Netflix seems immune (so far) from Hollywood’s shutdown

Their point was underscored Wednesday by Netflix’s fiscal second-quarter results that highlighted strong profits aided by lower content spending.

Read more: Netflix earnings bring big subscriber windfall, but stock gets dinged on light revenue forecast

The entertainment strikes are “not an outcome that we wanted,” Netflix Co-Chief Executive Ted Sarandos said during a video conference late Wednesday discussing the quarterly results. “We are constantly negotiating with writers, producers, studios… We are super committed to an equitable resolution.”

Sarandos declined to comment on how long Netflix’s trove of movies, TV series and unscripted content will last.

But analysts said Netflix’s bottom line benefited greatly from the strike on several fronts.

“Today’s results show that lower content spend and higher ad revenue is the name of the game for streaming companies to turn a profit. In the short term at least, the Hollywood strikes are indirectly helping companies crack the code of profitability,” Scott Purdy, KPMG’s U.S. national media leader, said in an email message. “Long-term though, the strikes could create a scenario of massive churn and lower ad revenue for streaming companies.”

In a letter to shareholders Wednesday, Netflix executives said they expect at least $5 billion in free cash flow for 2023, up from a previous estimate of at least $3.5 billion. “Our updated expectation reflects lower cash content spend in 2023 than we originally anticipated due to timing of production starts and the ongoing WGA and SAG-AFTRA strikes,” they wrote.

Netflix Chief Financial Officer Spencer Neumann said the company would remain flat in content spending from 2022 through 2024.

Netflix’s position as a streaming leader has made it an avatar of anxiety for Hollywood writers, many of whom have dubbed this year’s labor action ‘the Netflix strike.’”

Also see: Striking actors, writers, hotel housekeepers and grad-student workers have one thing in common

“Netflix in a lot of ways has upended the business model, and broken it in fundamental ways,” Jaclyn Moore, an executive producer and writer for “Queer as Folk” on Peacock and “Dear White People” on Netflix, told the Los Angeles Times in May from the picket line near Netflix’s Los Angeles offices. She and others point to how many writers have been harmed by changes wrought by Netflix and other streaming services in how shows are created and how writers are compensated.

Picketing was planned outside Netflix’s Silicon Valley headquarters in Los Gatos, Calif., on Thursday afternoon by those in support of striking SAG-AFTRA workers.