Movie theaters are most at risk if the writers’ strike drags on, Moody’s says

By Vanessa Yurkevich, CNN

Already strained movie theater companies could be hurt most from the Writers Guild of America strike, according to an analysis released Thursday.

The strike by film and TV writers entered its third day Thursday, with no negotiations currently scheduled with the Alliance of Motion Pictures and Television Producers, which represents management for big studios such as Disney, NBC Universal and CNN’s parent company, Warner Bros. Discovery.

“New big-budget tent-pole releases tend to fill theaters,” said Moody’s in its new analysis. “Theaters rely on these volumes for food and beverage sales as well, so exhibitors could feel the effects of a protracted strike more significantly.”

Broadcast and TV networks would be hurt too, as viewers would be left without their favorite shows move to streaming. The streaming services themselves would be affected least, since their libraries of content could carry them through a prolonged strike. They could even get a cash boost, as they did during the pandemic when production was halted, according to Moody’s.

But movie theaters have already been reeling from pandemic closures and the rising popularity of of streaming.

“Movie theaters have low credit ratings and less financial flexibility as compared to most studio and TV network owners, which makes them more vulnerable to a long strike. But in terms of the volume of content produced, television (networks and streamers) has more exposure,” said Moody’s.

The WGA is striking against streamers and movie studios over pay, employment levels and the changing way in which shows and movies are distributed. The strike comes at the beginning of the spring writing season for fall shows.

“Television will bear the brunt of a long strike as the implications of the writers’ strike will play out more noticeably for TV networks, stations, cable channels, and streamers. TV networks, particularly broadcast networks, consistently schedule new prime-time shows to begin in the fall,” the Moody’s analysis said.

This will hurt broadcasters’ ability to attract audiences and, in turn, advertisers. All four broadcast networks are owned by major studios.

Longer strike, bigger impact

“A quick settlement or a limited strike resolved in a month or two, in our view, would have a nominal impact on the financial health of the affected media companies,” according to Moody’s. “If a protracted strike occurs, and lasts six months or longer, it could hurt many media companies, especially smaller production companies.”

Media companies that are well diversified — that is, if they offer sports, news, or have a strong content library — will weather the storm the best. But Moody’s warned that customers may eventually have to pay higher prices to help offset the strike’s impact.

“We believe the strike will be temporary and unlikely to cause the investment grade issuers to see rating pressure in isolation, but it could cause some disruption and ultimately a settlement is highly likely to result in higher costs for all producers and distributors, and potentially for consumers, which could moderately impact subscription growth and churn rates,” said Moody’s.

The WGA said its proposal to the studios would result in approximately $429 million per year for writers, while AMPTP’s offer is about $86 million per year. Moody’s estimated a new three-year contract would likely cost media companies an extra $250-$350 million a year.

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