As Hollywood’s strikes hit Labor Day, how studio chiefs misread the writers room

Analysis by Brian Lowry, CNN

(CNN) — If Hollywood studio chiefs have a reputation as skilled dealmakers, a Labor Day that finds their key employees still out on strike after four months underscores just how badly they misread the writers room.

The history of Hollywood labor actions has seen major companies rely on their deeper pockets to absorb the pain and wait out their employees. Arguably, that advantage appears even more pronounced today, with the studios joined at the bargaining table by huge corporations like Amazon and Apple, which operate their own streaming services as they expanded into the programming game.

The studios, whose Alliance of Motion Picture and Television Producers is known as the AMPTP (of which CNN parent Warner Bros. Discovery is a member), clearly seem to have anticipated that scenario unfolding in these negotiations. Whether true or not, the perception that the goal was to crush guild resistance was stoked by a now-notorious quote attributed to an anonymous executive on the trade website Deadline, “The endgame is to allow things to drag on until union members start losing their apartments and losing their houses.”

What the studios somehow missed, or chose to ignore, was the shared belief by the guilds representing writers and actors that this represents an inflection point for the entertainment industry, forcing them to take a stand now. So rather than shaking their resolve, such inflammatory sentiments strengthened it, based on the assumption that it’s better to bite the bullet and stick together now, hoping to avoid another extended work stoppage over the next contract, or the one after that.

Indeed, writers and actors have rallied around the notion their current sacrifices will benefit not just them but the generations that follow them. As a model for that they point to 1960 – the last time the Writers Guild and Screen Actors Guild struck at the same time, when Ronald Reagan was president of the latter – that yielded signature concessions regarding residuals, or performers sharing in studio revenue over time.

While studios might not have much credibility when it comes to pleading poverty, they have a point fretting about the future. The shift toward streaming has upended traditional consumption of both movies and television, casting dark clouds over their business.

Disney CEO Robert Iger – usually one of the most polished corporate leaders – gave the guilds billboard fodder by seeking to drive home that warning, telling an interviewer what they’re seeking is “not realistic,” citing the fragility of the current climate.

It’s hard to deny that Hollywood – whose fortunes have often been built and shaken by new technology – has reached another crossroads. Although writers and actors can legitimately say that the current streaming-driven malaise isn’t their fault, it is their problem too, especially if the companies cut back on production, which is a legitimate concern.

Still, executives like Iger have become poor messengers for fiscal responsibility. Guild leaders shrewdly turned the conversation back to studio bosses’ stratospheric income levels, citing, for example, the $50 million earned by Netflix CEO Ted Sarandos in 2022, prompting a non-binding shareholder vote rejecting the company’s executive-compensation packages in June.

While minutia about residual payments and how many writers a streaming series employs don’t lend themselves to debate in the court of public opinion, the studios do appear to have lost that battle, as traditional efforts to undermine support for “greedy” actors and writers – whose best-paid members earn millions as well – have largely failed.

In terms of public perception, Los Angeles Times columnist Mary McNamara argued persuasively that the studios have already lost the PR war, signaling that it’s time to swallow their collective pride and make a deal.

Of course, meeting most of the guilds’ demands will cost the studios additional millions each year, likely heightening financial pressures that have already resulted in layoffs and spending cuts. In that sense, settling the strikes won’t necessarily put an end to Hollywood’s growing (or perhaps more accurately, shrinking) pains.

Yet if these giant companies still think making movies and TV shows, whatever the challenges, is a business worth being in, they’re going to need somebody to write and act in them. And while guild members would love to get back to work, the one thing they’re not going to do after months on the picket lines, whatever the studio’s strategic game plan when the strike began, is roll over and play dead.

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