No Boost for Media Stocks on News of Screen Actors Guild Deal Closure

After a year of a contract dispute hanging over the Hollywood studios, the Screen Actors Guild finally voted to approve a new two-year contract, approving it by a vast majority. Now movie and TV productions can start new productions without even a hint of fear about potential labor conflict.

But you didn't see any celebration in the media stocks on this news; all the media giants, Disney (DIS), Viacom (VIA), CBS (CBS), Time Warner (TWX), suffered a decline along with the market.

The fact that media stocks didn't rally on the news speaks to the fact that this contract was considered a done deal months ago, and there was little real risk of a strike.

• Hollywood actors approve new labor contract

The media giants face a whole slew of issues that have nothing to do with the threat of an employee walk out, and their issues seem a whole lot scarier. There's the decline in advertising, the slowing of the DVD market, and the shift online, where to quote NBC Universal CEO Jeff Zucker, "analog dollars" are being traded for "digital dimes." (GE is the parent company of NBC and CNBC).

That question of the future of digital revenues was at the center of contract negotiations between SAG and the producers association, the AMPTP, and it's sure to continue to be at the forefront.

SAG's interim national director says that negotiations for the next contract, two years from now, will start nearly immediately to prevent this kind of stand off. And the question about ownership of digital revenues is sure to dominate that conversation. Who should own what part of digital rights? The writers, directors, and actors will all scramble for a bigger piece than what they got from DVDs.

The real question for the movie studios is not how much they should give up of those revenues, but how they can grow those revenues enough to be material. We'll see if two years from now when the next round of contracts is implemented if digital can be worth dollars, not dimes.

Disclosure: No position