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Presenting our weekly edition from the pen of the Entertainment Strategy Guy, showbiz statistics maven and analyst extraodinaire.
If the last year has taught us anything, it’s to take the risk of unlikely events seriously. If at the start of 2020, you’d asked about the odds that a “flu” outbreak in Wuhan, China would lead to a global, economy-shattering pandemic, would you have taken it seriously? Most of us didn’t.
Sometimes, unlikely events happen. Remember when we all said it’d be insane if all the writers in Hollywood fired their agents?
It’s a lot like what is facing Hollywood right now in the showdown with IATSE, the union representing “below-the-line” workers in Hollywood. When IATSE voted last week—overwhelmingly I’d add — with 90% of members voting a resounding 98.7% in favor to authorize a strike, an actual work stoppage became a lot more likely. We’re definitely in the range of “unlikely but devastating consequences.” Streamers and studios have only just gotten their disrupted production schedules back to something resembling normal. Shed a tear, but they don’t need another work stoppage.
They also don’t want more expensive TV and film productions. IATSE wants residuals to more closely match those from broadcast and cable TV. Perhaps even more important, though, are their demands to reduce the length of shoot days. (Folks often work 14 hours and rise before dawn to come back the next day.) This would increase the number of days required to make a show, which directly increases costs. While I haven’t modeled the exact impact on production budgets, a rough guesstimation is that these demands would increase costs somewhere between 5 to 10 percent, though that’s a rough, rough guess. And this is with Covid protocols on set already creating massive increases in budgets.
All this would mainly hit the streamers hardest since they’re the production entities with favorable treatment under the current rules. HOW SO????
So… the million (or billion) dollar question is: Where would that money come from?
Like the law in physics that energy must be conserved, in business, the money most come from somewhere. If costs go up for streamers to produce their shows, where will they find it? And can they afford not to? As we know, Hollywood is always like the rich friend who forgot their wallet when the check arrives. So even if the streamers are throwing around hundreds of millions to the top names in town, that is not the defining experience for everyone else, who ends up on a thin margin of profit after production costs.
Here is a list of where the money may need to come to avert a strike:
• Streaming Profits
If you’ve been following the streaming wars for any length of time, you should say, “Ha, what profits?”
Indeed, one of the enduring truths of the streaming wars seems to be that as great as streaming has been for stock prices, it’s been pretty atrocious on bottom lines. Not the official bottom line, but the cash flow of the major streamers. As they say, profit is an opinion; cash flow is a fact.
And the fact is most streamers lose money. And paying more for productions doesn’t deliver more subscribers.
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