Paul Hardart

SAG-AFTRA finally ended the 118-day actors’ strike after negotiating a tentative three-year agreement with the Hollywood studios. This marked the longest strike in the guild’s history, securing significant improvements in pay, benefits and pensions and preliminary guardrails around AI use. 

Across the country, members of SAG-AFTRA celebrated their long-fought and well-deserved victory. Kevin Bacon commemorated the strike’s end by reprising his Footloose dance in the attic of an empty barn.

But just as the actors begin to put away their picket signs and return to soundstages and movie sets, the curtain is already rising on new challenges for everyone in Hollywood: less content and fewer jobs.

Both of these problems will be exacerbated by the value of the new deal. According to a statement from the union, it’s $1 billion. Ultimately, customers will be left footing the bill — via those frequent subscription fee increases — without getting more for it. Even before the summer of strikes, Hollywood faced significant business headwinds, with streaming services aggressively raising their prices while opting to spend less on films and shows.

And just this past week, Bob Iger announced that Disney would be targeting cost savings of nearly $7.5 billion and would be reducing its content spending by approximately 20% from two years ago. Concurrently, Disney is also raising its prices for Disney+, Hulu and ESPN+.

Similarly, Netflix, Max, Peacock, AppleTV+, and Paramount+ have also all raised their prices an average of about 23% over the past few months. As Scott Purdy of KPMG declared, the era of “streamflation is here.”

Why the sudden shift to price increases and cost management?

Wall Street no longer values these companies on the rosy vision of endless growth and promise. Instead, the new metric is how profitable the service is right now. And in this arena, the move to streaming has proven challenging. Over the past year, these companies have seen a significant degradation in their valuations, and, in some cases like Disney, activist investors have called for change.

Writ large, the entertainment landscape is encountering Clay Christensen’s famous Innovator’s Dilemma in real time. In which a disruptive technology (streaming) challenges the incumbent business (cable, broadcast and theatrical) to either adapt or face extinction. For the last several years, the legacy studios have chased the alluring valuation multiples that Netflix once enjoyed by launching their own services — only to realize those valuations were a mirage. The studios now have to make their streaming efforts turn a profit, and that means managing costs, cracking down on shared passwords and, as the guilds are well aware, controlling how much is spent on production.

As a result of SAG-AFTRA’s new deal, the actors and writers will be paid more for their work and have greater upside. The challenge is that there will likely be less work to go around and thus more competition for fewer roles. It is probably not a stretch that in the coming years, the membership of SAG-AFTRA may decrease in some proportion to the decrease in studio spending.

The drawbacks don’t render the union’s victory Pyrrhic. But in all the celebrations, sooner or later, we will have to note that it’s not perfect.

That said, the demand for entertainment is not going away. Stories, information and music are how humans have made sense of the world since the dawn of time. When I ask my students what they derive from watching a movie or a TV show, it is quite moving to hear them express the benefits. They’ll say things such as to “make me smile,” “escape,” “inspire me,” or, as one shy student quietly put it, “to feel the feels.”

The benefits we get from entertainment can sometimes transcend words, and that value is uncorrelated to the costs. Stories are as rudimentary to our lives as air, water and food. As new technologies and entertainment formats come into focus, the role of the actor and writer may continue to evolve. Through this deal and their resolute solidarity, SAG-AFTRA has laid the groundwork for how future negotiations can be framed. They have also memorialized the importance of actors to the ecosystem of the business of Hollywood.

In watching Kevin Bacon’s celebratory video, I reflexively smiled. While I can’t pinpoint the exact reason, it might just be that it made me “feel the feels.” That kind of experience is something for which I, along with most consumers, will probably be willing to pay a little extra.

Paul Hardart is director of the entertainment, media & technology program at NYU’s Stern School of Business and founding director of the Graduate Program in Media Management at The New School. He was previously an executive at Universal and Warner Brothers.