In an interview with Face the Nation on CBS this past weekend, Barry Diller, the seasoned media mogul and chairman of IAC and Expedia Group, voiced his concerns over the ongoing contract conflicts in Hollywood and warned of long-term consequences if the disputes aren't resolved soon.

However, Diller didn't just ring alarm bells -- he also proposed a radical solution. Diller suggested that top management teams at industry giants should consider taking a hard look at their own salaries. Swallowing the bitter pill of executive pay cuts could bridge the movie industry's gaping compensation gap, especially if the highest-paid movie stars follow suit.

But will these entertainment powerhouses be willing to sacrifice a slice of their hefty paychecks to ensure a steady stream of new content for viewers in 2024? And how much of a difference would Diller's proposed pay cuts make?

What exactly did Barry Diller say?

Diller pointed out that the COVID-19 pandemic and the rise of digital streaming created a unique moment in Hollywood's history. The contract-related strikes at the Writers Guild of America (WAG) and the Screen Actors Guild -- American Federation of Television and Radio Artists (SAG-AFTRA) play into this "perfect storm" to reshape the economic future of the movie and TV industries.

Hitting the reset button on screenwriters' and actors' contracts in 2023 could work out in everyone's favor, but only if it happens fairly quickly. If the strikes drag out past the holidays, Diller sees a widespread lack of fresh content in 2024 and beyond. With nothing new to watch, millions of cable clients and streaming subscribers would cancel their subscriptions, undermining the same production budgets that didn't have room for industry-saving increases in the first place.

"And at just the time the strike is settled, that you want to get back up, there won't be enough money," Diller said. "So this actually will have devastating effects if it is not settled soon."

Therefore, giant content studios like Netflix (NFLX -0.63%), Walt Disney (DIS -0.04%), and Warner Bros. Discovery (WBD -2.17%) have plenty of financial incentive to settle their differences with the writers and actors guilds.

Diller called for a Sept. 1 deadline, by which the talent guilds and the studios need to come to an agreement. And in order to boost the trust between the negotiating parties, Diller would like to see a restructuring of the pay scales.

"The one idea I had is to say, as a good-faith measure, both the executives and the most-paid actors should take a 25% pay cut to try and narrow the difference between those who get highly paid and those that don't," he said.

The talent and studio bigwigs

So let's take a look at the financial stakes behind the scenes. The WGA (West) reported $1.55 billion in total earnings for the Guild's 5,951 screenwriters in 2021. At the same time, 73% of the payments flowed to writers in television and digital platforms, up from 71% in 2019.

SAG-AFTRA numbers are harder to come by, but the union reported $1.5 billion in production fees for 319,000 members in the first four months of 2021. The compensation per union member is much lower than the WGA's, but SAG-AFTRA also represents thousands of low-paid background actors and extras with very low earnings.

On the other hand, the top-shelf eyeball magnets command a large slice of SAG-AFTRA's total payroll. Last year, 11 actors each pocketed more than $20 million, led by Tom Cruise's $100 million. Slowing down the cash flow to Hollywood's leading men (the highest-paid woman on this list is Barbie star Margot Robbie, at $12.5 million) could free up a significant chunk of cash to be distributed among Hollywood's lower-paid paycheck earners.

What about the executives, then? Well, Disney CEO Bob Iger may earn as much as $27 million this year. Warner Bros. Discovery CEO David Zaslav is looking at a $39 million paycheck, including stock option incentives and other bonuses. For Netflix, co-CEOs Ted Sarandos and Greg Peters can earn up to $40 million and $35 million, respectively.

These payroll items are comparable to blockbuster-quality actors, but there are fewer C-suite executives to go around. In other words, cutting these particular budgets should make a smaller real-world difference than adjusting the highest-end compensation to top thespians.

However, doing so could still be an effective way to build trust in the industry's financial system. This might be the final straw to break the strikes and let the movie industry move forward.

Can actors and writers tip Hollywood's fiscal scales?

Of course, all of these million-dollar figures look small compared to the revenue and profits the leading studios report. For example:

  • Disney generated $13 billion of earnings before interest, taxes, depreciation, and amortization (EBITDA), from $87 billion in top-line revenue over the past four quarters.
  • Netflix's EBITDA stands at $20 billion over the same period, based on $32 billion of subscription revenue.
  • Warner Bros. Discovery is no slouch, landing $18 billion of EBITDA profits and $41 billion in sales.

It seems like the actors and writers have plenty of leverage in these negotiations. Even if you were to double their annual production fees, the direct impact on each studio's bottom-line profits would be easy to miss. At the same time, Barry Diller suggests that the whole industry could grind to a permanent halt if the production lines are paralyzed until the pipeline of premieres runs dry.

I can't say exactly how important Diller's Sept. 1 deadline might be, but I agree that the media industry would be better served by a pair of quick settlements. There are downsides if the contracts are rushed, leaving risky holes in issues such as copyright protection and artificial intelligence-based production. But the financial concerns should be relatively easy to settle.