Moody’s Investors Service says a strike by movie and television writers would not have credit implications for any media company unless it were to extend into next year – a time frame that the credit rating service says is unlikely. "We don’t think the strike will last long enough to seriously hurt revenues and cash flows, particularly of large, diversified investment-grade companies," said Moody’s Senior Vice President Neil Begley.
A protracted strike, however, would begin to have credit implications some time in 2008 as studios used up backlogs of new material and companies began to lose audiences and advertising revenues. "The consequences of a long strike could prove opportunistic for a few, but bothersome and even dire, under certain circumstances, for many media companies along the food chain that rely on the content studios produce and that have minimal financial flexibility," says Begley. A writers’ strike would most immediately affect the TV networks, then, if it continued, the premium cable channels, film and television production studios and finally the movie theaters, said Moody’s. The credit ratings of the movie theater companies are most at risk, though, because of already high leverage and dependence on the studio product. Least at risk are the ratings of the major studios and largest broadcasters, as these companies are well-diversified and have relatively strong balance sheets, according to Moody’s.