Hollywood Actors, Studios Reach Labor Agreement Ending 118-Day Strike

SAG-AFTRA, the union representing working actors in Hollywood, and the Alliance of Motion Picture and Television Producers (AMPTP), the trade group representing the studios and Netflix, among others, have reached a tentative agreement ending the longest labor strike in Hollywood history.

“As of 12:01 am on Nov. 9, our strike is officially suspended and all picket locations are closed,” SAG-AFTRA said in a statement. The agreement must must be ratified by SAG-AFTRA members on Friday, Nov. 10.

The new three-year deal is valued at more than $1 billion dollars, and includes “above-pattern” minimum compensation increases, provisions for consent and compensation from the threat of artificial intelligence (AI), and for the first time establishes a streaming participation bonus.

“Our “pension & health caps” have been substantially raised, which will bring much needed value to our plans,” the union wrote. “In addition, the deal includes numerous improvements for multiple categories, including outsize compensation increases for background performers, and critical contract provisions protecting diverse communities.”

The long ordeal, which reportedly idled about $10 billion in TV and film production, had pitted myriad industry representatives on both sides of the issue against each other, including chief union negotiator Duncan Crabtree-Ireland, and AMPTP president Carol Lombardini, Disney CEO Bob Iger, Netflix co-CEO Ted Sarandos, NBCUniversal chairperson Donna Langley, and Warner Bros. Discovery CEO David Zaslav.

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Both Sides Optimistic as Hollywood Strike Settlement Negotiations Resume Oct. 24

NEWS ANALYSIS — When negotiations between the union representing working actors (SAG-AFTRA) and AMPTP, the trade group representing studios and streaming companies, abruptly shut down Oct. 11 after actors made last-minute demands for a cut in streaming revenue, a return to the bargaining table seemed for off.

But over the weekend, Netflix co-CEO Ted Sarandos went public lauding the Oct. 24 resumption of negotiations to end the 100+ day strike, leading to speculation a deal is forthcoming. Sarandos was the prominent industry voice when negotiations broke down earlier this month, arguing the actors’ demand for a $1 levy on every streaming subscriber amounted to an economic “bridge too far” in the negotiations.

For the actors, who have been on strike since July seeking higher compensation in the streaming ecosystem, in addition to safeguards against the use of artificial intelligence (AI), Tuesday’s unexpected return to the bargaining table is a positive.

“As we mark the 100th day of our strike, we are pleased to confirm the company executives have asked us to return to the table,” SAG-AFTRA said in an Oct. 21 statement.

A surprising turn of events, indeed, after the AMPTP on Oct. 11 said it was “clear that the gap between the AMPTP and SAG-AFTRA is too great,” and that the negotiations were no longer moving in a “productive direction”.

In a statement at the time, AMPTP outlined studios and streamers’ offers to the actors, including safeguards against improper AI use, and what the subscriber levy would cost.

“SAG-AFTRA’s current offer included what it characterized as a viewership bonus that, by itself, would cost more than $800 million per year – which would create an untenable economic burden,” AMPTP said in a statement.

Apparently, that economic burden is no longer untenable — to discuss.

News Analysis: Netflix Posts Big Profits While Saying Actors’ Demands ‘Bridge Too Far’

NEWS ANALYSIS — Netflix hit another home run in its most-recent financial quarter (ended Sept. 30). The subscription streaming VOD pioneer exceeded industry expectations, adding almost 9 million paid subscribers worldwide to top 247 million subs.

Revenue over the 90-day period increased nearly 11% to more than $8.5 billion. The streamer saw a 22.9% increase in operating income to more than $1.9 billion, and net income of $1.67 billion, the latter up more than 20% from $1.39 billion in profit in the previous-year period.

Indeed, profit is no stranger to Netflix. Over the past 12 months, the streamer reported quarterly net incomes of $1.48 billion, $1.35 billion and $1.39 billion. The lone outlier was $55 million in profit in the fourth quarter of 2022 when adjusted operating margin for the year remained an impressive 20%.

Netflix was practically immune from the industry shutdowns during the pandemic, and remains aggressive on multiple fronts, including content spending ($17 billion annually) and in rejecting demands in the ongoing SAG-AFTRA labor strike that has seen working actors (not the stars) on the picket line for almost 100 days seeking higher daily compensation in the production of myriad TV shows and movies streaming on Netflix and other platforms.

A chief studio face during the labor negotiations is Netflix co-CEO Ted Sarandos, who grew up in a pro-labor union household, and says he is committed to finding a solution to the strike.

“That union was very much part of my life growing up,” Sarandos said in July. “I remember on more than one occasion my dad being out on strike. I remember that because [a strike] takes an enormous toll on your family, financially and emotionally.”

Yet, when negotiations between SAG-AFTRA and the Alliance of Motion Picture and Television Producers, the entity negotiating with actors on behalf of Netflix and the major studios, broke down last week over a last-minute $1-per-streaming-subscriber levy actors wanted to impose on streamers, Sarandos went public calling the proposed $800 million fee “a bridge too far.”

Speaking on the Oct. 18 fiscal webcast, Sarandos doubled down on the statement, adding the union’s demand “really broke our momentum, unfortunately.”

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“The industry, our communities, the economy are all hurting,” he said. “So, we need to get a deal done that respects all sides as soon as we possibly can. We want nothing more than to resolve this.”

No doubt, Sarandos and other media giant CEOs want an end to the strike and return to business as usual with all parties satisfied. So how would a $247 million levy (247 million subs x $1) break Netflix? The same company that last month shuttered a profitable by-mail DVD rental business generating $100 million in revenue?

Michael Pachter, media analyst at Wedbush Securities in Los Angeles, said the proposed levy at most would require a 15 cents monthly increase in subscription fees for each service. Virtually every SVOD platform has raised monthly subscription prices in recent years, including Netflix just yesterday upping the fees for its basic and premium tiers by $2 and $3 respectively.

“It’s crazy that any of them can claim [the levy] would bankrupt them with a straight face,” Pachter said. “If the cost is really that modest, they should suck it up and pay.”

The analyst said that as the streaming services raise prices, the actors have a right to ask for a financial participation on the back end.

“I think if [the streamers] struck a deal with inflation-adjusted escalators built in, they would never face this issue again,” Pachter said.

Netflix’s Ted Sarandos: ‘We Need to Get a Deal Done That Respects All Sides’

Netflix co-CEO Ted Sarandos started the streamer’s Oct. 18 quarterly webcast interview addressing the ongoing 95-day SAG-AFTRA labor strike that continues to shutter content production throughout Hollywood.

Sarandos said negotiations between the actors’ union and the Alliance of Motion Picture and Television Producers (AMPTP), the trade group responsible for negotiating virtually all industry-wide guild and union contracts for studios and streamers, had come close to a resolution last week when SAG-AFTRA presented a “new” demand calling for a reported $1-per-streaming subscriber fee.

Calling the demand a “levy” unrelated to viewing or content success, Sarandos said the union’s demand “really broke our momentum, unfortunately.”

Regardless, the executive said the AMPTP and Netflix are “totally committed” to ending the strike, which currently shows no sign of a resolution after all parties walked away from last week’s negotiations.

“The industry, our communities, the economy are all hurting,” Sarandos said. “So, we need to get a deal done that respects all sides as soon as we possibly can. We want nothing more than to resolve this.”

The executive then lauded Netflix’s deep content portfolio that he claims has the streamer in good shape through the end of the year and beyond. Sarandos said competition for talent, shows and films continues to increase production costs.

“We’ve managed successfully through that year after year,” he said, adding that Netflix maneuvered successfully through the pandemic, which he reiterated shut down all content production worldwide.

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Sarandos then read off a list of pending content releases underscoring the streamer’s ability to weather production shutdowns for the foreseeable future. The list includes the final season of “The Crown,” new seasons of “Big Mouth,” Spain’s “Elite,” the new series “Berlin,” “All the Light We Cannot See” from Shawn Levy, and “Bodies” from the United Kingdom, among other titles.

“And that’s just on the TV side,” Sarandos said, adding that new movies from directors Zach Snyder, David Fincher and John Hayes and Bradly Cooper’s Maestro, among others, underscore a robust feature film slate.

“That’s all coming in Q4,” Sarandos said.

Netflix ‘Committed’ to Ending Actors’ Strike While Upping Third-Party Licensed Content

Netflix Oct. 18 reiterated its desire to end the ongoing SAG-AFTRA strike that has effectively shuttered most Hollywood productions.

“We’re committed to resolving the remaining issues as quickly as possible so everyone can return to work making movies and TV shows that audiences will love,” co-CEOs Ted Sarandos and Greg Peters wrote in the shareholder letter.

At the same time, the streamer lauded the results of its third-party licensed content — most notably 2019 legal drama “Suits,” which Netflix co-licenses with Peacock. The series, co-starring Meghan Markle before she quit acting to marry Prince Harry, generated 1 billion hours of viewing worldwide over a 12-week period during the summer.

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Netflix said licensing catalog episodes of notable series such as “The Office” and “Friends” helps drive viewership.

It also circumvents having to pay actors to create new content.

“Licensing has always been an important part of our programming strategy,” Sarandos and Peters wrote, adding that third-party catalog content complements the streamer’s original fare.

What’s not mentioned in the letter is the lifeline licensed TV shows and movie provide Netflix during the ongoing actors’ strike.

Sarandos and Peters said that as the “competitive environment evolves,” the streamer may have “increased opportunities” to license more “hit” titles.

“We believe this will deliver additional value for our members (i.e., engagement), as well as for rights holders who benefit from the increased awareness and revenue that Netflix delivers, in addition to the new life that success on Netflix can drive,” the executives wrote.

Netflix reportedly balked paying SAG-AFTRA $1 for every one of its subscribers — or about $247 million in an annual fee.

Speaking at the recent Bloomberg Screentime confab, Sarandos called the actors’ revenue-sharing proposal “a bridge too far to add this deep into negotiation.”

SAG-AFTRA says the $1-per-subscriber figure is misleading since the actual cost to streamers is 57 cents per subscriber, when factoring in non-SAG-AFTRA content.

The strike doesn’t appear to be hurting Netflix financially. The service ended the most-recent fiscal quarter (ended Sept. 30) generating more than $8.5 billion in revenue, up more than 10.7% year-over-year. The streamer saw a 22.9% increase in operating income to more than $1.9 billion, and net income of $1.67 billion, the latter up more than 20% from $1.39 billion in the previous-year period.

Separately, Netflix said it would adjust its executive compensation guidelines after shareholders at the annual meeting voted against the $166 million in executive compensation for Sarandos, Peters and executive chairman Reed Hastings, among others.

“We recognize we don’t have wide support for our executive compensation model of the last 20 years,” Sarandos and Peters wrote. “We are listening to our shareholders and plan on substantial changes for 2024 to a more conventional model. Our executive compensation plan will continue to be built on pay for performance.”

Actors Union SAG-AFTRA Votes in Favor of Authorizing Video Game Strike

Hollywood writers may be headed back to work, but SAG-AFTRA, the union representing working actors, is looking to expand its picket lines to include the video game industry.

The union said its members voted 98.32% in favor of a strike authorization on the Interactive Media Agreement that covers members’ work on video games. The strike authorization included 34,687 members cast ballots, representing a voting percentage of 27.47% of eligible union voters.

The strike authorization does not mean the union is calling a strike. Instead, the move is an attempt to bring attention on labor negotiations, which began in October 2022, between actors and the gaming industry, whose members include Activision Productions, Blindlight LLC, Disney Character Voices, Electronic Arts Productions, Formosa Interactive LLC, Insomniac Games, Epic Games, Take 2 Productions, VoiceWorks Productions, and WB Games.

Throughout the negotiations, SAG-AFTRA claims the video game companies have refused to offer acceptable terms on critical issues, including wages that keep up with inflation, protections around the uses of artificial intelligence, and basic safety precautions. The next bargaining session is scheduled for Sept. 26, 27 and 28.

“It’s time for the video game companies to stop playing games and get serious about reaching an agreement on this contract,” Fran Drescher, president of SAG-AFTRA, said in a statement.

Drescher said the vote tally underscores union membership’s understanding of the “existential nature” of the negotiations.

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“The time is now for these companies, which are making billions of dollars and paying their CEOs lavishly, to give our performers an agreement that keeps performing in video games as a viable career,” Drescher said.

The strike authorization vote was initiated on the unanimous recommendation of the SAG-AFTRA Interactive Media Agreement Negotiating Committee and National Board. Voting information was sent to eligible members on Sept. 5, and the final deadline to vote was Sept. 25 at 5 p.m. PT.

Duncan Crabtree-Ireland, chief negotiator for the actors’ union, said the reasons to authorize a strike are similar to the one currently being waged against Hollywood studios and streamer Netflix

“After five rounds of bargaining, it has become abundantly clear that the video game companies aren’t willing to meaningfully engage on the critical issues: compensation undercut by inflation, unregulated use of AI and safety,” Duncan Crabtree-Ireland said.

Corporate Fence-Straddling on Hollywood Strike Is Entertaining

NEWS ANALYSIS — With Hollywood writers and actors entering the dog days of their ongoing strike against producers and studios, corporate media executives’ attempts to straddle the fence in a show of support to both sides of the issue is itself entertaining.

Disney CEO Bob Iger last month did himself no favors accusing the unions of not being realistic in their demands (for greater compensation and technology safeguards), calling strikers “quite, frankly, very disruptive.”

On the Aug. 9 fiscal call, Iger appeared to soften his tone. Noting that he had great respect for the creative community, as well as an appreciation for the “extraordinary creative engine” that drives Disney and Hollywood. The executive said he hoped both sides could find solutions to the issues that have kept the industry apart for almost 100 days.

“I am personally committed to working to achieve this result,” Iger said.

Minutes later, interim CFO Kevin Lansberry revealed that Disney had generated $1.6 billion of free cash flow in the quarter — an amount no doubt elevated by Iger’s ongoing personnel cuts across the company, in addition to lower spending on content due to the strike.

The week before, Warner Bros. Discovery CFO Gunnar Widenfels told investors the media giant that includes Warner Bros. Pictures, had saved millions in spending due the labor shutdown.

“While we are hoping for a fast resolution … should the strikes run through the end of the year, I would expect several $100 million upside to our free cash flow guidance,” Wiedenfels said.

The company is projected to generate about $4.5 billion in free cash flow for the full fiscal year, aided by a lower usage of working capital, according to analyst Gimme Credit.

Free cash flow is the amount of money a company has (or doesn’t have) after covering all of its operating costs. The metric is what Wall Street covets in the form of dividends and stock repurchases. The kind of activity that can jumpstart a company’s share price, to which many senior executives’ compensation is tied.

While Paramount Global CEO Bob Bakish may be “saddened” the industry couldn’t have avoided the labor unrest with a new agreement, the result, in the short term, is more money on the bottom line.

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Indeed, CFO Naveen Chopra said the company saw $210 million in free cash flow in the quarter, which included a “modest impact” from the strikes.

“We anticipate continued delays in production for the duration of the strikes. And as such, we estimate free cash flow in the back half of the year will be significantly higher than previously expected,” Chopra said.

Analyst Michael Pachter with Wedbush Securities in Los Angeles contends media companies genuinely believe they are making the right business decision in not settling with writers and actors.

“But they are wrong,” he said. “Writers/actors create the content that media sells, and without them, media will starve.”

Pachter said CEOs are being penny-wise and pound-foolish, but added that they can “still have sympathy for the actors and writers.”

Fox Reportedly Set to Delay 2023 Primetime Emmys Due to Hollywood Strikes

The 75th Primetime Emmy Awards reportedly have been postponed from their original Sept. 18 broadcast on Fox due to the ongoing Hollywood labor strikes. The delay would be the first for the Emmys since the 9/11 terrorist attacks in 2001.

While no official decision has been announced, media reports suggest the Television Academy, which organizes the annual industry event, and Fox are eyeing dates in November or next January depending the status of ongoing nationwide strikes by members of SAG-AFTRA and the Writers Guild of America.

The writers have been on strike since May 2, while the actors joined the labor unrest earlier this month. Both parties are looking for increased residual compensation, in addition to safeguards against the rising use of artificial intelligence (AI), and writer guarantees in content production.

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Any delay would also impact the Creative Arts Emmy Awards also slated to take place in September.

Whip Survey: Delayed Content Due to Strikes Increases Subscriber Urge to Churn

Based on how consumers perceive the potential impact of the strike today, every major SVOD is likely to see higher churn if a strike significantly delays new U.S. original programming, according to a new survey from Whip Media.

Though Hulu started with among the lowest percentage of subscribers who said they might cancel, it saw the largest increase on that measure when people considered the impact of the strike on new U.S. original programming.

Netflix appears to be least vulnerable to the impact of the strike on delays in release of new U.S. original programming; it was the only service to see less than a 100% increase.

The survey was fielded to 2,011 consumers from Whip Media’s U.S. panel of TV and film consumers from July 7-17, 2023. Respondents were between the ages of 18 and 54.

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Actors Reportedly Walked Away From $1 Billion Hike in Pre-Strike Compensation, Benefits Offer

The Alliance of Motion Picture and Television Producers (AMPTP), the negotiating entity representing the Hollywood studios and streamers, including Netflix, reportedly offered SAG-AFTRA, the union representing about 160,000 working actors, more than $1 billion in increased financial compensation and benefits before the strike call last Thursday, July 13.

“The deal that SAG-AFTRA walked away from on July 12 is worth more than $1 billion in wage increases, pension and health contributions and residual increases and includes first-of-their-kind protections over its three-year term, including expressly with respect to AI [artificial intelligence],” read an AMPTP  statement, according to Reuters, which first reported the offer, citing information from AMPTP.

SAG-AFTRA, which reportedly is calling the statement a mischaracterization of the pre-strike negotiations, is seeking  greater compensation for streaming video distribution, among other issues.

The Directors Guild of America (DGA) in June inked a new labor deal with AMPTP that featured a 21% hike in streaming residuals that includes content streaming access to foreign subscribers across Netflix, Disney+ and other major platforms.

SAG-AFTRA is also seeking greater control of actors’ AI images as the technology’s use increases with content production.

Studios already use Generative Artificial Intelligence (GAI) when making actors appear younger or older, or creating realistic images, voiceovers and communication.

For example, in the new three-part Showtime documentary Goliath on the late NBA star Wilt Chamberlain, GAI is used to recreate Chamberlain’s voice-overs from media statements he made.

The technology and practice is increasingly being used by content producers for actors in other situations — an emerging business practice SAG-AFTRA wants to stay on top of.

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The DGA labor deal with AMPTP expressly addressed safeguards for directors regarding GAI.

Specifically, the agreement outlines that “duties performed by DGA members must be assigned to a person, and GAI does not constitute a person.”

Content creators/producers are not allowed to use GAI in connection with “creative elements” without consultation with the director or other DGA-covered employees. The labor contract also calls for twice-yearly meetings with the studios to discuss and negotiate the use of GAI.