Many take for granted what is needed to create content, whether it be the movies they watch in the theater or the tv and movies they stream on services like Netflix (NFLX).
Your favorite shows, and yes, even reality television shows require writers. These writers belong to the Writers Guild of America and after weeks of negotiations with Hollywood’s major studios broke down, the union voted to strike.
Ok, so why does that matter? Well, the cost to the entertainment industry is roughly $200 million a day after writers closed their laptops and joined the picket lines.
The last time the union went on strike was in 2007 and it lasted for four months. It helped launch the start of reality tv before reality tv became scripted-reality tv.
How does this impact the market? Streaming services are in desperate need of content to keep people locked into the service. There won’t be new content without writers.
Paramount (PARA) dropped 28% yesterday. Yes, I know that’s not all due to the writer’s strike.
But think of Netflix (NFLX), Amazon Prime Video (AMZN), Peacock (CMCSA), Disney+ (DIS), and others that rely on content to be generated in faster timeframes than any other time in entertainment history. There was no such thing as binge watching and now that’s how the majority of content is consumed.
What will happen to these streaming services if the writer’s strike lasts four months like the last one?
Watch for communications services to feel pressure until this gets resolved.
The trade idea for the day is based on a concept more than a specific trade with entry prices.
Shopify (SHOP) surprised earnings and sold its logistics business to Flexport.
I’ve also been writing about the companies that are announcing layoffs and cutting expenses that are getting rewarded in the market. They are reducing their workforce by 20% and integrating artificial intelligence. Many are now using chatGPT in Shopify.
Any time a company can reduce expenses (workforce) and integrate artificial intelligence to increase productivity, that’s a potential recipe for an increase in stock price.
Oh, an increase in sales year-over-year is also helpful.
Due to the earnings report, SHOP gapped up. Wait for a pullback and look through your knowledge base of bullish strategies to use on SHOP.
Keep SHOP on your watchlist for at least the next quarter.
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