Lights out in Tinseltown:
Will The Actor’s Strike Be Hollywood’s Next Flop Or Hit?
Act 1 Scene 1
We open in a well-lit, large conference room. The room is filled with a sea of people - union members, journalists, and cameramen - gathered in anticipation of a momentous event. The air is charged with excitement and purpose. The date is July 13.
At the podium, the union’s president, Fran Drescher, gives a rousing speech, blistering with fiery rage.
“You cannot change the business model as much as it has changed and not expect the contract to change too. We’re not going to keep doing incremental changes on a contract that no longer honours what is happening right now with this business model that was foisted upon us.”
The cameras capture the intensity of Drescher’s gaze, her unwavering commitment to the union’s mission evident in her eyes.
“What are we doing... moving around furniture on the Titanic? It’s crazy. So the jig is up AMPTP [Studio Execu- tives]...We are labour and we stand tall and we demand re- spect and to be honoured for our contribution. You share the wealth because you cannot exist without us. Thank you.”
Cut to black.
Such is the level of histrionics to be expected in a strike announced by the president of the American actor’s union, an actor herself. After failing to come to a negotiated settlement on actor pay, SAG-AFTRA (the union’s formal title) and its 160,000 national members formally went on strike on July 14. They joined their colleagues, writers, who had been striking since May 2, largely for the same reasons. These reasons include the refusal of the AMPTP, the Hollywood studio executives’ trade association, to pay writers and actors more in residuals, and provide them with robust digital protections against AI’s looming threat.
The direct result of the strikes has been an almost complete halt to production of American movies and television, an industry valued at $134 billion. The secondary consequences – within and across industry - may be even more damaging, particularly because of the global spillovers these strikes cause. With such a global reach, Hollywood’s strikes have the potential to cause economic earthquakes as damaging as the physical ones it creates on the silver screen.
Good Guys and Bad Guys
Regardless of which version of the script one is reading from, each version presents the typical cinematic battle of heroes and villains. In Fran Drescher, SAG-AFTRA’s, and the writers version, the bad guys are the greedy studio and streaming executives, or in Drescher’s words, “land barons of a medieval time.” The argument is predicated on two main points: residuals and AI.
Residuals are royalty payments actors get as compensation for continued use of their work, subsequent to its airing. Every time a show or movie is ‘rerun,’ the airing network cuts all the actors involved in the project a cheque based on the value the show or movie generates for the network (i.e advertising revenue, ratings,etc.). This allows these actors to continually earn from their work. The issue with this business model emerged with the streaming revolution in entertainment. Giants like Netflix, Disney+, and Amazon Prime Video don’t have live TV. Streaming means their content is permanently stored in their libraries – there are no ‘reruns,’ which makes it hard to assess the value each show (and episode) gives the streaming services. One possible solution is using streaming services’ subscriber numbers and analytics, but this is something the giants refuse to reveal. With shorter series, actors’ pay is increasingly squeezed downwards. This serves as rationale for SAG-AFTRA’s first demand: a comprehensive renegotiation of residuals.
While the residual problem may serve an immediate and somewhat familiar risk to actors and writers, AI poses a longer term, uncertain, and potentially existential one. Writers argue that studios will use large language models such as OpenAI’s ‘ChatGPT’ to eliminate their role entirely, or cut away writers’ compensation. Background actors are worried that studios could use AI to create a ‘digital twin’ that would be used in perpetuity without compensation. The technology is not there yet, but it is certainly feasible. This constitutes the second demand by those striking: provide legal protections against AI.
The response of the studios and streaming executives, announced officially though its trade association, the AMPTP, has attempted to refute some of their counterparts’ claims, and accept others with many caveats. In their version of the script, they are the stewards of the entertainment industry making the ‘difficult decisions.’ On wages, AMPTP claim they have offered a deal in “wage pension & health contribution and residual increases” worth more than $1 billion, including at least 5% wage increases for actors, background actors, stand-ins and stunt coordinators. The actors however, demand 11%. On AI, the AMPTP has offered robust protections: background actors will be compensated for their ‘digital likeness’ and any use will “require consent,” and AI “cannot be considered for writing credit” (AP). SAG-AFTRA argues these offers are insufficient, failing to address concerns around digital likeness ownership.
At the same time, studios cite economic conditions to ar- gue they cannot meet the unions’ demands. There is some truth to this. Other than Netflix, all of the large streaming services are running at losses. Box-office numbers still have not recovered also since the pandemic. According to a PwC analysis, it will take until 2025 for box office revenues to return to pre-pandemic levels. However, there are still gargantuan profits in the industry which have grown 500% between 2000 and 2021.
In sum, the story is much more nuanced than any side will have you believe. The question is who has the power to be more to outlast the other.
Winners and Losers
The struggle in Hollywood will ultimately be decided based on the distribution of bargaining power. Currently, this balance is heavily tilted in favour of the studios. They have alternatives. The first is international content: actors in other countries are not required to strike; and streaming services such as Netflix have already invested millions in creating the production infrastructure necessary to create content, with a large hub in Madrid. The second is non-scripted content such as reality TV, which requires no writers, or actors. Finally, these studios can depend upon a deep library of old content – think “Friends,” “Brooklyn 99,” “Breaking Bad.” New content is good, but it can wait if necessary.
Granted, the actors have visibility. Meryl Streep, Jennifer Lawrence, Brian Cranston, and Matt Damon are all great players to have on your team. This makes it easier to get the public onside: indeed, a YouGov poll found 60% of Americans (including 43% of Republicans) support the strike action. The problem is the public don’t get to vote on this issue. The result: both sides dig in and play the long game.
The secondary consequences will manifest themselves in many ways, but especially in local and global economic impacts. With most American productions (barring a select few greenlit by SAG-AFTRA) on pause, production staff will see their opportunities diminish. This has knock-on effects on the local economy – the last writers strike in 2008 cost the state of California an estimated $2 billion.
Globally, entertainment industries outside the US will rightly see this as the perfect opportunity to scale content, especially in Britain. Though American studios cannot directly commission shows in the UK, it can still acquire them. This means two things. First, production costs for local producers (e.g., BBC, ITV) will go down. With the unlimited Hollywood check-book out of action, locals can obtain services for cheaper. Second, new locally made projects will command higher acquisition fees on the international market. It would be a terrible mistake not to capitalise on this opportunity.
The more pertinent consequence will be across industry. Strikes in Hollywood are part of a general increase in labour disputes across several industries in the US, and also globally. However, the danger is that if labour loses in this case, employers will be emboldened to refuse demands in their respective industry. If it can happen to good looking people, it can happen to anyone.
Ultimately, it is not clear exactly when these consequences will materialise, but it is clear they will be transformational. With a battle between heroes and villains, a super technology, and an undercurrent of suspense, the strike has all the marks of a Hollywood thriller. Maybe one day they will make a movie out of it.