Netflix Reports Higher Earnings As Actors And Writers Picket Outside

Netflix reported positive second-quarter earnings on Wednesday, the fourth day of SAG-AFTRA'S strike and months after the writers guild took to the picket lines.

The company earned more than $8 billion in revenue, 3% more than the same period last year. It also reported a net income of $1.5 billion — about the same as last year — and an addition of nearly 6 million new paid subscribers to the platform.

Netflix says the rise in revenue is because of its recent policy to restrict password sharing. There are more new subscriptions than canceled ones in regions where the company has implemented the program.

It also introduced a cheaper membership tier last November that includes advertisements. The new tier has twice as many members as last quarter.

Earlier, the streaming giant had announced it was scrapping its basic ad-free $9.99 plan, leaving only its $6.99 advertising plan, its $15.49 ad-free plan and its $19.99 premium plan.

Timeline: SAG-AFTRA strike

Some things to note: This is the first SAG strike since 1980. The 1960 strike, which took place while the WGA was also striking, was led by Ronald Reagan, then the president of SAG. Current events:

• May 17: Union leaders ask for and receive a strike authorization vote ahead of contract talks.
• June 7: SAG-AFTRA begins negotiations with the AMPTP; contract due to end June 30.
• June 30: Both sides agree to extend talks through July 12.
• July 12: Federal negotiator is brought in
• July 13: The national board of SAG-AFTRA authorizes its 160,000 members to go on strike.
• July 14: Picketing begins at 9 a.m. at major studios and streamer HQ’s across the city.

Timeline: WGA strike

Some things to note: It is the first WGA strike in 15 years. The last work stoppage began in November 2007 and lasted 100 days. Current events:

• April 18: 98% of WGA members vote to go on strike if the contract talks fail.
• May 1: WGA contract expires with no agreement between sides.
• May 2: WGA strike begins

The issue: Actors

Minimum earnings: SAG is asking for an 11% general wage increase to reflect inflation. The AMPTP is countering with 5%.

Share of revenue: Actors feel they haven’t received their fair share of revenue from hit streaming shows.

• Traditionally compensation has been linked to ratings. Streamers like Netflix, however, don’t release how many people watch their shows, so it’s difficult to know which ones are major hits. SAG-AFTRA proposed bringing in a third-party company to measure ratings and devise residuals. The AMPTP rejected this. 
• Executives at studios and streamers maintain they’re still recovering from pandemic losses and have spent billions of dollars creating and buying content for new streaming platforms, some of which are far from profitable.
• While some streamers are thriving (Netflix recently reported $1.71 billion of quarterly operating income), The Walt Disney Co. has announced the firing of 7000 employees to save money, having lost close to $10 billion to date on its streaming platforms. Warner Bros. Discovery is making deep cuts because of its $50 billion in debt. 

Artificial intelligence: There is deep concern about how artificial intelligence will be used, with particular anxiety about the use of a performer’s image and likeness. The union wants to prevent studios from training AI programs on actors’ work without permission, and for actors to consent and be paid if AI is used to replicate them. The AMPTP offered what it called a groundbreaking proposal that it said “protects performers’ digital likenesses." The union rejected this.

Self-taped auditions: Since the pandemic, self-produced audition tapes have become the norm — meaning actors light and film themselves. It’s labor intensive, with no pay, and widens an already competitive pool of performers. The union says it understands self-taped auditions can be useful, but wants to put restrictions around them.

• Read SAG-AFTRA’s summary of negotiation points 
• And what the AMPTP has to say about the negotiations

The issues: Writers

Maintaining a liveable wage: The WGA says that companies’ business practices have “slashed our compensation and residuals and underminedour working conditions”, and that the current contract terms failed to anticipate the explosive growth of streaming.

• It says that most of its nearly 12,000 members are making less than they once did, and that after factoring for inflation, average WGA pay has actually dropped 14% over the last five years. 
• Meanwhile the AMPTP says it’s offering the highest first-year general wage increase in more than 25 years, while also offering to create "an entirely new category of rates that will establish a new and higher floor for mid-level writers’ compensation”.

"Gig economy": The union says that shorter schedules and small writers room means writers have to cobble together jobs, similar to the gig economy. The AMPTP says screenwriting has almost nothing in common with standard "gig" jobs. Writers often have a guarantee of specific weeks or episodes, and writing jobs come with benefits such as employer-paid health care and pension plan contributions.

Staffing and duration of employment: The union wants a minimum number of weeks on a project, and a certain number of writers. The AMPTP sees this essentially as a hiring quota that's "incompatible with the creative nature of our industry", and says it's a one-size-fits-all solution to shows that are each unique.

Artificial intelligence: Writers want to make sure that AI isn’t used to replace their creative output. Meanwhile the AMPTP says "AI raises hard, important creative and legal questions for everyone. For example, writers want to be able to use this technology as part of their creative process, without changing how credits are determined, which is complicated given AI material can't be copyrighted. So it's something that requires a lot more discussion, which we've committed to doing."

• Read the full WGA statement
• Hollywood producers released a statement on May 4 that addressed specific points of the WGA's concerns. 

Why it matters

What you’ll be watching: 

• Ahead of the WGA contract’s expiration, studios and streamers stockpiled scripts so they would have content to produce if there were a strike. But now the actors are on strike, even that content cannot be filmed, and some productions have been cancelled mid-shoot. Expect game shows, talk shows, docu-series and reality shows in the fall (which are covered under different contracts).

• Companies like Netflix release series in multiple languages, however, so their production schedules often run many months ahead of traditional TV networks, which means they tend to have a bigger shelf of completed shows.

• Movies have a fairly long lead time, so almost all of the movies due to come out through the end of the year have already finished filming. Movies that were slated to begin production soon and come out next year or later are being pushed back, like Gladiator 2 and Deadpool 3.

The local economy:

For the 2007 - 2008 writers strike, the Milken Institute estimated the resulting economic losses were $2.1 billion, along with a net loss of 37,700 jobs directly and indirectly tied to the entertainment industry.

Those 2007-2008 losses worked out to about $20 million a day, or close to $30 million in today’s dollars. But the number of scripted series and streaming movies has grown exponentially since then.

The financial and job loss estimate includes not only lost pay for screenwriters, but also for people who work in production, and businesses that either cater to or depend on production: everything from costume and prop rental companies to caterers and equipment rental outfits.

What else you should know

• As of today, no new talks were scheduled.

How we're reporting on this

Our AirTalk team has featured the strike in on-air discussions on LAist 89.3 and LAist coverage. Our HTLA podcast has also talked to writers and others affected by the strike.

This is a developing story. We fact check everything and rely only on information from credible sources (think fire, police, government officials and reporters on the ground). Sometimes, however, we make mistakes and/or initial reports turn out to be wrong. In all cases, we strive to bring you the most accurate information in real time and will update this story as new information becomes available.

What questions we're asking

• What are the main sticking points in the negotiations?
• How do the contracts of other Hollywood unions — some of which have no-strike clauses — affect this strike?
• What's next for your favorite shows.

Learn more

• TV And Movie Writers Strike Over 'Gig Economy' Conditions. What’s At Stake In The WGA Walkout
• From Gas Stations to Restaurants: How The WGA Strike Will Hit The LA Economy
• This Hollywood Writers Strike Could Have Massive Economic Impact. An Economist Explains What We Can Learn From 2007
• How The WGA Strike Of 2007 Strike Brought Donald Trump To Power
• A History Of Strikes: How The WGA Has Played Catch-Up As Emerging Technologies Made Others Richer

Your questions or ideas