How Netflix Stands to Strengthen Amid Dual Writers and Actors’ Protest

For the first time since 1960, Hollywood writers and actors have jointly initiated a strike, taking to the picket lines to address a range of pressing issues. These concerns encompass stagnant contract pay that hasn’t seen any increase for years, as well as the far-reaching impact of streaming on the entertainment business. The strike was approved by SAG-AFTRA, the guild representing around 160,000 TV and movie actors, causing a sudden halt in Hollywood’s operations and plunging the entertainment industry into an uncertain state that might extend for several months.

Interestingly, despite streamers like Netflix being at the epicenter of this momentous standoff, the impact on Netflix itself is expected to be relatively minimal – at least for now. The key terms here are “relatively” and “for the time being.”

In addition, there has been a noteworthy development related to Netflix amid the ongoing strikes. Recently, a job listing has surfaced for a machine learning product manager role at Netflix, with a remarkable salary potential of up to $900,000. The timing of this listing is intriguing, given that the use of AI has become a contentious issue in the ongoing labor disputes. Studios have proposed compensating extras minimally for granting perpetual rights to their AI likeness.

Furthermore, Netflix has outlined its broader vision for machine learning, hinting at plans to expand AI implementation beyond personalized content recommendations within the app. The company aims to leverage AI to curate its catalog of movies and TV shows more effectively, learning from the characteristics that contribute to content success. Moreover, Netflix seeks to optimize the production process for original movies and TV shows through the use of AI and machine learning.

This move towards utilizing AI in various aspects of the entertainment industry raises interesting questions amid the current labor strife.

Meanwhile, there are at least two significant areas where Netflix seems to have a strategic advantage, enabling it to weather the Hollywood work stoppage and potentially even gain from it.

Firstly, as observed during the Covid pandemic and now likely during the actors’ strike, Netflix operates on an extensive lead time. Many of the TV series or movies that debut on the platform in the present week might have been in development for months or even a year ago. This substantial backlog of content sets Netflix apart from its smaller competitors, who may lack such a vast reserve of pre-produced material to sustain them during the strikes.

Moreover, Netflix’s vast global scale allows it to continue its operations unhindered in markets outside the US that remain unaffected by the actors’ strike. For instance, in countries like Korea, where the company plans to increase content spending by hundreds of millions of dollars in response to the international success of shows like Squid Game, Netflix can continue its content creation and distribution without any immediate disruption.

In these ways, Netflix’s preparedness and global reach give it a unique advantage during the ongoing Hollywood strikes, positioning the streaming giant to navigate the challenges and capitalize on opportunities in the entertainment industry.

Moreover, the argument in favor of Netflix’s potential success during the strikes takes a rather uncomfortable turn. Beyond its extensive content backlog and international reach, the strikes are anticipated to have a cost-cutting effect, resulting in improved earnings for Netflix in the short term.

During its recent quarterly earnings presentation, Netflix confirmed that it now anticipates $5 billion in free cash flow for the year, a significant increase from the initial projection of $3.5 billion. The strikes are contributing to reduced expenses for the company, as it will have fewer payments to make to striking actors and writers, leading to a reduction in the number of active productions.

This aspect of the situation has led some observers to speculate that studios might, in the short term, view the strikes as a means to cleanse their balance sheets. However, such a strategy could be seen as a risky move that might have long-term repercussions, akin to willfully bringing down the temple upon oneself.

While Netflix may experience near-term benefits in terms of cost reduction and financial gains during the strikes, the overall implications and motivations behind the strikes remain complex and subject to various interpretations.

In a passionate and fiery speech at the “Rock the City For a Fair Contract” rally in Times Square, Bryan Cranston, renowned for his role in Breaking Bad, took a stand against studios for their over-reliance on AI and their reluctance to adapt contract terms to fit the streaming era’s economic realities.

During the event earlier this week, Cranston pointed out that the entertainment industry has evolved significantly in the past decade. The advent of streaming platforms has transformed the business model, making it vastly different from what it was even a mere 10 years ago. However, despite acknowledging this shift in today’s economy, studios are fiercely opposing necessary changes, opting to cling to an outdated economic system. Cranston emphasized that this approach is not tenable; the industry cannot and will not revert to the past.

His speech reflected the collective resolve of writers and actors, who are seeking fair treatment and equitable compensation that appropriately reflects the current state of the entertainment landscape, rather than being tied to obsolete practices. The call for embracing the new reality and ensuring a fair and forward-looking contract for all stakeholders resonated with the passionate crowd at the rally.