Claiming ‘the entertainment industry remains highly profitable’ as ‘writers have fallen behind’, the WGA today pleaded for a fair contract ahead of the start of negotiations on March 20 for a new film and acting deal. television.

“Given the tenor of recent industry media coverage, this may seem hard to believe,” the WGA Bargaining Committee said in a message to guild members. “Stories about economic model uncertainty, corporate layoffs and impending industry downturn are both standard refrains during union contract bargaining cycles and the predictable outcome of Wall Street’s narrow focus. on stock prices and short-term earnings.

“In reality, content writers and other talent created for this industry have enormous value, and companies have demonstrated time and time again that they can and will capture that value.”

The WGA’s State of the Industry report, released on Friday, examines “the profitable past, present and future of the entertainment industry, where content writers will continue to generate billions of dollars.”

See the full report here.

“Over the decades, entertainment has been a highly profitable business, withstanding periodic downturns but constantly bouncing back,” the report states. “In 2000, the combined entertainment operating profits of Disney, Fox, Paramount, NBC, Universal and Time Warner were approximately $5 billion. In 2019, adding Netflix, they were $30 billion on more than $50 billion in total company profits and have remained nearly as high during the pandemic. Even excluding news and sports networks, entertainment profits were estimated to be over $20 billion in 2021.”

The report acknowledges that corporate profits in 2022 were lower “as they sometimes are when you look at corporate performance over decades. Warner Bros. Discovery posted losses for 2022 as the company took billions of dollars in content write-downs to justify a misguided merger driven by Wall Street’s demand for growth. Continued investment in streaming has also squeezed 2022 earnings as companies continue to build out 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 – the demand for valuable content – remain strong.

“In the face of this picture, analysts and the mainstream press continue their nervous coverage of the entertainment industry, reflecting the reality that even when industry profits are high, Wall Street demands that those profits continually rise. The Boom unexpected pandemic-fueled subscriber signups fueled expectations on Wall Street, and the stock prices of several companies benefited.Once the pandemic subscription surge plateaued, Wall Street enthusiasm s Our employers have responded with layoffs and content writedowns in an effort to boost their stock prices, while spending billions on stock buybacks for the same purpose. Those reactions, and the stock market noise resulting from it, do not fully capture the strong fundamentals of the business.”

The report notes that over the past 20 years, “media companies have grappled with each successive technological development that challenged the status quo and ultimately found ways to expand their businesses and increase their profits. .

“The rise of cable channels in the early 2000s was to fragment audiences and end the mass programming era of broadcasting. Instead, legacy media companies have branched out into cable, creating new networks to monetize broadcast content and expand their original output. The companies then took advantage of the growth in cable subscriptions in the United States and around the world to post profits. In the United States alone, basic cable company affiliation fees – the payments cable companies make to cable networks for the right to bundle networks to subscribers – have risen from just $6.7 billion in 2000 to $36 billion. of dollars in 2015, then at 40 billion dollars per year for several years.

“Internationally, by exporting television networks or licensing television programming to foreign networks, media companies generated $15 billion in annual revenue in 2013. They even diversified network revenue broadcasting by forcing cable companies to pay retransmission fees; what was a virtually non-existent source of revenue in 2000 has grown to $6.5 billion in 2015 and over $14 billion in 2022.

The advent of Internet distribution was another challenge to the status quo that ultimately brought billions in revenue to the industry. At the negotiating table, however, companies are abandoning the bullish forecasts they give Wall Street and instead see the industry downfall. At the start of the 2007 MBA negotiations, Carol Lombardini, studios’ co-chief negotiator, explained the situation to the Guild’s bargaining committee: “How are we going to get our product to people who don’t want to watch it on a given channel? at any given time on a TV screen? And how much can they be expected to pay to see it? Whatever? If TV is no longer ad-supported, what audience can we hope to achieve?”

What has really happened, according to the WGA, “is that the rise of Hulu, Netflix and Amazon has created a lucrative new revenue stream for TV and film programming, with these services spending more than $7 billion. dollars by 2016 in licensing movies and TV content. The combination of foreign cable and SVOD licensing has led to instant profitability for many TV series. As former CBS CEO Les Moonves put it described at the time, “just like we did with Amazon for under the dome And Existingwe pre-sold the SVOD rights for [Zoo]this time to Netflix, which means that zoo will also be immediately profitable for us. Warner Brothers also estimated that with this model, domestic and international licensing fees exceeded production costs by 23% for all series.

“On the feature film side, DVDs generated theatrical profits in the early 2000s. Once this market matured, studios shifted their strategy towards franchise films to capture more box office revenue, especially from the international box office, which grew from around $13 billion in 2002 to $31 billion in 2019.⁹ Coming out of the pandemic, studios have taken advantage of the increased demand for movie content from streaming services to increase movie profitability. As Jeffrey Shell, CEO of NBC Universal, said last year: “Movies generate platforms and I think that’s not just a phenomenon in the United States, but around the world, we have a strong licensing business for our film content, which makes the whole business more profitable.'”

Major studios, the report says, “are also spending billions on the original content they continue to create for traditional media, much of which ends up on their streaming services. Like Pearlena Igbokwe, president of Universal Studio Group , said in January 2023: “I was asked the question, are people going to stop buying TV shows? People are not going to stop buying TV shows, they have need TV shows.Streamers need things to watch because you subscribe and you pay, and so they are going to do things.

In conclusion, the report states that “while Wall Street blames media companies for failing quickly enough to generate short-term profits from a still nascent streaming market, the fundamental truth remains: the content created by writers has enormous value. Companies have demonstrated time and time again that they can and will capture this value, but writers and the WGA must work to ensure that the success is shared.

Next week, the guild said it would present its analysis of “how writers have fared over the last decade of booming corporate profits. Spoiler alert: the writers have fallen behind. »

The WGA’s current contract with the Alliance of Motion Picture & Television Producers expires May 1.