(Welcome to the “Most Important Story of the Week”, my bi-weekly strategy column analyzing the most important (but often not buzziest) news story of the last two weeks. I’m the Entertainment Strategy Guy, a former streaming executive who now analyzes business strategy in the entertainment industry. Please subscribe.)
In an offhand comment in the last edition of the “Most Important Story” column, I mentioned that it felt like the town was ready to move past any more strike talk. And how true that was!
My last “Most Important Story” column came out the day after SAG-AFTRA announced their deal with the studios. I didn’t want to comment on the end of the SAG-AFTRA strike—a union that represents 160,000 workers—until I could read the impending deluge of coverage. Most outlets said we’d have specific contract details by that Sunday…so I waited until Sunday…and the deluge of news stories never came?
It seems like everyone is ready to just say, “The strikes are over, the Guilds got what they wanted, now let’s get back to work!” If the strikes were a marathon, instead of sprinting the last quarter mile, everyone is just slumping to the finish line. This is even more surprising, since the SAG-AFTRA vote seemingly has more public controversy than the WGA vote.
That seems like a mistake to me, though. To toss one analogy on top of another, it’s like the difference between political reporting on elections and the daily “horse race” versus coverage of policy and actually crafting new laws. Personally? I don’t love the Politico-esque daily coverage on the latest polls, gaffes, and whatnot. (Please, not another article about Hunter Biden.) I prefer articles that dive deep into the policy weeds, like Matt Yglesias’ Slow Boring newsletter (2K words on carbon capture technology? Yes please!)
Most of the last few months have been about the horse race: Who is winning the messaging battle? Who’s losing? Who made the bigger PR gaffe? That plus tons of innuendo, gossip and rumors. Now that we have the deal points, it seems like most folks are ready to just get back to work and assume the negotiators did their jobs.
Fair enough. We all want to get back to work. (As a newsletter publisher, I’ve been publishing throughout the strikes, but I do wonder if the lack of paychecks to writers (and some actors) has impacted my growth, since newsletter subscriptions are probably one of the first items to cut back in down times!) Yet I owe it to my readers to deliver my last thoughts on the year of strikes. It is a big deal that the town is officially back to work. Let’s discuss the final strategic implications.
Most Important Story of the Week – Thoughts on SAG-AFTRA-AMPTP Strike Ending
First, let’s discuss what SAG-AFTRA actually got in this negotiation. Then we’ll discuss what comes next, in both the long term and the short term.
Thoughts on the Negotiations
While AI and residuals dominated the post-resolution coverage, SAG-AFTRA asked for and received much more than that in this negotiation. (For example, pay increases across the board.)
In particular, a larger “meta” negotiating point may get lost. In addition to a similar residuals bonus as the Writer’s Guild, SAG-AFTRA also negotiated higher minimum increases. This comes after the WGA secured similar foreign residuals and minimum increases as the DGA, but then secured a larger residual bonus. So…the longer a Guild held out, the better and better deals they got. Implicitly, the AMPTP sent out the message that you want to be the Guild who holds out the longest in the next deal. The next time the guilds go on strike, AMPTP has implicitly incentivized the unions to hold out longer than their fellow unions.
Now let’s talk AI. Some SAG-AFTRA members pushed back against their union leadership regarding the language around AI, and whether or not it’s strong enough. Having read the summary of the terms, I tend to agree with the criticisms. Basically, “getting permission” from talent often becomes “you say yes or you’ll never work again”, which is why I’d avoid language like that. I mean, it’s better than “no consultation”, but it can still be coercive. (As for the entire “AI Issue”, I’ve written about it once before, and definitely plan to dive back into this topic in 2024.)
As for the residuals, the actors defined a fairly similar deal to the writers: shows that achieve a “20% views of subscribers” threshold earn a bonus. For specifics of how many shows may get that bonus, see here. The big win for the actors is that their residual bump is a 100% bonus, not 50% like the writers. That said, actor residuals tend to come in much lower than writers since they split it with their fellow actors, so the bump matters a little more.
SAG-AFTRA is also creating a smaller pot with the residuals money to do…something with. I’ll be honest, I really dislike this. Giving a union a pot of money to decide how to use really benefits the union leadership more than the members, and I’d prefer the deal just paid the bonus out to talent, or had a very clearly defined use case.
What Comes Next?
Theaters
The craziest statistic for theaters in 2024 is that there will be no, repeat no, Marvel Cinematic Universe releases for the first time since…2008. That’s what shutting down production for six months will do for you. (Technically, Deadpool 3 will likely come out, but it’s more “Fox Mutants” than MCU. And it’s rated R.)
The only bright spot is that a lot of potential big films moved from 2023 to 2024, including the Into the Spider-verse sequel, The Dune sequel (which moved up in March), Inside Out 2 and Venom 3. There are some tentpoles to hold up the theatrical tent, just not as many as if 2023 had finished strong and production hadn’t been interrupted. Overall, I doubt theater chains “die” or we see waves of bankruptcy, but if another big disruption to production timelines happens in 2024, we could see a wave of theater closures.
Right now, current projections have the 2023 box office ending up around $9 billion in the US. Some analysts put next year’s around the same number, and I’d tend to agree with that. One of the most widely quoted financial analysts in entertainment business said a few years back that “cinema was dead” on Twitter like every day. And sure, $9 billion is smaller than $12 billion that the US saw in 2019…but it’s not 0%! Sans the two strikes and Covid-19, I think this year likely would have cruised over $10 billion.
Are theaters a growth industry? No. Are they dead either? Nuance is okay in business.
Broadcast
If you want to know what moves the needle in terms of profit at the traditional studios, focus on what TV shows they greenlit first after the strikes ended: broadcast shows. All of them as quickly as possible.
Right now, it looks like most scripted broadcast shows will return to the TV in February, right as the NFL ends, allowing broadcasters to leverage America’s biggest sport to promote their ever shrinking scripted programming slates. Some will go even faster, as NBC will get shows up in January.
Again, is broadcast a growth industry? No. Is it dead? No.
Streaming
That leaves the third pillar of the current entertainment business model, streaming. Unlike during Covid-19, where the streamers saw big boosts in subscribers locked-down, the current strike doesn’t seem to have shaken up subscriber numbers.
I’ll admit, after a few down weeks in August, I haven’t really seen the impact on streamer’s release calendars like I thought I would. (Yet. The last two weeks of streaming releases have been…odd. Read future Streaming Ratings Reports for details.) The streamers—like the film studios—seemed to have spaced out their content calendars as much as possible. If they don’t see huge increases in churn going forward, then it may show all the streamers that they were making too much content in the first place. If churn does increase as content slows down, then the streamers will have tough (read: expensive) decisions to make. But I’m betting on the former.
Is streaming a growth industry? Well, this town certainly needs it to be…
The Medium Term
After getting production and release schedules back on track, the biggest priority for the studios and streamers will be…Oscar campaigning? I kid, but nearly as soon as SAG-AFTRA announced their strike ending, the FYC content seemed to kick up a notch.
Then, all eyes turn toward IATSE, the union which represents below-the-line workers in Hollywood. Their last contract renewal came up in fall of 2021, so the fall of 2024 could see a similar slowdown in work if IATSE and the AMPTP can’t come to an agreement.
This is where “forecasting” becomes “guess-timations”. Do I think IATSE goes on strike in 2024?
Yeesh, that’s tough to judge. Consider what we do and don’t know. I think we can say for sure that IATSE will expect to get as much support for its labor actions as they provided the WGA and SAG-AFTRA, even though technically those guilds can’t strike in solidarity. I can imagine IATSE will also demand contract increases in line with what those other guilds got. Bank on that.
Do the studios give them that? I have to imagine they would, simply because they can’t really afford another strike. But then say they give in on the demands, could IATSE strike to get even better demands? Potentially. Or maybe both sides really can’t afford another extended work stoppage—IATSE members can least afford work shut downs as some of the lowest paid workers on the production totem pole—and they make a deal that works for both sides. If the haven’t, the AMPTP and IATSE need to start negotiating now though back channels.
That will be a big story in 2024 either way.
Almost Most Important Story of the Week – Warner Bros. Discovery Cancels and Un-cancels Coyote vs Acme
One of the challenges of writing a newsletter is avoiding “audience capture”. As you put things out into the world, you get feedback on what customers think and what types of things your audiences want to read, so it’s tempting to tilt you coverage into what those readers want.
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