Netflix co-CEO Ted Sarandos wants to be clear: a Hollywood strike is not the outcome he wanted. The streaming company was the first to post earnings this season and address the strike-related questions on many investors’ minds. Other companies with streaming platforms, including the Walt Disney Company, Paramount and Warner Bros. Discovery, will take the stage in the coming weeks.
“We very much hoped to reach an agreement by now,” Sarandos told investors during the company’s earnings call yesterday (July 19).
The unions representing Hollywood writers and actors are both on strike for the first time in 63 years, bringing many productions to a standstill. Sarandos was reportedly one of a handful of studio executives in talks to bring in a federal mediator to help negotiate, but the parties couldn’t reach a deal before the predetermined deadline. Earlier this year, Sarandos said Netflix had enough content to survive a strike from Hollywood writers for “a long time.” But the addition of actors to the strike earlier this month puts added pressure on the streaming company.
While filming is halted across the industry, Netflix posted better-than-expected subscriber numbers and upped its free cash flow prediction yesterday. The company added 5.9 million subscribers in the three months ending June 30, in part because of Netflix’s crackdown on password-sharing. During the same period last year, the company lost nearly 1 million users. It also increased its free cash flow expectation from $3.5 billion to $5 billion for 2023, resulting from decreased spending on content due to the strikes. While Netflix might have improved free cash flow in the near term, the work stoppage might also create some “lumpiness” in the following years as production schedules shift, according to Spencer Neumann, chief financial officer. The company missed analyst expectations on revenue, and its stock fell 8.8 percent overnight, trading today at $435 per share.
Sarandos’s father was a unionized electrician who went on strike “on more than one occasion,” so the co-CEO understands the financial and emotional toll that strikes take on a family, he said during the earnings call. Nobody at Netflix “took any of this lightly, but we’ve got a lot of work to do,” he said. The unions and the trade association representing studios couldn’t reach terms regarding wages and benefits for workers, as well as company use of artificial intelligence.
“We’re super committed to getting to an agreement as soon as possible,” Sarandos said. “One that’s equitable and one that enables the industry and everybody in it to move forward into the future.”
