Recently, shares of Netflix have taken a substantial hit amid challenging financial conditions for the streaming giant. The company’s ad revenue is expected to decline significantly as actors and Hollywood writers remain on strike, seeking more favorable pay.
Netflix already had a disappointing earnings report that came in lower than expected, even prior to the full impact of the strike being priced in. Second-quarter earnings for the streamer were reported of roughly $8.19 billion, missing the expected $8.3 billion forecasted by Wall Street.
The estimated $8.3 billion was predicated on a new advertisement plan that Netflix recently implemented alongside a June addition of nearly 6 million new subscribers. Although the streaming service noted the benefits to revenue from this news would not be priced into the company’s financials until the latter half of the year. Netflix still maintains that it has already observed positive signs from the integration of this new strategy, though.
Scott Purdy, U.S. national media leader at KPMG, commented on the lackluster earnings report from Netflix, opining that the Hollywood strikes are having an outsized impact on the company’s business model. Purdy noted that the “results show that lower content spend and higher ad revenue is the name of the game for streaming companies to turn a profit. In the short-term at least, the Hollywood strikes are indirectly helping companies crack the code of profitability. Long-term though, the strikes could create a scenario of massive churn and lower ad revenue for streaming companies.”
Netflix and other major streaming platforms have been targeted by actors, creators, and writers who are striking over complaints regarding compensation. These key players have claimed that as the streaming industry has exploded in recent years, they have been left behind. Some actors have even taken to social media, sharing their actual pay to illustrate the severe disparities.
Productions have halted for many streamers as 65,000 SAG-AFTRA members went on strike, joining 11,000 members of the Writer’s Guild of America who have been on strike since May. According to SAG-AFTRA’s website, “SAG-AFTRA represents approximately 160,000 actors, announcers, broadcast journalists, dancers, DJs, news writers, news editors, program hosts, puppeteers, recording artists, singers, stunt performers, voiceover artists and other media professionals.”
The Writer’s Guild of America is also a labor union that has very significant influence in the entertainment industry. Netflix CEO Tod Sarandos recently assured investors that Netflix would be able to navigate the strike and reach an agreement favorable for all parties involved.
“These strikes, this strike is not an outcome that we wanted,” Sarandos noted. “But we’ve got a lot of work to do. There are a handful of complicated issues. We’re super committed to getting to an agreement as soon as possible, one that’s equitable and one that enables the industry and everbody in it to move forward into the future.
Last Thursday, Netflix shared dropped over eight percent, bringing the Nasdaq index down more than 1 percent with it. Reports indicate that the streaming industry is in a tough position where other platforms actually seem to be in a more challenging position than Netflix.
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