Hollywood strike threatens film industry’s post-Covid recovery

It’s been 60 years since both writers and actors have manned picket lines in Hollywood. Back then it was also about how studios would pay out “residuals” – royalties for their part in films that were now being repeated on TV networks as the world of entertainment morphed into something new.

Today’s dispute is almost like a re-run. The advent of streaming services has changed the game again as consumers are given the power to watch what they want, when they want and as many times as they want to view it.

Streaming giants like Netflix, Apple and Amazon vie for supremacy against veteran film makers Paramount, Warner Bros. Discovery, Fox and Disney – all of them are profiting from the glut of wonderous and hastily-devoured content and actors and writers are fighting for their share.

If the dispute goes on for months, then the entire industry, which has only just begun to recover from Covid’s cruel grip, could be seriously impacted.

For investors the biggest question is how long will these strikes last now that actors have joined writers on the picket line? If it’s a matter of weeks the impact should be relatively minor, especially for platforms like Amazon and Apple which have invested hugely in unaffected sports content, and for Netflix which has a vast international network of production teams, and a slate of popular content heralding from far-flung places like South Korea.

Popular US streaming platforms, film studio and cinema stocks

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If the dispute goes on for months, which veteran actor Brian Cox told BBC Newscast is the more likely outcome, then the entire industry, which has only just begun to recover from Covid’s cruel grip, could be seriously impacted.

Already, production on a number of highly-anticipated blockbusters has been halted, and red carpets have been devoid of stars – with Disney’s Haunted House premier having to fall back on dressed-up characters rather than the actors who have brought those characters to life on screen.

Investors are wily lot, already pricing in the impact on the walkout is likely to have on traditional film studios and US cinema empires.

And the Succession star might have good reason to believe this dispute will last at least as long as that in the 1960’s.

AI concerns at the heart of the strikes

Because this dispute isn’t just about residual fees, it’s also about the potential that AI could infiltrate every aspect of the industry.

Investors are wily lot, already pricing in the impact on the walkout is likely to have on traditional film studios and US cinema empires.

We’ve already seen the wonders that special effects can create: bringing back the dead in order to finish story arcs from series like Star Wars. But imagine if an actor’s face, voice, or familiar expression could be reproduced ad-infinitum without them ever having to set foot on a sound stage.

And what of the words that spring from that actors’ mouth, the human stories that captivate us all and keep us coming back series after series? If an app like Bard or ChatGPT could rustle up a few pages of dialogue, would we the viewing public really know the difference? I imagine the answer is murky at best.

What is clear is that content is king. Investors developed a keen understanding of that fact following the dearth of material post-pandemic, and the rush to spend by studios which ate so deeply into recent profit margins.

Whilst the cinematic slate is looking more exciting than it has in years, cinema attendance is still looking a little fragile, and box office takings for blockbusters like the final Indiana Jones movie and the latest Mission Impossible jaunt have been a touch disappointing.

If cinemas are once again starved of great material, then recovery could fizzle out altogether

Momentum is important and this strike has the potential to cause huge damage to film studios, streamers, cinemas and a whole range of interconnected businesses, with some estimates suggesting the economic fallout could be upwards of four billion dollars.

UK companies that could be impacted by Hollywood strikes

Source: Sharepad

Strike impact will be felt around the world

And the fallout isn’t limited to the United States. Sheffield-based Zoo Digital saw its share price plummet as actors walked off sets and the company revealed how deeply it had already been impacted by writers’ strikes and cost-cutting moves by those aforementioned streaming sites.

The company provides dubbing and subtitling and other post-production services both in the UK and in Los Angeles whilst another London listed firm, Facilities by ADF, provides those great big make-up trucks and star trailers ubiquitous on film locations.

It too has seen investor confidence wane since the start of the year as has ITV, though the latter has other issues to deal with alongside the current crisis.

And when you consider the wider implications, if cinemas are once again starved of great material, then recovery could fizzle out altogether and all those bars, restaurants and shops that rely on the movies for footfall will also suffer.

This is a dispute guaranteed headlines thanks to all the famous faces in the mix. But underneath the glitter it’s about money and how it ends will have huge ramifications for everyone with skin in the game.

Past performance is not a guide to future performance and some investments need to be held for the long term.