Hollywood’s strike cost could amount to $500M this year to the company as per Warner Bros. Discovery. Warner Bros. Discovery said Tuesday it expects to take a hit to its full-year profit due to the ongoing Hollywood writer and actor strikes. The financial impact of strike on Hollywood could continue through the end of the year.
The continued Hollywood actors and writers strike cost is staggering. Warner Bros. Discovery has trimmed its full-year earnings guidance for 2023 on Tuesday by $300 million to $500 million as the strike has stopped production of most shows and movies.
Hollywood strike is costing delays in movie releases
Movie release delays are also dealing a blow to cinema chains such as AMC Entertainment, Cineplex and Cinemark, which are still trying to recover from the COVID-19 pandemic.
“Dune” was one of the most anticipated films on the late 2023 schedule.
Warner Bros also said CEO, David Zaslav would be participating in an investor conference on Sept. 6, and expects to discuss, among other topics, impact of strike on Hollywood.
The studio is now raising full-year free cash flow expectations to at least $5 billion, with the third quarter alone expected to exceed $1.7 billion due to the strong performance of the “Barbie” movie and strike-related factors.
Hollywood is experiencing its first dual work stoppage of writers and actors in 63 years, halting productions across the industry. The strike is costing the California economy billions of dollars.
The actors’ strike has prompted movie studios to adjust film schedules in the absence of celebrities to hit red carpets or talk shows to help build buzz.
The Warner Bros movie studio said last month it would delay the planned November release of a big-budget sequel of “Dune” until March, as its stars would not be able to promote the movie during the strike.
Hollywood strike cost to Warner Bros.
Warner Bros, the corporate parent of CNN had previously told investors that it expected the strike to be over by early September. But WBD now says it cannot predict when the strike will ultimately end, and it assumes the impact will continue through the rest of this year.
“WBD is hopeful that these strikes will be resolved soon,” said a filing the company made with the Securities and Exchange Commission with its new guidance early Tuesday.
The company said even with the estimated cost of ongoing Hollywood strike of $300 million to $500 million hit to adjusted earnings before interest, taxes, depreciation and amortization, (EBITDA) it expects that key earnings measure to come in at $10.5 billion to $11 billion for the year.
Shares of WBD were up more than 1% in early trading following the filing after estimated cost of ongoing Hollywood strike.
In a Securities and Exchange Commission (SEC) filing, the entertainment giant cut its outlook after the strike cost declaration, lowering its expected earnings before interest, taxes, depreciation and amortization to between $10.5 billion to $11 billion, which would be a $300 million to $500 million hit. The company said the revision is “predominantly due to the impact of the strikes.”
Impact of strike on Hollywood
The four-month Hollywood strikes that pitted the studios against writers and actors have no end in sight. Meanwhile, the economy is suffering and facing the impact of strike on Hollywood.
In August, the entertainment industry, which includes the movie, TV, and music businesses, employed 17,000 fewer people than it did in the prior month, according to Bureau of Labor Statistics data. It’s a sign of the broad impact strike on Hollywood with the work stoppage, which has largely stymied studio production, not just on the striking workers themselves, but also the businesses like lighting and sound that support the Hollywood machine.
The Hollywood strike cost to the industry is expected to be more than $3 billion in losses. It has impacted the production of film and television series and is expected to cost the industry more than $3 billion in losses.
With SAG-AFTRA and the WGA simultaneously on strike, many already feel the financial impact. The Hollywood strike could exceed $3 billion in economic fallout. Some predict Hollywood strike weekly cost could hover around $150 million in losses.
Estimated cost of ongoing Hollywood strike
Estimated cost of ongoing Hollywood strike is around $500M for the studios. While [Warner Bros. Discovery] is hopeful that these strikes will be resolved soon, it cannot predict when the strikes will ultimately end,” the SEC filing reads. “With both guilds still on strike today, the Company now assumes the financial impact to [Warner Bros. Discovery] of these strikes will persist through the end of 2023.”
So far, the strikes have cost California’s economy an estimated $5 billion, according to the Financial Times. The situation is so concerning that California Treasurer Fiona Ma sent a letter to studio heads urging them to find a speedy resolution to the strike so that its economic ripples wouldn’t spread any further. In her letter Ma urged studio executives to consider that the $429 million it would cost to settle the writers’ strike would be significantly less than the billions of additional economic damage the strikes would cause if they continued.
The company warned last month that the strikes could hit its bottom line.
Bright side to Hollywood strike
In the SEC filing, Warner Bros Discovery did issue some brighter news that it had raised its free cash flow projections for the year to at least $5 billion. Previously the company had forecast free cash flow of $4.5 billion to $5 billion, with the company now confident it will hit the higher end of the range it had provided in August. It attributed that increase to the success of Barbie and its $1.4 billion in global ticket sales. Warner Bros. Discovery was also saving big money on production and marketing because of the strike. On an earnings call in August CEO David Zaslav called free cash flow Warner Bros Discovery’s “financial North Star.”
Zaslav acknowledged the strike’s unprecedented impact on Hollywood. “We’re in uncharted waters,” he said.
Contract negotiations between the studios and striking workers picked back up last month, only to break down again.
Other companies that are being struck include Apple, Amazon, CBS, Disney, NBC Universal, Netflix, Paramount Global and Sony.
