Netflix in trouble because of AI? The strikes are ruining business for streaming companies

Netflix, which has emerged as a leader in streaming services in recent years, disappointed Wall Street with second-quarter results that fell short of analysts' estimates. Shares fell 5% after the announcement.* The writers' strike, joined by a number of actors, no doubt played a role, causing problems in the production of further series and film sequels. In the background of the whole case is the hot trend of the time - the use of artificial intelligence. How does the American pioneer of cinema deal with it?

Actors and screenwriters strike

Not only Netflix, but also other companies in this segment are facing strikes by tens of thousands of Hollywood actors and screenwriters, which have caused the interruption or cancellation of many film and television productions. The strike launched by the Writers Guild of America (WGA) on May 2, 2023 is a long-term issue. Netflix has an advantage over its competitors in that its activity is measured globally, i.e. new movies and series are created all over the world. However, due to the current situation, it had to postpone the release of 6 new movies from this year to 2024. Delaying the expected movies could potentially deter many fans from paying for the streaming service.

AI in the spotlight again

The main reason for the strikes is the use of artificial intelligence, which for its training uses the works of screenwriters, their intellectual property, without the consent of their authors. The Screen Actors Guild - American Federation of Television and Radio Artists (SAG-AFTRA), an organization that represents more than 160,000 workers in the industry, has called a strike after union representatives said it was unable to reach an agreement with the studio on a new three-year contract with higher benefits and restrictions the use of their images by artificial intelligence. SAG-AFTRA is seeking an 11% across-the-board wage increase in the first year of the contract to compensate for inflation. Studios are only willing to accept terms with five percent.

Filing a complaint

The Alliance of Motion Picture and Television Producers (AMPTP), which represents major film production players such as Netflix, Walt Disney and Warner Bros., said SAG-AFTRA "continues to distort the course of negotiations." The strikers filed a complaint with the National Labor Relations Board (NLRB) against Comcast, accusing it of restricting picketing space, i.e., unionization, as part of their strike.

Stock value

From a five-year perspective, we can see that Netflix had its golden period during the pandemic, when most people were at home and streaming services were offered as the best way to enjoy quarantine. This year, which the company sees as a period of steady progress, Netflix shares have managed to increase their value by 31% and have gained 12% when looking at the five-year performance.* In the second half of 2023, the company's management expects to start using paid sharing in full and in addition will continue to steadily grow its ad-supported plan.

wonderinterest netflix

Chart: Netflix's stock performance over the past five years. (Source: Google Finance)*

* Past performance is no guarantee of future results

Olívia Lacenová, chief analyst at Wonderinterest Trading Ltd.


This text constitutes marketing communication. It is not any form of investment advice or investment research or an offer for any transactions in financial instrument. Its content does not take into consideration individual circumstances of the readers, their experience or financial situation. The past performance is not a guarantee or prediction of future results.

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