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Netflix Should Cut Its Own Deal with Writers and Actors, According to This Analyst

Netflix is the big bad of the dual strike, portrayed as the streaming disrupter that made the industry reshape its business models and gutted residuals. But what if Netflix could be… the hero?

Michael Pachter, entertainment analyst and managing director at Wedbush Securities, believes Netflix could be the first of the AMPTP giants to settle. Not that they’re necessarily “willing” to give in to any demands now or in the near future, he said, but they “should consider this.”

Pachter first raised this possibility on an episode of Matthew Belloni’s podcast “The Town,” speculating that Netflix could compromise on data transparency and agree to the guilds’ residual demands.

“They unilaterally step out and strike a deal. That pressures everyone else to incur even greater losses, which they probably won’t do,” Pachter said on the podcast. “It’s absolutely going to impact everybody, but the guy who settles first looks like the hero, the friend of the industry, and they can do it and screw everybody else, and that is who they are.”

In an email exchange, IndieWire asked Pachter what it would take for Netflix to get to that point. He said that settling the strike now before the rest “strengthens their competitive position.” And he had the math to back it up.

Stranger Things Millie Bobby Brown
Millie Bobby Brown in “Stranger Things”Courtesy of Netflix

Pachter estimated that roughly 20 percent of all content available on Netflix is an in-house, domestic production, with about 30 percent international production and 50 percent licensing. Since the WGA strike began, Netflix has shifted to international production that’s not covered by the guild. So if the strike were to drag on, Pachter said, Netflix would lose “only” about 15-20 percent of its content. Others could lose as much as 50-60 percent.

That also informs why Netflix would seem most likely to dig in its heels. Other studios, with linear TV and theatrical releases to worry about, or without a toilet-paper-delivery business or amusement parks, would lie bleeding.

So why would Netflix be most likely to settle first? Because “it costs Netflix less to concede than it costs the peers,” Pachter said.

He reasons that if the cost of production rises due to the AMPTP accepting the actors’ and writers’ demands, Netflix’s overall costs would rise by a smaller percentage than its peers. For instance, let’s say production costs go up 10 percent (SAG-AFTRA is requesting raises of 11 percent). That 10 percent increase would apply to the 20 percent of Netflix content produced domestically. Overall, Netflix’s production cost would increase by 2 percent. Other studios with more domestic productions would feel a bigger impact.

“Since Netflix is profitable, and all of its peers other than HBO are not, this increase could make them less viable and less of a threat,” Pachter said. “A first move by Netflix also sets them up to look like the good guys.”

One of the major sticking points has been the issue of data transparency. Both guilds believe that more streamer data is essential to getting paid fairly in residuals and allowing talent to negotiate better rates. Pachter said streamers want to protect that data not to hide their hits but to “avoid the embarrassment for their stinkers.”

“The production contracts are typically set up with a fixed rate for season 1 and a different rate after that season has aired,” he wrote. “It’s hard to know if Netflix will budge on this (I think they will not), but if the actors and writers get residual viewing data on season 1 after season 2 has launched, they are in a position to negotiate season 3 rates. This is all pie in the sky, but I think that it is a reasonable compromise.”

Ted Sarandos Greg Peters Netflix
Netflix Co-CEOs Ted Sarandos (left) and Greg PetersGetty Images

What’s to stop Apple or Amazon from doing the same thing? Well, nothing. Pachter said it would not only be unreasonable for Netflix to say no to more data transparency, its hand could be forced if a rival gives in.

“I have no idea if any of the others will offer a deal, but the longer they balk, the less enamored the writers and actors become,” he wrote. “The first mover here gains a big advantage negotiating new deals.”

The WGA has precedent for an organization stepping out from its larger trade organization to cut a deal. After the WGA talks broke down with the Association of Talent Agents over what the guild saw as a conflict of interest with packaging fees, the writers guild held firm until individual agencies one at a time agreed to a deal. WME was the final holdout in June 2021, ending a 22-month standoff.

The AMPTP is a different beast: It represents over 350 studios and production companies that are dealing with a two-guild strike, making it far less likely that Netflix would step out. An AMPTP rep declined to comment. WGA is meeting with AMPTP on Friday in the hopes that formal negotiations can soon resume.

In 2019, Netflix also forged its own SAG-AFTRA contract and re-negotiated new terms again in 2022. That agreement specifically covered Netflix programming and provided fixed residuals for stunt performers, protections for Spanish-dubbing actors, and other improvements to exclusivity rules for series regulars. But as Duncan Crabtree-Ireland recently told us, Netflix made a point to join the AMPTP and sync up its agreements with the larger, industry-wide negotiations this year. When asked whether the guild would consider negotiating with a studio individually, Crabtree-Ireland didn’t rule it out.

“Anything’s possible. I wouldn’t rule it out. However, I have no reason to think that that is likely or that’s going to happen,” he said. “Anything that helps us achieve a fair deal and help to keep the strike as short as possible would be something we’re interested in.”

The real trouble is, neither strike is solely about money. The WGA is demanding a minimum number of writers employed on a given show as a means of preserving the writers room and providing long-term growth opportunities for younger writers entering into the field. SAG-AFTRA is also at odds with the studios over revenue sharing on streaming programs, which the AMPTP says is a non-starter because it puts the burden on the production companies, not the streamers themselves. And don’t get us started on AI.

Netflix did not respond to a request for comment on this piece, but Sarandos said on the most recent earnings call that the company is “super committed to getting an agreement as soon as possible.”

But if all else is equal, Pachter’s best guess is that Netflix will wait to settle until late September after the fall TV season has failed to materialize, and “the strike will wear on for another month after they do.”

“If they don’t settle, this could drag on for a long time,” he said.



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