Writers Strike Looms Over Hollywood: Average Residual Checks Can Barely Cover An In-N-Out Burger

Hollywood's writers are preparing to go on strike against major studios like Walt Disney Co. DIS, Comcast Corp./NBCUniversal CMCSA, Paramount PARA, Warner Bros. Discovery WBD, Netflix Inc. NFLX and others.

What Happened: The Writers Guild of America (WGA) and the Alliance of Motion Picture and Television Producers have until midnight on Monday, May 1 to agree on a new three-year contract.

More than half of the WGA is receiving the minimum wage negotiated from the guild's previous contract negotiation.

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As streaming platforms continue to churn out new films and TV shows, or upload an existing series from a network, writers' residual checks have remained low — perhaps as little as $3.

According to "Thor" screenwriter Zack Stentz, "The formulas used to calculate the money owed for various forms of reuse are complicated and vary widely across platforms. As a result, the payments can be relatively tiny or very large — and one of the more delightful parts of being a working screenwriter is opening your mailbox and seeing the distinctive green envelope that residuals come in, not knowing if the check inside will cover an In-N-Out burger or your mortgage payment."

Why It's Important: The average writing gig in Hollywood is anything but lavish. A streaming studio like Netflix, Amazon Prime AMZN or Apple+ AAPL typically wants a series to go for just eight to 10 episodes a season. That's a far cry from the days when a sitcom like "Friends" would get at least 24 episodes per season.

Recall the last time writers went on strike, in 2007. Writers pleaded for compensation for movies and shows that were downloaded or purchased on DVDs. No one does either anymore. So the residuals from streaming are key to make ends meet.

The WGA's members make on average around $250,000 a year before taxes, union dues and commissions to agents, managers and lawyers, Stentz tells the New York Times.

The paydays have to last through dry spells that nearly every writer experiences when looking for that next gig, he explained.

The AI Factor: Another sticking point for the WGA is making sure that the writers do not have to share residuals in the event that tools supported by artificial intelligence (AI), such as ChatGPT, are used to author scripts.

Writers are concerned their jobs could be replaced by studios utilizing AI to draft stories and, as a result, avoid writers and paying royalties altogether.

The potential for AI disruption comes at a time when the entertainment industry is announcing sweeping layoffs and billions in losses.

What's Next: If an agreement with the WGA isn't reached, don't expect movie studios to be overly stressed — at least for now. Executives have reportedly braced for this strike scenario for months by stockpiling scripts.

There's also the go-to savior from the last writer's strike: reality TV. Unscripted shows were a boon in 2007.

Netflix CEO Ted Sarandos boasted during a recent earnings call that the company has a "robust slate" of content from across the globe that will take the streamer into "a long time."

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Image by Oli Lynch from Pixabay.