Netflix Profits Amid Hollywood Strikes: Strategic Excellence or Corporate Vampirism?

Netflix is set to announce their quarterly earnings today amidst a period of ardor within Hollywood not seen since the 1960s. A multitude of writers and actors have been striking since May to bring attention to the worrisome decline in pay and unfavorable working conditions many attribute to the shift in the industry caused by Netflix's impact to the streaming world.

The second quarter concluded on June 30th, and the Writers Guild of America (WGA) has remained on strike since May 2nd. As of last Friday, the Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) has joined the ranks of their fellow workers on the picket lines. This information suggests any financial implications of the quarter will remain minimal, with the exception of modest write-offs due to production shutdowns and a rise in cash flow from the same source.

As the strike continues, many worry about the ongoing squeeze on the industry, though Netflix appears to maintain a secure advantage due to their backlog of unreleased content and global production structure, according to analyst Alan Gould of Loop Capital. Netflix's sparse live show platform gives them an edge, as they need less promotional talent. A disruption in the fall television schedule could potentially direct more viewers to the streaming platform.

Co-CEO of Netflix, Ted Sarandos, expressed in April during the first-quarter earnings call his company's appreciation for writers and the WGA, emphasizing the crucial role they play in the existence of the industry. Despite Sarandos' respectful discourse, a strike was not averted with either group of writers or actors, leading to an anticipated reaction from both Sarandos as well as his peers.

From a corporate standpoint, Netflix's rollout of $7.99 password sharing accounts appears successful, promoting a strong surge in new signups. Analysts say they will not be surprised if Q2 net subscriber additions surpass Netflix's forecast of around 1.8 million, akin to its Q1 additions.

Netflix has also seen an uplift in their price targets due to the successful password plan. MoffettNathanson's Michael Nathanson, a skeptic of the company's future, added $30 onto his 12-month outlook for Netflix stock, which is at $380. An analysis by MoffettNathanson revealed a resilience in the streaming market, pointing to potential growth for newer services and mature companies, such as Netflix.

Now, let's take off these rose-tinted glasses and dive into the less sanitized, grittier side of things.

It's hard to deny Hulu and Disney+ a nod of respect while Netflix frolics in their glimmering golden showers of new sign-ups and a backlog of content that'd make any quarantine lock-in worthwhile. Yes, Netflix is doing well, but is this the streaming love story we really want to see? Are we supposed to be writing sonnets to the successful giant while smaller production companies might be squeezed out of business due to the current WGA and SAG-AFTRA strikes?

Ted Sarandos stated during the Q1 earnings call that he "respects the WGA." Well, isn't that sweet? A heartfelt speech from a giant reading off a teleprompter right before it squashes you. The truth is, while Netflix is not the cause of these issues, it plays a part in the looming narrative of an industry that's squeezing the life out of its in-house talent.

So, yes, Netflix is turning a disadvantageous strike into an opportunity to grow its subscriber base. It's a solid business strategy. There's no crime in making a profit. But there's a thin line between strategic excellence and corporate vampirism. We may want to consider whether we're watching an entertainment product or a gladiator-style corporation mistreating its crew while we recline on our sofas.

These strikes reveal the darker side of an industry. Let's not neglect the smaller players. Let's pay a moment's heed to the writers and actors that are fighting for equitable treatment and pay. After all, without them, Netflix wouldn't have any content to stream. Here's to hoping Netflix remembers that during their next earnings call.

Let's have a little show called: "respect and fairness in the workplace". And Netflix? You get the starring role.