On Wednesday, negotiations between SAG-AFTRA actors' union and Hollywood studios, including The Walt Disney Company (NYSE: DIS) and Netflix Inc (NASDAQ: NFLX) cratered as the two sides clashed over streaming revenue, the use of AI and other matters that have been halting production for three months already.
The studios earlier smashed the guild that is led by Fran Drescher for making costly demands and abandoning productive negotiations while the SAF-AFTRA responded by accusing the AMPTP of using the "bullying tactics" that they already tried on the WGA to cripple their deliberations.
It seems that studios mistakenly thought that they will easily solve their conflict with SAF-AFTRA after coming to an agreement with the WGA who recently approved a new three-year contract that includes pay raises, AI protection of writers and other gains, ending the five-month strike. Striking actors and raised prices is certainly not the challenge Disney needs right now as it looks for ways to renew the growth of its kingdom that has been lacking magic.
Disney Hiked Prices For The Second Time This Year
On Thursday, Disney rose its streaming prices in response to DTC profitability challenges and loss of subscribers.Back in August, Disney posted streaming losses for the third quarter of $512 million with Disney+ subscribers dropping 7.4% from the previous quarter. to 146.1 million.
Disney announced the price hikes in August, with these increases impacting the monthly price of the ad-free Disney+ and Hulu plans in addition to the Hulu live TV packages and ESPN+ subscription. The Disney+ ad-free plan is now 27% more expensive as its monthly cost in the U.S. is $13.99 which is double the $6.99 monthly cost Disney charged when it first launched its streaming star in 2019.
Additionally, Disney will also be applying this strategy on its theme parks so visiting the world's happiest places will also cost more.
Iger Has Too Many Fires To Put Down
Along with streaming headwinds, Disney is also facing a parks business slowdown, a a broken linear TV business model and a weak box office that fails to impress. Although Iger came back to save Disney, things are clearly not going according to plan as the world's biggest entertainment company entered what seems to be an existential crisis. His two-year CEO timeline has been extended to four years as the once-America's-most-beloved-chief-executive-officer who orchestrated modern-day Disney's biggest business magic isn't able to Mary Poppins his way out of this mess. But then again, sequels almost always fail to live up to the original.
Netflix Remains The King Of Streaming, But It Cannot Afford To Ignore The Harsh Reality Of The Industry
Netflix first launched streaming in the U.S. in 2007 and by being the leader for 16 years, it gathered a massive user base that now has 238 million global subscribers. With its first-mover advantage and tremendous scale, Netflix built a solid financial footing with even the iconic Disney lagging behind on the profitability front as its DTC segment which covers Disney+, Hulu and ESPAN+ delivered an operating loss of whopping $2.2 billion through the first three quarters of fiscal 2023 that ended on July 1st. But even Netflix will have to deal with increased costs due to writers' and actors' strikes, although it is still in a more favorable position than Disney. Additionally, the collapsed negotiations imply that that production of scripted shows scheduled for autumn remains on hold.
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