Netflix could play a key role in upcoming Hollywood labor drama

As Hollywood’s major unions gird for potentially contentious contract negotiations with the major studios, streaming giant Netflix is moving to hash out its own labor deals that could give it a competitive advantage in the event of a strike.

This summer Netflix negotiated its first overall agreement with actors union SAG-AFTRA. Last month the International Alliance of Theatrical Stage Employees (IATSE), the union that represents Hollywood’s craftspeople and technical workers, revealed it will negotiate its own contract with Netflix. And labor experts expect other Hollywood unions will seek their separate agreements with the streaming giant.

“I believe that we are not alone in Netflix’s outreach to secure a deal,” David White, SAG-AFTRA’s national executive director and chief negotiator, said in an interview. “I think it makes total sense for them to want independent deals and to not worry about the possibility of industry labor strife that their competitors will have to be concerned about in upcoming negotiations.”

Netflix has the ability to go it alone in labor negotiations because unlike Hollywood studios such as Disney — as well as tech rivals Apple and Amazon — it does not belong to the Alliance of Motion Picture and Television Producers (AMPTP), the collective bargaining group that represents studios in negotiations with unions representing actors, writers and directors.

As a result, Netflix would not be subject to any contract dispute that erupts between the unions and the studios should they fail to reach agreement on new film and TV contracts — all of which expire next spring or early summer. Writers, actors and directors could continue to work on Netflix shows even if they staged a walkout with members of the producers alliance.

Some believe that could provide union leaders more leverage in upcoming negotiations, while potentially giving Netflix an advantage over rivals who could face a disruption in production.

The streaming revolution that Netflix ignited has heightened labor tensions in Hollywood. The growth of streaming services has changed the way writers and actors make money, offering them large up-front sums for their work rather than payments based on a show’s long-term popularity.
With the evaporation of the syndication market, hit series no longer have a long shelf life and TV seasons also have shortened considerably, creating more economic uncertainty for writers and others.

Many industry watchers view the months-long standoff between the Writers Guild of America and talent agencies over packaging and other deeply unpopular practices as a precursor to a larger fight with the studios that could erupt next spring. WGA leaders have dismissed talk of a strike as premature and intended to scare members into accepting an inferior contact to replace one that expires May 1.

The WGA West declined to comment, but its president has already signaled a willingness to negotiate separately with Netflix if the union cannot reach an agreement with the producers alliance.

“If they pushed us to a strike, the threat that Netflix or another company would make an interim deal and keep producing new product is very real,” wrote President David Goodman in his candidate statement earlier this year.

Netflix declined to comment, as did a representative of the AMPTP.

As it has bulked up in other areas, Netflix has also taken steps to build its own labor relations team.

Stephen Carroll, a former senior vice president and senior labor relations counsel at Warner Bros. Entertainment, joined last year as Netflix’s head of labor relations. His department has roughly 20 people. Prior to his job at Warner Bros., Carroll was a vice president at AMPTP.

It’s no surprise that Netflix would not want to join the alliance, given its often tense relations with legacy studios that are now scrambling to compete with it. The Los Gatos company’s interests aren’t aligned with those of the major studios that have other types of businesses, such as broadcast and cable networks, industry analysts say.

“The studios just have a different distribution model than Netflix and when they are at the table, they have an entirely different set of concerns,” said Schuyler Moore, a partner at Los Angeles law firm Greenberg Glusker.

Netflix touted the singular focus of its business — an on-demand subscription streaming service.

“I think the bigger you are, the more distractions you have to your core business, the more likely you can’t move as quickly as we’ve been able to through our history,” Chief Content Officer Ted Sarandos told The Times recently. “The new set of competitors is actually just the old set of competitors.”

Indeed, the company, which has long dominated the subscription video streaming industry, is now facing an onslaught of competitors, including Disney+, HBO Max and Apple TV+, and studios are moving popular licensed shows off the Netflix platform. To fill its library, Netflix has a content budget of $15 billion in cash this year, some of which will fund original series and movies.

The company lists in its annual report that one of the risks to its business are labor disputes.

“If expiring collective bargaining agreements cannot be renewed then it is possible that the affected unions could take action in the form of strikes or work stoppages,” Netflix wrote in its annual report. “Such actions, as well as higher costs in connection with these collective bargaining agreements or a significant labor dispute, could have an adverse effect on our business by causing delays in production or by reducing profit margins.”

Despite concerns about how streaming has changed compensation, some unions believe they can benefit from deals with Netflix.

SAG-AFTRA, for example, had tried for years to persuade studios to cover actors who used performance capture technology. Netflix agreed to the demand in its most recent contract with SAG-AFTRA signed in July.

While the Netflix agreement did not cause any change in the rate of residuals, whatever SAG-AFTRA is able to negotiate with AMPTP will apply to Netflix, White said.

“Any improvement that we negotiate in this next round of negotiations, Netflix has agreed to adopt that as well,” White said. “That is a very positive, most-favored-nations-type provision that we’re quite happy with.”

The agreement, however, includes a provision that allows Netflix to opt out of any provisions that “adversely affect” it alone.

The Directors Guild of America negotiated an overall agreement with Netflix after it finished negotiations with AMPTP at the end of 2016. The Netflix agreement will expire on June 30, 2020.

The DGA, which typically bargains well in advance on when contracts expire, declined to comment.

Cathy Repola, national executive director of the Motion Picture Editors Guild IATSE Local 700, said in a recent podcast that she hopes her union is able to negotiate a new residual formula with Netflix “that will set the tone for the next negotiations with the AMPTP.”

“I think it’s imperative that we achieve something along those lines,” Repola said last month in the podcast “Post, Coast to Coast.”