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  • Writer's pictureThe San Juan Daily Star

The economic stakes in the Hollywood shutdown

Striking Screen Actors Guild and Writers Guild of America members picket outside Netflix’s offices in Los Angeles on Friday, July 14, 2023. The actors’ union blasted studios for refusing to bend on key issues, including higher payouts from streaming titles and clear limits on the use of artificial intelligence

By Andrew Ross Sorkin, Ravi Mattu, Bernhard Warner, Sarah Kessler, Michael J. De La Merced, Lauren Hirsch and Ephrat Livni

It’s happening: America’s $134 billion movie and TV industry has ground to a halt after the Hollywood actors union voted to strike, joining screenwriters and shutting down virtually all productions.

The move reflects the growing aggressiveness of the American labor movement, which has been battling against Starbucks, Amazon, UPS and others. Only in this case, the dispute involves one of the most visible industries around — and there’s no sign of a compromise in sight.

The actors union blasted studios for refusing to bend on key issues, including higher payouts from streaming titles and clear limits on the use of artificial intelligence. “How they plead poverty, that they’re losing money left and right when giving hundreds of millions of dollars to their CEOs,” Fran Drescher, the TV actor who now leads the SAG-AFTRA union, said Thursday. “It is disgusting. Shame on them!”

The studios argue that the unions’ demands are unrealistic, given the challenges the entertainment industry faces, from streaming to fallout from the pandemic. “This is the worst time in the world to add to that disruption,” Disney CEO Bob Iger said on CNBC on Thursday.

Expect more such comments this coming week on media company earnings calls.

Tinseltown’s glitz quickly went dim. Because actors are now forbidden from promoting their films, the cast of Christopher Nolan’s “Oppenheimer” walked out in the middle of the movie’s London premiere. And campaigning for shows nominated for Emmy awards, which were just announced Wednesday, was suspended.

That will have consequences for other Hollywood industries, including advertising and talent agencies, celebrity and trade publications and film festivals. “The celebrity factory has shut down,” Janice Min, the head of entertainment publication The Ankler, told Vanity Fair. “If this goes on for a long time, you will feel it across the whole internet.”

In some ways, the strike could actually benefit studios and streaming platforms. The lack of new shows and movies may allow them to back out of expensive production deals they signed during the content boom.

But the longer the strikes go on, the more audiences may grow restless with a lack of fresh scripted content. (Fall TV schedules are packed with reality and game shows.) Streaming giants with vast libraries might be OK, but lesser-stocked services may face a deluge of cancellations, and studios that sell to other platforms could be in increasingly dire straits.

A new era of dealmaking at Disney?

A day after Iger extended his tenure as Disney’s CEO by two years, the entertainment mogul suggested that he was weighing a bigger shake-up of the media giant, including potential deals for ESPN and other channels like ABC.

The remarks indicate that Iger, who oversaw some of Disney’s biggest acquisitions, may yet do more deals — albeit as a seller. The big question is: Whom will he do them with?

Iger is under pressure to turn Disney’s fortunes around, after laying off thousands and slashing costs. Although he has headed off a challenge by activist investor Nelson Peltz, shareholders can’t be happy with Disney’s stagnating stock price.

Here’s what an Iger shake-up might look like:

— Disney may sell a stake in ESPN, which has suffered from a steep drop-off in cable subscriptions, to a partner that could help the sports network improve its online reach and pay for increasingly expensive broadcast rights. Likely candidates are tech titans with online video platforms, including Apple (an often-rumored buyer for Disney, antitrust concerns aside), Google and Amazon.

— Buyers for ABC and cable channels like FX are less obvious, since a deal with another media giant could draw opposition from antitrust regulators. Wells Fargo analyst Steven Cahall speculated that private equity or hedge funds may jump in, tempted by the businesses’ steady cash flow and the opportunity to cut margins (as they’ve done with newspapers).

How serious is Iger about selling? His comments may have been meant to test investor reaction. (He previously hinted that Disney might sell its majority stake in Hulu, before saying he would more likely buy out Comcast’s stake in the platform.) Disney shares barely budged Thursday after his remarks.

But Iger has been pessimistic about traditional TV for some time. “Linear TV is marching towards a great precipice and it will be pushed off,” he said at the Code Conference last year. “I can’t tell you when, but it goes away.”

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