The ripple effect

Strike a small blow to conglomerates

Wall Street firm Bear Stearns in a recent report asks producers and writers: "Can't We All Just Get Along?"

Bear Stearns concludes that the answer could be "no" for some time, since talks between WGA strikers and the AMPTP have broken down twice.

The report, a primer on the Hollywood writers' strike, seeks to figure out how the ongoing labor disruption might affect stock prices of the media conglomerates.

The answer is: not much.

Even if the writers' demands are met as now proposed, their new wages and reuse fees will amount to just $32.2 million for Time Warner over the next three years.

After TW, the new WGA contract would impact NBC Universal most, at $23.2 million over three years. After that it's News Corp. ($19.5 million), Walt Disney ($19.3 million), Sony ($16.9 million), Viacom ($16.5 million) and CBS ($4.9 million).

At most, predicts Bear Stearns, a new WGA contract will knock 1% annually off of the earnings per share of the companies named above, and that is after factoring in a five-times multiplier to account for the ripple effect of a beefier contract for the DGA and SAG.

Furthermore, one of the big issues being fought is over a cut of new-media revenue, and Bear Stearns uses WGA estimates as to the future size of that market. But Bear Stearns calls that estimate "fairly aggressive."

Bear Stearns also makes the case — as others have — that the strike could be a good thing in the medium term.

"Networks should benefit from lower programming costs as they will likely replace scripted programming with lower-cost reruns and/or reality programming," the report says.

Networks could also benefit by using the strike to alter fundamental parts of the TV business, including revamping the pilot process, expanding the development season and by replacing the fall TV season rollout with a more gradual one. The latter strategy could save hundreds of millions in off-air marketing expense, Bear Stearns argues.

There are downside risks as well, one big one being that a significant number of TV viewers who seek content elsewhere during the strike will permanently lose a measure of interest in TV.

Other risks include an acceleration of the shift of ad dollars to the Internet; next year's upfront being knocked down; and a loss of programming in the pipeline hitting ancillary revenue streams.