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Paramount CEO: Hollywood writers' strike could hit revenue

Paramount Global (PARA) CEO Bob Bakish weighed in on the Hollywood writers' strike during the company's quarterly earnings call on Thursday, revealing the longer the strike continues, the bigger the impact it will have on its financials.

"In terms of financial impact, it really ultimately depends on duration of strike," Bakish said. "But at this point, we think it's probably slightly dilutive to revenue, flat on [operating income before appreciation and amortization] and accretive [to cash spend.]"

The executive added Paramount has multiple "levers" it can pull to successfully mitigate the strike's impact — even for an extended duration.

"In terms of those levers, we have a lot [of] content in the can, so with the exception of things like late night, consumers really won't notice anything for a while," he said.

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He explained the media giant's leading position in reality and unscripted content, coupled with sports and offshore productions, helps further beef up its content position. "We've been planning for this."

Ultimately, Bakish said he hopes the writers and studios can reach a resolution as quickly as possible given writers are "an essential part of creating content that our audiences enjoy." However, he did warn "there's a pretty big gap today" in the negotiations, describing the situation as "multifaceted."

Members of the Writers Guild of America union hold up placards as they picket in front of Netflix offices, Wednesday, May 3, 2023, in Los Angeles. (AP Photo/Chris Pizzello)
Members of the Writers Guild of America union hold up placards as they picket in front of Netflix offices, Wednesday, May 3, 2023, in Los Angeles. (AP Photo/Chris Pizzello) (ASSOCIATED PRESS)

After failing to reach an agreement with production studios, the Writers Guild of America (WGA), which represents thousands of television and movie writers, called for a strike at midnight on Tuesday, setting off a production shutdown across the industry.

It's the first writers' strike in 15 years following 2007's 100 day stoppage.

In a statement, the WGA said the committee "began this process intent on making a fair deal, but the studios' responses have been wholly insufficient given the existential crisis writers are facing."

"The companies' behavior has created a gig economy inside a union workforce, and their immovable stance in this negotiation has betrayed a commitment to further devaluing the profession of writing," the guild added.

The WGA had been negotiating with the Alliance of Motion Picture and Television Producers (AMPTP), which bargains on behalf of studios including Netflix, Amazon, Apple, Disney, Warner Bros. Discovery NBCUniversal, Paramount, and Sony.

The six-week talks centered on pay concerns brought on by the streaming boom, in addition to other fundamental changes within entertainment like the recent wave of cost-cutting that has prompted media giants from Disney (DIS) to Warner Bros. Discovery (WBD) to enact mass layoffs and shelve multiple projects.

"The AMPTP presented a comprehensive package proposal to the Guild last night which included generous increases in compensation for writers as well as improvements in streaming residuals," the AMPTP said in a statement following the strike announcement. "The AMPTP also indicated to the WGA that it is prepared to improve that offer, but was unwilling to do so because of the magnitude of other proposals still on the table that the Guild continues to insist upon."

How we got here

The TV and movie industry today is being dramatically reshaped by the impact of streaming services.

Streaming shows often have fewer episodes and less residual income compared to traditional network television, which often means less money in the pockets of writers.

At the same time, the majority of studios are no longer just "pure play" production houses. Rather, they have their own streaming divisions, which have brought on a new set of challenges as direct-to-consumer losses mount.

"Whether this is a blip on the radar or a prolonged strike like in 2007 remains to be seen," Scott Purdy, US media industry leader at KPMG, told Yahoo Finance. "In the near term though, consumers should prepare for some of their favorite TV shows to be delayed and to potentially enter a period where there’s a limited amount of new content to watch. We’ll be watching to see how this impacts subscription decisions with inflation-pinched consumers who were already reassessing their spending habits."

Late night television is already feeling the impact, with programs like "Saturday Night Live" and late night talk shows resorting to reruns amid the strike.

Striking writers rally in front of Netflix offices, Wednesday, May 3, 2023, in Los Angeles. Television and movie writers launched a strike Tuesday for the first time in 15 years, as Hollywood girded for a walkout with potentially widespread ramifications in a fight over fair pay in the streaming era. (AP Photo/Chris Pizzello)
Striking writers rally in front of Netflix offices, Wednesday, May 3, 2023, in Los Angeles. Television and movie writers launched a strike Tuesday for the first time in 15 years, as Hollywood girded for a walkout with potentially widespread ramifications in a fight over fair pay in the streaming era. (AP Photo/Chris Pizzello) (ASSOCIATED PRESS)

Similar to Bakish, other studio executives have said they have enough scripted content banked to prevent disruptions to the content pipeline.

"We have a large base of upcoming shows and films from around the world, so we could probably serve our members better than most," Netflix (NFLX) co-CEO Ted Sarandos said during the company's quarterly earnings call last month.

Warner Bros. Discovery CEO David Zaslav echoed similar sentiments during the company's Max streaming launch presentation last month, telling reporters, "We've got ourselves ready. We've had a lot of content that's been produced and we are launching a product on May 23. So, we are ready to go guns blazing in terms of our product and our platforms around the world."

The box office should also be safe, according to industry executives: "For films coming out this year, the strike really doesn't have an impact," IMAX (IMAX) CEO Richard Gelfond told Yahoo Finance Live on Monday. "It's a question of how long it goes on for and what happens next year."

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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