This month, the actors’ union SAG-AFTRA took up its own picket signs alongside the already-striking writers’ union, putting further pressure on Hollywood studios to agree on terms concerning residual pay in streaming and the use of AI in TV and filmmaking. But advertisers may play a role in bringing them to an end.

This year’s TV upfront negotiations, already expected to be prolonged as advertisers take extra budgetary precautions due to economic uncertainty, now contend with production on scripted content coming to a halt.

While the length of the WGA and SAG-AFTRA strikes is impossible to tell, they’ve already made apparent numerous implications for the TV advertising market—the migration of dollars to streaming, audience fragmentation, competition from digital video platforms such as TikTok and YouTube and the ways studios use influencers to market their content.

“Unfortunately, [the strikes] could go on for quite a long time, but as they do, they get worse for everyone over time,” said Jacqueline Corbelli, co-founder and CEO of Brightline, the company that provides the tech for major TV companies’ interactive ad units. “Getting delayed upfront commitments adds a really important layer of pressure on the studios and streamers to negotiate [with the unions] with more speed and willingness.”

As media companies have sought ways to reduce the cost of producing content for streaming, advertising has become a necessity for monetizing digital audiences, whose subscription fees alone weren’t enough to fund the hundreds of millions now spent on many series. And as fresh content threatens to wane should the strikes continue, consumers already struggling with subscription fatigue may begin questioning the value of cable or streaming payments.

Writers’ union reaches out

Negotiations between media companies and agency buyers have begun wrapping—multiple buyers said they were approximately 80% done with their dealmaking as of late July, with the major sellers such as NBCUniversal, Disney, Warner Bros. Discovery and Paramount already completed. But phase two of the upfronts, in which clients agree on dollar amounts and place orders with each media company, may become complicated as the strikes’ impacts have yet to be determined.

“If there were no strikes, I have a high degree of confidence that there wouldn’t be a ton of churn from hold to order, because the budgets were already somewhat conservative and already down in a lot of cases,” said one agency buyer.

If the strikes continue, causing more upsets in new content, clients may begin to either cut their commitments or continue forward with intentions to take options.

The buyer also noted the WGA had sent correspondence to prompt them to leverage the strikes into their negotiation talks with sellers. The emails, reviewed by Ad Age, began by calculating the number of series that had halted production due to the writers’ strike—50 series each on linear and streaming before the actors’ strike disrupted numerous more this month. The letter then listed questions buyers might pose to networks: “How are you addressing the risk that diminished content slates resulting from the writers’ strike may lead to viewership declines or subscriber loss?” and “What are your plans to end the strike and unfreeze the content pipeline?”

The buyer said their agency had not participated in direct conversations with media companies or the Hollywood unions about negotiations to resolve the strikes.

One network executive said that if the strikes continue past Labor Day, that would start to more urgently trigger alarm bells for advertising revenues. “Advertisers don’t go to order until October,” said the executive. At that point, clients might start shaving percentages off of their spend with TV companies, said the executive. “The sales forces are saying to the powers that be, ‘You better have this figured out by Oct. 1, or we’re going to see some changes.”

Short-term implications

While multiple media buyers agreed the strikes haven’t currently thrown existing upfront negotiations too far off course—commitments are already smaller given current economics and flexibility continues to be incorporated into agreements since the onset of the pandemic—they won’t go completely unnoticed. 

“It’s definitely worse short-term for linear TV, but it's going to impact streamers’ pipeline down the line as well if it lasts,” said a second media buyer. “The ugly truth for scripted linear is the ratings are so low that the drop between what the scripted stuff would have delivered in fourth quarter to what replacement reality and game shows will deliver is not significant,” a primary difference from the writers’ strike in 2007 that derailed negotiations.

A third buyer said the strike amplifies the unsustainable pricing of primetime inventory on linear TV. “The media companies have shown that they're not investing in primetime,” said the buyer, adding that the networks’ resources are being poured into streaming and tech so “why would we continue to fund their future development of a DTC business by paying ridiculous prices in primetime and areas of the marketplace where they’re not even trying to gain audiences back.”

Entertainment programming, inclusive of both scripted and unscripted content, makes up about 60% of linear ad dollars, according to ad data platform Guideline. Sports make up a third of linear spending. Already, the major linear networks have debuted fall primetime schedules with notably fewer scripted series, instead populated with sports, reality and game shows. The network executive said live sports, which maintains a steady cadence through fall seasons and into marquee events like the Super Bowl and Olympics next year, remains the top playing card for pitching advertisers on linear TV.

For the 2022-2023 broadcast year, the 10 most expensive linear primetime programs to advertise during, per Ad Age’s TV pricing chart, consisted of two NFL properties, three scripted series and five unscripted series. While the ad pricing for over half of all returning series had declined by more than 5%, a greater percentage of scripted series declined in pricing than unscripted series.

While linear may see the most immediate impact, streaming may conversely receive a short-term boost. As reruns become meaningful to both TV formats, streaming is innately more friendly to consumers’ selecting their favorite shows on demand, and some platforms such as Netflix, could boost their numbers by importing foreign programming not affected by the striking unions. 

Netflix recently forecast 2023 free cash flow of at least $5 billion, up from a prior forecast of at least $3.5 billion, due to lower expected spending on content, citing the timing of production starts and the strikes. The streamer, as well as other platforms, had previously announced it would slow the pace of productions in order to increase profitability, and the strikes may also send more users to streamers’ ad-supported tiers as higher-priced subscriptions may seem less desirable for rewatching content. 

Brightline’s Corbelli said the timing is lucky for Netflix, but “of course, it’s temporary because there's only so long before they're going to have to produce more content.”

In the long term, the first buyer said the strikes could drive clients' dollars away from TV altogether “if it’s not getting the incrementality that we need,” naming YouTube and social video platforms such as TikTok as likely beneficiaries.

Will the strikes impact TV pricing?

Conversation around this year’s upfront market was largely around rollbacks in the pricing of TV inventory. Media buyers previously told Ad Age the cost of advertising in digital would fall by high single-digit percentages, with linear inventory falling by double digits.

However, as the abundance of inventory reverses course and becomes scarce against new releases, Darrick Li, VP of sales, North America Media Owners, at Guideline, said pricing could rise.

“As [the strikes] continue to drag into the fall, we’re probably going to see pricing start to go back up,” said Li. “You’re going to have CPMs [the cost to reach 1,000 viewers] for live sports go up, and you’re going to have CPMs for reality shows go up as well, especially as they appear more in primetime.”

The supply-and-demand rationale for linear TV may be less clear in the complex streaming marketplace. Brightline’s Corbelli predicts the strikes will at best be leverage for streamers to “hold on their pricing, which advertisers consider too high right now.”

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“A lot of things have to play out before [lack of supply] is a real issue,” said Corbelli. “The psychology will help the studios support their argument that you can’t expect us to reduce pricing at this point,” said Corbelli. “But can they use it to actually increase their prices? No.”

Influencer marketing

With SAG-AFTRA members steadfastly refusing to promote any upcoming films, TV series or other content from struck companies, those media companies will likely look to creators to fill in those gaps in their marketing.

For this month’s premiere of “Haunted Mansion,” for example, Disney invited a slew of influencers and Disneyland cast members to walk the red carpet in place of absent actors such as Owen Wilson, Rosario Dawson and Danny DeVito.

Media companies extending red-carpet invitations to influencers and tapping these creators to promote the launch of films or TV series with social media content is not a new phenomenon. But the strike will likely push these companies to rely more heavily on creators and accelerate the “collision course” that influencers and traditional entertainers have been on for the past few years, said Geoffrey Goldberg, co-founder and chief creative officer at Movers+Shakers. 

“In the last year, all of a sudden every red carpet event has had influencers at them,” he told Ad Age. “We’ve seen a huge increase in movie studios and TV studios working with the influencer community, so that won’t necessarily be new. The thing that will be interesting to watch, especially with larger influencers, is whether we’ll see more trepidation from them to engage with studios during this time.” 

In a list of influencer-specific guidelines surrounding the strike that SAG-AFTRA shared last week, the union urges creators not to promote struck companies or their work, whether as part of a paid brand deal or as unsponsored social media content. Non-union creators who cross the so-called digital picket line during the strike will be barred from joining the union—which began allowing influencers into its membership in 2021—down the road, according to the guidelines. 

“Many digital creators do have those more traditional aspirations” of transitioning from social media to acting, directing or other roles in the entertainment industry, making them hesitant to promote struck media companies, said Victoria Bachan, president of Whalar’s talent management division. She anticipates larger influencers—those with followings in the hundreds of thousands or millions—will be most strict about refusing to work with media companies during the strike, while smaller or part-time creators may have fewer reservations. 

“Even if we remove the idea of paid work right now, from an organic perspective, we are having a lot of conversations with our clients on how to navigate the strike,” Bachan said.

The union will likely also introduce additional guidelines for creators as the strike continues, she said. Case in point, the union put out supplemental guidelines for podcast creators in the days following the release of its rules for influencers that ban creators in the union from hosting or appearing on any podcasts that promote struck companies or work. Again, any non-union influencers who discuss these media companies or their work on their podcasts will be unable to join SAG-AFTRA in the future. 

And even for creators who don’t have Hollywood aspirations, the potential negative backlash they could face for partnering with media companies during the strike could also drive influencers to turn down brand deals, Goldberg said. TikTok users called out many of the influencers who attended Disney’s “Haunted Mansion” premiere, including singer and dancer Andra Gogan, referring to them as “scabs,” a derogatory term for those who work with struck companies. Gogan has since deleted her videos from the movie premiere and others, such as Victor Garibay, have turned off the comment sections on posts tied to the event.

“We're going to see a lot of creativity when it comes to how the studios collaborate and partner with creators,” Goldberg said.

For example, media companies could go beyond brand deals and work with creators on new content series to fill in programming gaps as the strike continues, he said. Many of the partnerships between media companies and influencers had already begun shifting in the direction of “co-created work” prior to the strike—and this trend is likely to continue among creators willing to cross the digital picket line, he said.

“I imagine there's going to be many people who might still partner with studios for those releases,” Goldberg said. “But we’re definitely hearing from a lot of the influencer community that there's a lot more reticence in working with a struck brand right now.”