Labor Day Looms as Crisis Point in Hollywood Stalemate

Ongoing strikes could disrupt the entertainment industry in fundamental ways, putting the 2024 box office and the fall broadcast lineup in jeopardy.
Labor Day Looms as Crisis Point in Hollywood Stalemate

In May, when 11,500 movie and television writers went on strike, Hollywood companies like Netflix, NBCUniversal and Disney reacted with what amounted to a shrug. The walkout wasn’t great, but executives had expected it for months. They could ride it out.

The angry response from Hollywood’s corporate ranks when actors went out on Friday was dramatically different. What began as an inconvenience has become a crisis.

For a start, the actors’ union is much more powerful than the writers’ guild, with a membership of about 160,000 that includes world-famous celebrities studied in the art of delivering messages to captivated audiences. The film and TV scripts that studios had banked in case of a writers’ strike have been suddenly rendered inert, deprived of actors to bring them to life. Numerous big-budget movies that had been shooting had to shut down immediately, including “Twisters,” “Venom 3,” “Deadpool 3” and “Gladiator 2.”

In interviews, three studio chairs who spoke on condition of anonymity because of the sensitivity of the labor situation, said Hollywood’s content factories could sit idle for little more than a month — roughly until Labor Day — until there would be a serious impact on the release calendar for 2024, particularly for movies. A work stoppage that stretches into September could force studios to delay big projects for next year by six months, making 2024 resemble the ghost town of recent memory set off by the Covid-19 pandemic.

Studios had just gotten the release schedule looking normal again, with one big movie following another. Another significant lull in offerings may be devastating for theaters. This year’s box office has already been underwhelming and, with striking actors barred from publicity efforts, films scheduled for the second half of 2023 could be affected — especially those with awards aspirations. One of the studio executives on Friday predicted it could imperil at least one of the national cinema chains.

Bobbie Bagby Ford, the chief creative officer and executive vice president of B&B Theatres, a midlevel chain with more than 50 locations in 14 states, said the strikes “have impacted the industry at a difficult time.”

“The duration of the ongoing strike will play a significant role in its impact on cinemas,” Ms. Bagby Ford said. “If it remains short enough to prevent an overwhelming backlog of movies, the situation can be managed.”

Greg Marcus, chief executive of the Marcus Corporation — which owns the fourth-largest theater chain in the country — agreed that the strikes were unnerving but said they were less threatening to the industry than the pandemic.

“Depending on the length of time, there could be a gap in a year,” Mr. Marcus said. “But it’s not like being closed for months on end, people debating the value of theatrical, and then big gaps because of production delays.”

Labor Day will arrive in a heartbeat, which would seem to prompt studios to break the standstill with the actors sooner rather than later. But there’s a problem: Studio executives were genuinely surprised by the Screen Actors Guild’s reaction to their proposed terms. They felt they had made significant concessions and were stunned by the union’s rhetoric, especially since they were able to amicably negotiate a lucrative new contract in 2020.

The proposed terms included increased pay, protections around the audition process and more favorable terms for pension and health contributions. They also offered that dancers receive an on-camera rate for rehearsal days.

In particular, the studios — acknowledging in private conversations that they had made a mistake by largely ignoring the writers’ demands for guardrails around artificial intelligence — proposed terms for use of A.I. that their negotiators said would protect actors.

But it wasn’t enough to avert a strike. Duncan Crabtree-Ireland, the actors’ chief negotiator, said in an interview on Saturday that the studio’s proposal was unreasonable. The artificial intelligence terms jeopardize “the entire field of acting,” Mr. Crabtree-Ireland said, adding that studios also weren’t offering actors revenue participation in streaming.

“Those are the core issues,” Mr. Crabtree-Ireland said. “And the fact that the companies won’t move on them reflects a colonial attitude toward the workers who are the entire basis of the existence of their companies.” He said actors want to begin bargaining again.

The Alliance of Motion Picture and Television Producers, which negotiates on behalf of the studios, disputed Mr. Crabtree-Ireland’s characterization of its members’ attitudes, citing terms of its proposal including a “groundbreaking A.I. proposal that protects actors’ digital likenesses.”

The frustration on the other side of the bargaining table was evinced by comments made on Thursday by Robert A. Iger, Disney’s chief executive, who said during an interview on CNBC that workers were being “unrealistic.” Pouring gas on the fire was an article on the show business website Deadline that quoted an anonymous studio executive, who threatened to “bleed out” writers until they “start losing their apartments.” The studio alliance said the anonymous executive did not speak for its members.

Though some executives see a brief stoppage as an opportunity to slash costs, a long-term shutdown has the potential to cause havoc in an entertainment industry already buffeted by the rise of streaming and struggles at the box office.

“While media execs try to spin the dual strikes as a positive as production spending stops, investors are far more concerned that this will be a long strike that hurts the performance of already completed movies and TV series,” said Rich Greenfield, an analyst at the research firm LightShed Partners.

If the twin strikes drag on for just one or two months, companies will probably seize on the shutdown as an opportunity to save cash that they otherwise would have been spending on preproduction — the work done before shooting starts — and bidding on scripts, said Michael Nathanson, an analyst at SVB MoffettNathanson who focuses on the media and entertainment industries. Some of those costs will be incurred later anyway, he noted.

They can also take a second look at the shows and films they have in the pipeline, pruning ones that are too costly, Mr. Nathanson said. He compared a brief strike to a halftime break for a losing team that needs to draw up a new strategy.

The strike also threatens lucrative, long-term deals struck by media companies during the streaming boom, when they were willing to shell out astounding sums to lure creators like Shonda Rhimes, Ryan Murphy and J.J. Abrams. Some long-term deals have force majeure clauses, which take effect on the 60th or 90th day of a strike, allowing the studios to terminate their contracts without paying a penalty. Mr. Greenfield said those clauses could theoretically let studios get expensive deals off the books, but invoking them would jeopardize relationships with top talent in the future.

If actors aren’t back to work by the fall, it will hurt network television, which needs them for new shows coveted by advertisers, Mr. Nathanson said. He added that traditional media companies based in the United States are at a disadvantage compared with Netflix, the dominant streaming company, which can take advantage of its production facilities around the world.

“It’s like if the United Auto Workers go on strike, and all of a sudden you see more cars from Japan and Germany on the road,” Mr. Nathanson said.

Publicly, studio executives are urging Hollywood to get back to work. Mr. Iger said last week in an interview from the annual Sun Valley conference for business titans that the strike would have a “very damaging” effect on the entertainment industry.

There’s little indication, however, that a deal is close.

The negotiating parties have all said they want to reach a fair agreement, placing the blame for the standstill on the other side. But they all acknowledge privately that if Hollywood doesn’t thaw out in time, everyone will get frostbite.

“Making nothing as a cost-saving strategy is foolish with the fall TV season rapidly approaching and advertisers and consumers expecting new programming,” said Ellen Stutzman, the chief negotiator for the Writers Guild of America.