Major studios and networks including Disney and Netflix are locked in talks with the powerful Writers Guild of America (WGA), which has threatened to order a walkout just after midnight Tuesday unless a new deal is agreed.

If a strike takes place, late-night shows could immediately grind to a halt, and television series and movies scheduled for release later this year and beyond could face major delays.

The last time talks failed, in 2007, Hollywood writers laid down their pens and keyboards for 100 days, costing the Los Angeles entertainment industry around $2 billion.

This time, the two sides are clashing as writers demand higher pay and a greater share of profits from the boom in streaming, while studios say they must cut costs due to economic pressures.

“I think everybody feels like there’s going to be a strike,” said one Los Angeles-based TV writer, who asked not to be identified.

“This is a deal that’s going to determine how we are financially compensated by streamers,” not just now but well into the future, they said.

Streaming ‘residuals’

Many of the issues are familiar to contract talks in industries around the world.

Writers say it is becoming impossible to earn a living, as salaries have flatlined or declined after inflation, even as employers reap profits and fatten executives’ paychecks.

More writers than ever are working at the union-mandated minimum wage, while shows hire fewer people to script ever-shorter series.

A key issue is reworking the formula that calculates how writers are paid for streaming shows, which often remain on platforms like Netflix years after they were written.

For decades, writers have been paid “residuals” from reuse of their material, such as television re-runs or DVD sales.

These are either a percentage of studios’ receipts for the film or show, or a set fee each time an episode is replayed.

With streaming, writers simply get a fixed annual payout – even if their work generates a smash hit like “Bridgerton” or “Stranger Things,” streamed by hundreds of millions of viewers around the world.

“These amounts remain far too low for the global reuse of WGA-covered programming on these massive services,” says the guild.

The WGA has vowed to “improve these residuals so that writers share in the global success of the programming they create.”

It also wants to address the future impact of artificial intelligence on writing.

‘Challenged’

Unsurprisingly, the studios – represented by the Alliance of Motion Picture and Television Producers (AMPTP) – have a different take.

They note overall residuals paid to writers hit an all-time high of $494 million in 2021, largely thanks to the boom in writing jobs driven by the explosion of streaming content.

That was up by almost half, from $333 million, a decade earlier.

They also dispute suggestions that studios are falsely claiming economic hardship to bolster their negotiation position.

“Do you think that Disney would be laying 7,000 people off for fun?” said a source familiar with the AMPTP’s position.

“There’s only one [streaming] platform that’s profitable right now, and that’s Netflix. The movie industry… that’s a pretty challenged segment as well.”

After the spendthrift past few years, when rival streamers chased subscriber growth at any cost, bosses are now under intense pressure from investors to curb spending and deliver profits.

‘Picketing’

With the midnight (0700 GMT Tuesday) deadline looming, the two sides could agree to a last-minute deal, temporarily extend talks, or walk away and prepare for picket lines.

The industry fears a ripple effect.

Several other Hollywood unions have voiced solidarity with writers, including the actors’ SAG-AFTRA, and the directors’ DGA. Both will hold their own talks with studios this summer.

“The greatest amount of leverage we collectively bring to a strike action is the withdrawal of our labor,” the WGA wrote to members Sunday, in a message seen by Variety.

“Picketing is a key tactic to demonstrate that we are all in this together, and that until a strike is resolved, it’s not business as usual.”