Hollywood has ground to a halt. With approximately 20,000 members of the Writers Guild of America (WGA) and 160,000 members of the Screen Actors Guild – American Federation of Television and Radio Artists (SAG-AFTRA) on strike, filming has paused, stars have ceased acting, and writers are not writing.
Many are predicting difficult times ahead for entertainment companies with concerns there will be a dip in new scripted shows as soon as this fall, and next year's movie release schedule could also face disruption.
Walt Disney CEO Bob Iger has made his feelings clear, suggesting the contract demands of actors and writers are "not realistic," a view that has seemingly only stoked further distrust between the unions and the Alliance of Motion Picture and Television Producers (AMPTP) -- the body that represents Hollywood studios.
Despite all this, Netflix (NFLX 3.04%) (which is an AMPTP member) may fare better than its media rivals through this difficult period. Let's see why.
A global productions powerhouse
As long as the strikes continue, it seems likely that Hollywood studios will look overseas -- beyond the purview of the WGA and SAG-AFTRA -- to fill the gaps in their release calendars. And while Walt Disney, Warner Bros. Discovery, and Amazon all have produced a portion of their content in foreign markets, Netflix has long focused on creating a significant amount of regional content for its various international markets. That could provide it a particular advantage over the coming months.
The streamer has established offices across multiple continents, allowing it to develop a broad array of local-language movies and shows starring regional talent. Indeed, the company has been so successful in growing its non-domestic operations that much of what it has produced for markets outside of the U.S. has surged to popularity in other territories.
For example, the Spanish-language drama series Elite and the German-language film All Quiet on the Western Front were among its most popular global offerings last year. Netflix also noted that 60% of its worldwide audience had viewed a Korean title during 2022.
Additionally, English-language shows produced in the U.K. -- where Netflix has invested $6 billion since 2020 -- have also performed well. The third season of Sex Education accumulated more than 418 million hours watched, while the second season of Bridgerton has generated over 656 million hours.
Keen-eyed viewers might note that Warner Bros. Discovery's House of the Dragon films in Europe, meaning that production on its second season will seemingly also not be impacted by the U.S.-based strikes. But unlike Netflix, Warner Bros. Discovery has been decreasing its overseas production presence, actively shutting many regional commissioning units last year. This means that even when it can shoot overseas, the company still primarily relies upon U.S. writers' rooms.
Netflix says it wants a resolution to the strikes
Perhaps the most encouraging thing for Netflix investors at this time is that, despite the company's perceived advantage in overseas content, it still wants to see Hollywood back in action. Co-CEO Ted Sarandos recently opened the company's second-quarter earnings call with something approaching a mea culpa:
"This strike is not an outcome we wanted," said the executive before citing his family's own history of union membership. "We're super-committed to getting to an agreement as soon as possible, one that is equitable, and one that enables the industry and everybody in it to move forward into the future."
For investors -- and the unions -- that overture may be more encouraging than Iger's take on the issues. Sarandos' mention of reaching "equitable" agreements with the WGA and SAG-AFTRA suggests a focus on reaching a resolution sooner rather than later. Still, Netflix is only one member of the AMPTP. Considering that the U.S. film and TV industry generates hundreds of billions of dollars annually, it seems unlikely other AMPTP members (and their shareholders) could really rely on overseas content for long.
Those watching the industry would do well to pay attention to quarterly earnings reports and any profit warnings that may emerge as strikes continue. If investors see that audiences are no longer getting what they want from some media companies, they may start turning toward those that can still deliver fresh programming, while also being vocal about their commitment to reaching a fair deal with the WGA and SAG-AFTRA.
