish the importance of theatrical releases has contributed to this disruption. It is crucial for the industry to find a resolution that balances the financial needs of actors and writers with the survival of movie theaters.
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