WGA Says “Writers Have Fallen Behind” As Film & TV Industry “Remains Highly Profitable”
Claiming that “the entertainment industry remains highly profitable” while “writers have fallen behind,” the WGA made its case today for a fair contract ahead of the March 20 start of negotiations for a new film and TV contract.
“Given the tenor of recent press coverage of the industry, this may seem hard to believe,” the WGA Negotiations Committee said in a message to guild members. “Stories about business model uncertainty, company layoffs and the industry’s impending downturn are both standard refrains during union contract negotiation cycles and the predictable result of Wall Street’s narrow focus on stock price and short-term profits.
“In reality, the content writers and other talent create for this industry has tremendous value, and the companies have demonstrated time and time again that they can and will capture that value.”
Released today, the WGA’s State of the Industry report examines “the entertainment industry’s profitable past, present, and future, where writers’ content will continue to generate billions of dollars.” See the full report here.
“Over the decades, entertainment has been a highly profitable business, weathering periodic downturns but consistently rebounding,” the report says. “In 2000, the combined entertainment operating profits of Disney, Fox, Paramount, NBC, Universal, and Time Warner were approximately $5 billion. By 2019, adding in Netflix, they were $30 billion out of more than $50 billion in total company profits and remained almost as high through the pandemic. Even excluding news and sports networks, entertainment profits were estimated to be more than $20 billion in 2021.”
The report acknowledges that the companies’ profits in 2022 were lower “as they occasionally are when you look at company performance over decades. Warner Bros. Discovery reported losses for 2022 as the company has taken billions in content write-downs to justify an ill-advised merger driven by Wall Street’s demand for growth. Ongoing investment in streaming also lowered 2022 profits as the companies are still building up their new services. On the other hand, streaming services continue to grow subscribers, raise prices, and diversify revenue by introducing advertising. This reflects that the fundamentals of the business—demand for valuable content—remain strong.
“Faced with this picture, analysts and the mainstream press continue their nervous coverage of the entertainment business, reflecting the reality that even when industry profits are high, Wall Street demands that those profits continually grow. The unexpected boom in pandemic-fueled subscriber sign-ups fostered Wall Street’s expectations, and several companies’ stock prices benefited. Once the pandemic surge in subscriptions plateaued, Wall Street enthusiasm cooled. Our employers have responded with layoffs and content write-downs in an effort to boost their stock prices, while spending billions on stock buybacks for the same purpose. These reactions, and the attendant stock market noise, do not fully grasp the strong fundamentals of the business..”
The report notes that over the past 20 years, “the media companies have confronted each successive technological development that challenged the status quo and ultimately found ways to expand their businesses and increase profits.
Per the report:
“The rise of cable channels in the early 2000s was projected to fragment audiences and end the mass audience programming era of broadcast. Instead, the legacy media companies expanded into cable, creating new networks to monetize broadcast content and expanding their original production. The companies then rode the growth of cable subscriptions in the U.S. and around the world to record profits. In the US alone, basic cable affiliate fees — the payments cable operators make to cable networks for the right to package the networks to subscribers — have grown from just $6.7 billion in 2000 to $36 billion in 2015, and then to $40 billion annually for the past several years.
“Internationally, by exporting television networks or licensing television programming to foreign networks, the media companies generated $15 billion in annual revenue by 2013. They even diversified revenues for broadcast networks by making cable providers pay retransmission fees; what was a virtually non-existent revenue stream in 2000 reached $6.5 billion in 2015 and more than $14 billion dollars in 2022.
“The advent of internet distribution was another challenge to the status quo that ultimately brought billions of revenue into the industry. At the bargaining table, however, the companies abandon the rosy forecasts they give Wall Street and instead see the industry’s downfall. At the beginning of the 2007 MBA negotiations, Carol Lombardini, co-chief negotiator for the studios, explained the predicament to the Guild’s negotiating committee: ‘How will we deliver our product to people who don’t want to watch it on a given channel at a given time on a television screen? And how much can we expect them to pay to see it? Anything? If television is no longer ad-supported, how big an audience can we expect to reach?'”
What actually happened, the WGA says, “is that the rise of Hulu, Netflix, and Amazon created a new and lucrative revenue stream for television and film programming, with those services spending more than $7 billion by 2016 on licensing library film and television content. The combination of foreign cable and SVOD licensing led to instant profitability for many television series. As former CBS CEO Les Moonves described at the time, “Just as we did with Amazon for Under the Dome and Extant, we presold the SVOD rights for [Zoo], this time to Netflix, meaning that Zoo will also be immediately profitable for us.” Warner Brothers similarly estimated that under this model, domestic and international license fees exceeded production costs across all series by 23%.
“On the features side, DVDs drove theatrical profits in the early 2000s. After that market matured, the studios shifted their strategic focus to franchise films to capture more box office revenue, particularly from international box office — which grew from approximately $13 billion in 2002 to $31 billion in 2019. Emerging from the pandemic, the studios have leveraged the increased demand for theatrical content from streaming services to drive film profitability. As NBC Universal CEO Jeffrey Shell said last year: ‘Movies drive platforms and I think — it’s not just a U.S. phenomenon, but around the world, we’re having a robust licensing business for our movie content, which is making the whole business more profitable.'”
The major studios, the report says, “are also spending billions on the original content they continue to make for traditional media, much of it making its way onto their streaming services. As Pearlena Igbokwe, Chairman of Universal Studio Group, said in January 2023: ‘I’ve been asked the question, are people going to stop buying TV shows? People are not going to stop buying TV shows, they need TV shows. The streamers need things for you to watch because you’re subscribing and you’re paying, and so they’re going to be making things.’”
In conclusion, the report says that “while Wall Street criticizes the media companies for failing quickly enough to generate short term profits from a still-nascent streaming market, the fundamental truth remains: the content writers create has tremendous value. The companies have demonstrated time and time again that they can and will capture that value, but writers and the WGA must work to ensure that success is shared.”
Next week, the guild said, it will present its analysis of “how writers have fared over the past decade of booming company profits. Spoiler Alert: Writers have fallen behind.”
The WGA’s current contract with the Alliance of Motion Picture & Television Producers expires on May 1.