With contract negotiators facing a midnight deadline, Moody’s Investors Service estimates that a deal with the Writers Guild of America would cost the major studios $100 million to $125 million per year, but a strike could last as long as three months.

The credit rating service, in a report issued Monday, said that such a work stoppage would negatively impact the credit standing of weaker media companies with limited financial flexibility. Movie theater companies would be most at risk if there is a long strike, followed by broadcast TV networks and premium pay-TV channels while well-diversified movie studios, broadcasters with strong balance sheets would be least at risk.

Variety reported that negotiators for the WGA and Hollywood studios left the bargaining table Sunday evening with more cautious optimism about the prospect of avoiding a strike than when they sat down earlier in the day. The WGA’s current three-year master contract with the Alliance of Motion Picture and Television Producers expires at midnight PT tonight.

Moody’s estimated that a deal with the WGA would cost media companies an additional $100 million to $125 million annually. Its report, written by Neil Begley and John Diaz, also noted that it’s become more difficult for companies to stockpile scripts than it was during the last strike.

“Leading up to job actions of this nature, there is usually a lot of preparation similar to what studios and networks did in 2007, such as accelerating production and building up content inventory to offset the impact of strikes,” they wrote.

“However, with more platforms and a greater percentage of original programming being aired, there is an unprecedented demand for television content that has created scarcity of production facilities, equipment, workers, etc. It has become extraordinarily difficult, if not impossible, to materially preempt the effect
of a strike by accelerating production. We believe this could make the writers more confident.”

All but one of the six previous WGA strikes have lasted for at least three months. The last strike lasted 100 days from Nov. 5, 2007, to Feb. 12, 2008.

“If the sides fail to find common ground and the writer’s strike again, we believe there could be another three-month standstill,” Begley and Diaz said. “If a strike occurs but is shorter in duration, we do not expect it to seriously hurt revenues and cash flows, particularly at large, diversified investment-grade companies. Ultimately, strikes of this nature typically result in short-term softness tied to the lack of new content, pushing out the timing of planned releases of theatrical films and scripted TV series, despite the evolution of the industry over the last decade.”

The Moody’s report also said a long strike of at least five months could prove opportunistic for a few, but bothersome and even dire for many media companies that rely on studio content.

“Most at risk if there is a protracted strike would be movie theater companies, followed by broadcast television networks and premium pay-TV channels, especially companies that are highly leveraged or weakly positioned relative to their existing credit ratings,” Begley and Diaz said.

“Least at risk would be major studios and broadcasters that are well-diversified and have relatively strong balance sheets. If a writers’ strike against TV and movie studios occurs and turns into a long walkout, weaker media companies with limited financial flexibility could see their credit standing suffer.”

The WGA West told its members on April 28 that its proposal to the companies at that point would cost employers $156 million annually in increased payments to writers. “The cost of settling is reasonable,” it added.