On May 2, the Writers Guild of America went on strike against the Alliance of Motion Picture and Television Producers (AMPTP) due to labor disputes primarily regarding streaming service residuals and uses of artificial intelligence, such as ChatGPT, to replace writers.
Then on July 14, SAG-AFTRA Screen Actors Guild-American Federation of Television and Radio Artists went on strike stating similar issues with (AMPTP) to the Writers Guild of America. As soon as the strike was announced, the actors for the movie Oppenheimer left the London premiere. This is truly a historical event in that the simultaneous Strike between WGA and SAG-AFTRA hasn’t happened since 1960.
But for investors, it’s important to note that these two simultaneous strikes are massively affecting the entertainment industry. With a resolution not looking likely anytime soon, here are three companies that are going to see profound impacts on their businesses.
Disney (DIS)
Disney (NYSE:DIS) is a global entertainment company that operates Disney Parks, such as Disneyland Resorts in California, Walt Disney World in Florida, and Disney Resorts in China. Of course, this mammoth of a company has its own media and entertainment companies including Pixar, Marvel, Lucasfilm, Twentieth Century Studios, Hulu, ESPN, Freeform, ABC, Fox, and FX.
The recent Writers Guild of America and SAG-AFTRA strikes have hit the company pretty hard given that their media distribution segment was the the most profitable for the company before their onset. On July 13, the CEO of Disney, Bob Iger, was interviewed by CNBC regarding the state of Disney’s business and the Hollywood Strikes. He mentioned how the writers strike and actors, who began striking the day after this interview, would damage the industry.
According to their most recent earning reports, Disney reported revenue for their media entertainment and distribution segment of $21.8 billion and $7.8 billion from Disney Parks and Experiences. This indicates Disney derives 64% of their total revenue exclusively from media distribution. It’s worth noting that the company share price has fallen 14% since the writer’s strike began back in early May.
Paramount Global (PARA)
Paramount Global (NASDAQ:PARA) is a media entertainment company that engages in TV and film media production as well as a direct-to-consumer business that provides streaming services. On their first quarter earnings call that took place on May 4, the company’s CEO Bob Bakish addressed the writer’s strike and how they plan to move forward. Since the studio has moved production offshore and is well-equipped with a list of new releases and an existing library, he spoke confidently, “Consumers really won’t notice anything for a while.”
The company’s share price fell by 28% directly following its first-quarter earnings reports due to unremarkable revenue growth, a significant net loss of $1.1 billion, and a dividend cut of 79% to $.05 per share compared to the previous year.
Over the last year, the stock has fallen by 37%. Given that Paramount Global releases its second-quarter earnings on Aug. 7, investors will be keeping an eye on the company to see how the Hollywood strikes will affect their earnings.
Warner Bros. Discovery (WBD)
Warner Bros. Discovery (NASDAQ:WBD) is a media company that produces theatrical release films and provides direct-to-consumer streaming services under the names such as MAX and Discovery Plus, as well as network television programs from CNN, Discovery, TBS, TLC, TNT, and Food Network channels.
Warner Bros. seems to be performing better than the other two stocks on this list due to the fact the company’s share price has increased by 34% year-to-date. In their most recent earnings report for the first quarter, the company stated a 70% increase in total revenue and a net loss just above $1 billion.
Warner Bros., just like the other companies mentioned, will feel the effect of the Hollywood strikes, but to what extent may be difficult to tell at the moment due to the fact that Warner Bros. has a portion of their business not directly exposed to the strikes.
As of this writing, Noah Bolton did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
