Major media conglomerates faced a turbulent day of trading on Monday, relinquishing early gains spurred by hopes of an imminent resolution to the ongoing screenwriters’ strike. Warner Bros Discovery, Paramount Global, and Walt Disney saw their shares dip between 0.3 percent and 2.1 percent.
While the union representing film and television writers tentatively agreed to a three-year deal on Sunday, the deadlock in negotiations with actors, encompassing nearly 160,000 members, remains unbroken. Investors within the media sector had initially welcomed the strikes for bolstering cash flows through reduced expenditures. However, this boon has now begun to erode earnings, compelling companies to shift their focus towards addressing actors’ demands post the writers’ settlement.
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, warned of an impending significant blow to major studios, asserting that, “with productions still on hold, the big studios will face a substantial hit in 12-18 months, given the scarcity of new content in the pipeline.”
In contrast, Netflix saw an uptick of approximately 1 percent, with analysts contending that the streaming powerhouse enjoys a superior position compared to its industry counterparts. This advantage stems from its diversified production operations and workforce located outside of the United States, thus remaining unaffected by the strike.
Walt Disney, on the other hand, issued a prior caution that the company’s full-year adjusted core profit could incur a loss of up to $500 million due to project delays resulting from disruptions. Since the initiation of the writers’ strike on May 2, its shares have plummeted by nearly 14 percent. Paramount, Disney, and Netflix have collectively suffered losses ranging from 20 to 45 percent. In stark contrast, the benchmark S&P 500 index has surged by nearly 5 percent during the same period.
The accord reached with the writers encompasses augmented royalties, mandatory staffing quotas for television writing rooms, and safeguards against the deployment of artificial intelligence. Barton Crockett, an analyst at Rosenblatt, opined that “the overall expenditure on shows will see minimal change. Studios will either pare expenses from other facets of show production or curtail the volume of new productions (a trend already in motion) to offset heightened costs attributed to writers.”
In Summary, major media conglomerates saw a tumultuous day of trading, giving up initial gains driven by expectations of a swift end to the ongoing screenwriters’ strike.Consequently, a resolution to the actors’ strike emerges as a pivotal precursor to a full-fledged return to normalcy within the Hollywood sphere. The industry remains poised, awaiting further developments in this high-stakes labor dispute.
Source: Reuters
