Hollywood writers’ strike could hit content spending at Disney, Netflix

Streaming services reevaluate outlook amid ad market concerns, price hikes, restructurings

For that, we bring in Yahoo
Finance's Alexandra Canal

Scroll back up to restore default view.

·Senior Reporter

Thu, May 18, 2023, 5:27 AM GMT+9·5 min read

Media companies are trying to rein in their spending on content to make their streaming services profitable. An ongoing Hollywood writers' strike may lead them to cut back even more.

Disney (DIS) CFO Christine McCarthy said at MoffettNathanson's Inaugural Technology, Media and Telecom conference on Wednesday that the entertainment giant's content spending will hit around $30 billion this year, but she warned the strike could impact spending for the remainder of the fiscal year: "We'll update that if it's appropriate," she said.

The comments come as Disney aims to cut $5.5 billion in costs, $3 billion of which stems from savings on content.

Meanwhile, Netflix's (NFLX) content spending was already down in the first quarter of this year from the year-earlier period. While the company expects total spending for the year to come in flat at $17 billion, the writers' strike adds further risks as some of the streamer's top-performing shows, including "Stranger Things" and "Cobra Kai," have paused production in the face of the shutdown.

Earlier this month, Hollywood writers began a strike in protest of higher wages and other demands amid the streaming boom. That set off a production shutdown across the entire industry.

While Moody's has warned that some media companies could see credit ratings suffer as a result of the strike, others point out that cutting content costs is a good thing for the industry as investors increasingly focus on profitability.

"A production work stoppage or even a slowdown that simply utilizes scripts on-hand could lead to far less content being delivered to subscription streaming services in 2H 2023," Rich Greenfield, analyst at Lightshed Partners, wrote in a note last month. "If content is not delivered to a streaming service, the expense is not borne by the streamer. In turn, multi-billion dollar operating losses could come in significantly better than expected with free cash flow also ending up being far greater than expected (remember how Netflix free cash flow came in far better than expected during the pandemic)."