6:14 AM PDT 5/1/2017 by Georg Szalai The Monday night expiration of Hollywood studios' current contract with the WGA comes as Hollywood conglomerates are gearing up for their quarterly earnings reports, and Wall Street analysts say a potential strike has as of late affected the stocks of sector companies.
"The combination of the very high likelihood of a writers strike, a mixed ad outlook and weak ratings have been weighing on the stocks recently," Jefferies analyst John Janedis wrote in a research report last week.
We see an extended strike as painful for WGA members, and disruptive to studios and the local economy and believe both sides are incentivized to reach (what we anticipate will be a valuation neutral) compromise." Wunderlich Securities analyst Matthew Harrigan said a possible strike "clearly most affects those with assets concentrated among networks dependent on scripted programming," while the likes of Walt Disney and Comcast/NBCUniversal are "more diversified, less exposed." And CFRA Research analyst Tuna Amobi tells THR: "If history is any guide, we expect the initial impact on entertainment stocks to be relatively muted, but this assessment could change if a near-term resolution proves elusive and a resulting strike drags on for a longer-than-expected duration." He added about the risk of a longer-term labor disruption: "Broadcast TV networks with more exposure to scripted TV programming could be vulnerable during the upcoming 2017-2018 season; such uncertainties could also cause some advertisers to reduce their allocation of TV spending at this year’s upfront, perhaps shifting a bit more to digital ads." And Amobi said: "The major film studios tend to have a longer development pipeline, although some collateral damage is also conceivable, including some high-profile franchise sequels, as reminiscent of the last strike.
"We spoke with Imax management and, along with beginning to shoot the episodes in Hawaii in early March, Imax has already completed scripts for six of the season's eight episodes," wrote Wold.