Big ratings agency Moody’s Investor Services estimated that new contracts with writers and actors will cost Hollywood studios at the high end of $450 million to $600 million a year more.
Absorbing that cost, spread over a large number of projects, won’t pose a credit risk for the studios in isolation, it said, noting that spending had already reached global records of well over $100 billion to support the streaming wars. But the firm doesn’t believe studios will change overall production budgets to accommodate the higher costs given the priority on “sustained profitability”, and some will even trim spending. Nor does it think they will reduce volume — which ha only recently started to ramp up post-Covid before the strikes hit,
That means cutting costs on productions.
“The companies are unlikely to reduce production volume materially if at all to accommodate higher costs. Instead, we believe they will look for cost savings that will not materially impair the volume of film and TV throughput or the quality of storytelling that will be noticed by audiences,” said Moody’s.
That includes trimming the use of A-list talent and less filming on location and increased use of soundstages and green-screens. They’re likely to trim postproduction spending and special effects.
“We believe that there are significant opportunities to tighten the budget processes given well known industry excesses, and studio executives will to do this exists given the secular pressure on linear television distribution, thin margins in film and collective industry losses in streaming.“
SAG-AFTRA announced a deal with the AMTPT this week following an agreement between studios and WGA in October.
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