The SAG-AFTRA strikes: an investment perspective for production companies

The actors’ and writers’ strikes that have ground Hollywood to a halt have far-reaching consequences that go beyond the delay of productions. The industrial action, though taking place in the US, is greatly impacting those working both directly and indirectly in the industry in the UK. The result is a challenging time for many people, including freelancers, background artists, facility and supplier companies. And in addition to those direct impacts on production work are the implications for future funding and investment that may come a little further down the line.  

Our hope is for a swift resolution for all parties, but while many productions are on hold, there are questions about funding opportunities for production companies that are worth broaching. In this article, Creative UK Investment Manager, Nick Cavander, shares his take on what these developments could mean for content producing companies and their ability to raise finance. 

Nick Cavander, Investment Manager

Investment opportunities and challenges for production companies 

In my view, the companies most affected by the strikes are those working in scripted content with SAG-AFTRA and WGA union talent attached. And while the UK’s Bectu and Equity unions are not formally on strike, they are standing with the US unions, meaning the implications stretch further across the pond, especially with many UK productions intertwined with US union talent and studio finance.  

This is a situation with potentially different outcomes for companies based on their level of script reliance. Businesses on the scripted production side are seeing all union-involved income and commissions paused, though SAG is providing some waivers on qualifying productions. Conversely, many non-scripted, as well as non-union independent productions, may be able to progress and could benefit from greater access to short term crew and support. However, it is worth noting that Bectu has reported a significant dip in the UK’s unscripted TV sector, so we are not necessarily looking at an easy fix and up-and-coming production companies are likely to find themselves in a tight cash position due to their reliance on slate finance.   

On the post-production side, companies whose output includes non-scripted work may find their way through the strikes by focusing on content such as documentaries and reality TV. In some cases, they may even be busier than ever as streamers and broadcasters will have an enhanced focus on these areas. Companies relying solely on scripted content, however, will not see these opportunities. 

There is real concern for the bigger post-production companies typically servicing scripted work for streamers and studios. The same goes for film marketing agencies, VFX and virtual production companies, all of whom depend on those big US commissions coming through from the likes of Netflix and Disney.  

How can content producing companies work to overcome the challenges presented by strikes?  

We’ve seen how volatile the film & TV industries are so a long-term view is key. We went from a lockdown production ‘bust’ in 2020 to a post-COVID ‘boom’ in 2021 where the industry suffered a crew and tech shortage. But a recent 2023 Bectu survey on the effects of the strikes indicated 75% of freelancers are out of work and 25% were thinking of leaving the industry in the next 5 years. 

The post-2020 expansionary investment boom in UK production space means that capacity is currently dark as US productions aren’t flowing through. But once the strikes are resolved that investment should pay off and the crew and tech freelancers that support those entities will hopefully be able to return. A huge backlog of unspent production investment will release to service the demand that is currently building for new film & TV content. 

The first and most obvious route is for these companies to diversify their project mix, but in this industry, that is not easy. It takes a long time to build trust with key stakeholders and these relationships are essential in order to help a company pivot its approach.  

Where there is potential to diversify, production and post companies could consider looking to the big brand agency space to fill capacity – and they could look at their connections in documentaries or reality TV with a view to picking up ancillary work while they wait for the strikes to resolve.  

The effect on approaches to seeking investment 

The divergent experiences of (union) scripted and non-scripted reliant companies mean different investment approaches have to be taken during this challenging time. 

It may feel difficult right now – especially for those working freelance – but the demand for production will be there when there is resolution to industrial action, just as demand for production was experienced after the end of COVID-19 lockdowns. Script-reliant companies could use this time to get themselves investment-ready in preparation for when the pendulum swings back. For example, the BFI’s UK Global Screen Fund is an excellent place to look for grant finance for independent productions. 

Another positive approach would be to focus on developing an investability strategy. This means considering options around slate, equity and debt investment, preparing investment decks and deciding how you want to position yourself further down the line.  

Companies with cash flow could look at using debt, for example, to scale up quickly and put available industry resources to work on new documentary or reality projects. 

If taking the debt option, the pro is it’s non-dilutive, but the con is higher rates and eligibility requirements. Lenders will want to see that the debt can be serviced and secured, which requires predictable and visible revenues and a solid balance sheet. That’s not always possible for development companies to show, which is why for them, co-production, equity and slate finance are often the best options.  

Co-production deals really are the most useful aligned investment routes for film & TV production companies, even more so now that first-look and other slate finance deals are stalled, and anything connected to US union talent is on hold. Venture debt can work in instances where production companies have recurring revenue to service debt, say from animation or non-US productions. But, as most don’t have that, co-production with familiar finance partners makes the most sense. 

These are difficult times and not to be under-stated, but I would like to advocate for a tentatively positive approach when it comes to investment. If you have questions about investment, you can direct them to invest@wearecreative.uk.