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Lack of leverage

Netflix’s recent earnings report serves as an example that entertainment industry giants don’t seem to be feeling the pressure. The company delivered $3.29 in earnings per share during the second quarter of 2023, higher than the consensus forecast of $2.86.

The results make sense: the streaming giant says it has experienced a surge in subscribers since it started cracking down on password sharing. It also has the ability to produce content in other parts of the world while the Hollywood strikes drag on. In spite of the strikes, Netflix has expanded its cash flow to the point where management was able to contemplate billions in stock buybacks, according to its second-quarter letter to shareholders.

“If Netflix had a button that makes the strike go on for two or three years I think they would press it,” Galloway said.

By comparison, Galloway says, UPS would have started losing money right away if the Teamsters had walked out. This, he says, is why the company was willing to give in to some of the union’s demands, including higher pay, air conditioning systems in all new vehicles and the abolishment of compulsory overtime during off days.

Galloway points out the drastically different demands writers and actors are making compared to those of the Teamsters.

“The writers want the studios to not use AI and they want at least a certain number of writers in the room,” he said. “The UPS drivers … asked for an additional $2 an hour and air conditioning.”

(The tentative UPS deal in fact includes progressive wage increases totaling $7.50 per hour over five years.)

Galloway says that the writers’ demands are analogous to the Teamsters saying to management, “You can never use autonomous driving for the trucks … and in every truck there has to be two drivers.”

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'Taking their industry down'

Galloway believes the writers and actors unions are in a weak position comparable to that of U.K. coal miners during their 1984-85 strike.

Spurred by the Prime Minister Margaret Thatcher government's proposed pit closures, British miners launched a strike that the government was well prepared for, having built a stockpile of coal.

“They didn’t have enough leverage to force the government to do anything, but at the same time the strike went on long enough that consumers and industry reshaped their energy needs,” Galloway said. “Even when they solved the strike, the industry came back smaller.”

As for the Hollywood unions, he said: “They are essentially taking their industry down such that late-night TV will not have nearly enough money to pay anybody, much less what the unions demand.”

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Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

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