What Striking Hollywood Writers Want And What That Means For The Economics Of Streamers

The demands of Writers Guild of America (WGA) members now on strike for a second week are well-documented. Writers want:

• Studios to order longer seasons of streaming shows, which traditionally have fewer episodes in a season than network television shows
• Studios to expand the size of writers rooms
• A better residual model to compensate writers for content they make that lives forever on streaming platforms

All of this, the TV studios and streaming companies are quick to point out, will cost money. Money that the studios and streamers say isn't simply lying around these days.

What we know about the state of streaming

The streaming landscape is saturated and competitive, which means companies have to spend more to stay relevant in the space. And indeed, while streamers and networks are far from unprofitable, the financial news for them lately doesn't exactly evoke images of Scrooge McDuck diving into piles of gold coins.

"For everyone but Netflix, streaming is costing money — not bringing in more money, "says David Offenberg, who teaches entertainment finance Loyola Marymount University. He appeared this week on LAist's public affairs show AirTalk, which airs on 89.3 FM.

And even Netflix is feeling the squeeze — it just announced $300 million on spending cuts this year, according to a report from The Wall Street Journal. Others like Warner Bros., meanwhile, are consolidating its HBO Max and Discover+ streaming services into one single platform called Max. Same with the Walt Disney Company, which has announced plans to merge its Disney+ and Hulu streaming services. They also recently announced they'll be pulling some content from their service as a way of cutting costs, following in the footsteps of HBO Max, which made a similar move last summer.

Offenberg says shifting consumer behavior is one of the things behind the streamers' revenue challenge. DVD sales, which peaked in 2005, are down 93% this year, he says. The 24-hour cable sports network ESPN is closely watched because live sports is one of the only remaining things keeping cable TV alive. But ESPA is down 26% from its peak viewership. And, he adds, some surveys show that Gen Z are interacting less with TV and movies and more interested in things like video games.

Streamers changed the writing game...at first

Streamers revolutionized the idea of going from script to series, says Tom Nunan, a longime TV executive whose resume includes stints as president of NBC Studios and UPN. Nunan says that the creative opportunities streamers offered in their infancy were really appealing to writers and other creatives.

"They didn't force pilots on creators...they didn't make them audition. They said, 'Hey, why don't you do a whole series?' Or, 'why don't you even do two seasons of something?'" he explained. "And they also were not very invasive when it came to the notes giving process."

Why residuals matter

But Nunan says, at the time, those creatives failed to consider that the content would continue to live on the streaming platforms forever. That matters because residuals, now a key point of contention in the WGA strike, had no payment model on streaming platforms. On older platforms like re-runs on cable or DVD box sets, there was clear compensation in place.

That's why, Nunan says, the WGA wants a residual model that will pay writers based on how well a show performs on a streaming platform. The film industry, he says, has a model like this where artists who work on films are paid not only for their contributions to the production, but via box office participation if the film does particularly well domestically or abroad. But he says that's been a non-starter with the studios so far, who aren't interested in making information about show performance on their platform public.

AI looming on the horizon

Both LMU's Offenberg and Tom Nunan, the longtime TV exec, say artificial intelligence is the elephant in the room for both streamers and writers going forward. Writers, of course, fear studios might replace them entirely with AI, leaving them out of a career. And the studios, Nunan says, don't seem ready to start conversations about how to regulate it.

"They're not even opening the door about how...we deal with it. And as much as I admired Disney and what [Bob] Iger has done with with Disney's successes, just yesterday he was talking about how exciting all of the research is around AI and how other people are working overtime on AI and all of its great promise. That sent a shiver down the spine of every person striking."

Offenberg says the tricky part about AI is that it's seen as a cost-cutting measure by studios, who are looking to minimize overhead in any way possible right now.

"They're just trying to do what they can to make cuts. And because they don't understand the technology, and I don't think any of us truly understand what AI is capable of, or what it will be capable of in five years or 10 years, I think they're just hedging right now because they realize both the threat of the economic environment and the opportunity of AI."

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