Shares of media companies stayed relatively tranquil Wednesday amid the work stoppage imposed by the WGA’s writers strike and another interest rate increase by the Federal Reserve.
Writers Guild of America union members took the picket lines in L.A. and New York for a second day, as they called on studios and streaming companies to agree to new contract terms for Hollywood writers. Meanwhile, the Fed on Wednesday raised its benchmark policy rate by 0.25%, to a new range of 5% to 5.25%, which is the highest it’s been since September 2007.
On the interest-rate hike, the Dow Jones Industrial Average turned negative and closed down 0.8% Wednesday, dropping 270.29 points to 33,414.24, while the Nasdaq ended the day down 0.46%.
Media company stocks saw a muted response. Gainers on the day included Warner Bros. Discovery (up 1.1%), Netflix (+0.6%), Disney (+0.2%) and Lionsgate (+1.5%). Companies ending lower after regular trading Wednesday included Paramount Global (down 0.4%), NBCUniversal parent Comcast (-0.75%), Fox Corp. (-1.1%) and AMC Networks (-3.3%).
According to industry analysts, the WGA strike — depending on its duration — could actually improve the bottom lines of subscription streamers. “The sorry news for writers is that, in declaring a strike, they may in fact be helping the streaming giants and their parent companies,” MoffettNathanson analyst Luke Landis wrote in a May 3 research note.
The last time the industry saw wide-scale production stoppages was at the outset of the COVID pandemic in 2020 — which also was the only year many subscription video services were able to grow free cash flow. “In a time when every media company is under greater scrutiny than ever to prove they can deliver returns to shareholders, any excuse to cut back on content spend may be a welcome one,” Landis wrote. He added, “The strike will end eventually, but regardless of whether it ends quickly or drags out, we believe the age of Peak TV is over and is not coming back.”
The streaming wars “forced big media companies to pour money into a seemingly bottomless pit, but investors are no longer willing to overlook the lack of profit,” notes Bloomberg Intelligence senior media analyst Geetha Ranganathan. The strike could reduce the number of shows delivered to TV networks and streaming services, which “may ironically turn into a positive, as it lowers costs, helping big media’s financial results for 2023.”
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