Hollywood Writers Want to Strike Digital Riches

While Europe recently had to deal with strikes by railroad workers, taxi drivers and even bread makers, this past holiday season, striking workers in the U.S. hit consumers where it hurt most: the entertainment industry. The dearth of holiday cheer was due to a strike by the Writers Guild of America (WGA), the film and television writers’ union responsible for the majority of primetime programming in the U.S., which halted the writing of new episodes on November 5, 2007. Immediately, WGA members in its two key centers — Guild East, based in New York with 3,770 members and Guild West in Los Angeles with 7,627 members — started picketing studios (including FremantleMedia in Burbank).

The union initiated a strike after reaching a stalemate in contract negotiations with the representative body of studios and networks, the Alliance of Motion Picture and Television Producers (AMPTP). The writers’ three-year contract expired on October 31, by which time committees from both sides had reached an impasse on several financial and strategic issues. At one point the negotiations were so acrimonious that they even argued about the site of the negotiations.

Prior to the October deadline, the union voted by a margin of 90.3 percent in favor of a walkout. “The writers do not want to strike,” said WGA West president Patric M. Verrone, “but they are resolute and prepared to take strong, united action to defend our interests.” And, this time, the financial stakes are so high that WGA members had been preparing for the eventuality of a strike since 2005.

The WGA’s demands include increases in residuals for DVDs, VoD, IPTV and Internet downloads. Originally, the writers insisted that they get 2.5 percent of all gross “new media” revenue from the content they write. But ultimately, they amended this stipulation to a flat rate for fear of what the WGA called studios’ “funny accounting.” Their current proposal involves a doubling of DVD residuals, which would bring the rate up to eight cents per sale (a four cent increase) and equal compensation for content distributed over broadband. In addition to new media issues, the WGA insists that the AMPTP recognize writers from untraditional sectors of television, including reality programming, animation and basic cable, which are not currently represented by the Guild.

Many of these requests echo those of the last contract negotiations in 2001. At the time, however, residual concerns were compromised in order to obtain better health benefits, which was the union’s priority. This time around the stakes are much higher in view of the fact that, eventually, all distribution will be via broadband. But although the new business models have not yet been defined, studios foresee broadband as a golden opportunity and VoD as a large moneymaker, and writers want to get in on the ground floor. In this respect, the Guild’s John F. Bowman is quoted as saying: “ I’m not going to be the chairman of the negotiating committee that gives away the Internet. There is an enormous burden of history here.”  Similarly, Jeffrey Immelt, CEO of GE, owner of both NBC TV network and Universal studios, has been quoted as saying that, “[It’s] worth taking a strong stand on.”

On the other hand, if VoD does not end up being a goldmine for the networks, they don’t want to end up losing revenue to the writers. Conversely, the writers want to get in on the ground floor if VoD takes off like videocassettes and DVDs did.

The AMPTP faces further challenges because a favorable settlement with writers could trigger similar demands by other unions such as the 120,000-member strong Screen Actors Guild and the Directors Guild of America (with 13,400 members), both of which have contracts expiring on June 30, 2008.

In his announcement of the strike to union members, WGA East president Michael Winship said of the AMPTP: “[They] are using fear and attempts at intimidation to maintain a status quo that makes no sense in a 21st century world of rapidly expanding global markets and new media.”

While the WGA tags the struggle over new media residuals as the reason negotiations keep breaking down, for the AMPTP, “It’s the desire of the WGA’s organizers to increase their own power and prestige by expanding the jurisdiction of the union over reality television and animation writers.” Indeed, the struggle is also for the union to acquire some clout and the studios to lessen the unions’ power, starting with the WGA.

The WGA cannot afford to show weakness by caving on key issues as in the past, but a long strike could spell disaster for the industry. The 1988 strike, which was the longest in history, also dealt with residuals, which before the advent of the Internet, applied to syndication and videocassettes. Lasting a total of 22 weeks, it caused a shortage of material for television. Networks were forced to air reruns and the fall season was delayed. However, one reason the WGA eventually settled in ’88 was because, at that time, AMPTP membership consisted of a large number of small producers, while, today, with media consolidation, the union is facing a handful of very large production companies.

The networks proved savvier this time around, going into production overdrive in an attempt to stockpile material as the contract expiration date moved closer. But the TV casualties began early nevertheless, with NBC’s The Tonight Show, CBS’s The Late Show, as well as Comedy Central’s The Daily Show with Jon Stewart and The Colbert Report, all going to reruns on the first day of the strike. Sitcoms fared a little better, holding out for a few episodes more each, with only NBC’s The Office going dark early on. One-hour dramas have endured longest of all, but each week the number of completed episodes dwindles. By the strike’s fifth week, a total of 50 shows had already shut down.

The film industry also anticipated the strike with a flurry of activity this past summer. Talent agencies reported roughly 300 projects being pushed as “priority” by the studios. However, the effects of the strike on the film industry, where production schedules are much longer than in television, may not be apparent for several months.

A recent study by London, U.K.-based Global Media Intelligence reported that studios are paying out as much as 25 percent of a film’s profits in residuals, which, in 2006, amounted to $3 billion. Of that, writers received $121 million, 55 percent of which went to their health and pension plans. On the other hand, a top actor or director can receive residuals ranging from $20 million to $70 million per film. The studios stand to pay the WGA $130 million to $151 million in residuals over the course of the new three-year contract, should they meet the writers’ demands.

The consequences of the strike are not limited to American television. Networks all over the globe rely on American content. And in other English-speaking countries, the turnover period between the American and foreign TV premieres can be a matter of days. In Ireland, for example, Radio Telefis Eireann (RTE) runs Prison Break, one of its highest rated series, only three days after its American airing.  With fresh episodes on hiatus, RTE is now running movies in Prison Break’s slot. “We have to do whatever it takes to cobble together a schedule,” said RTE director of Broadcast and Acquisitions Dermot Horan, “Even if that means running movies and repeats.”

The strike is even more detrimental to Canada, where U.S. programming is simulcast –– broadcast at the same time that it airs in the U.S.  International networks are coping with the strike by carefully pacing their American programs. However, the biggest problem may arise when it comes time to buy new U.S. programs. RTE’s Horan names a properly developed pilot season as the most important thing for both American networks and international buyers. “The networks claim to have a number of pilots already stockpiled for the fall season,” Horan said “But everyone knows that a pilot script needs a lot of work and bears no resemblance to what is shot.”  The strike could delay this process, resulting in fewer or under-developed products for international buyers. NATPE could potentially serve as a meeting point for international buyers to check in with the studios about the “strike-proof” shows they already have in the pipes and about their plan But should the strike continue into February — at which point the new U.S. TV season would be compromised.

Under this scenario, some international buyers are concerned that the L.A. Screenings might be postponed. This fear, however, has been dissipated by Warner Bros., which has already notified its international buyers of a May 19 start. Indeed, some TV executives feel that writers are not being idle during the strike and, once it is settled, they’ll present the studios with a host of completed scripts. Curiously, key bargaining sessions were held at the Intercontinental in Century City, one of two hotels known as L.A. Screenings headquarters. 

For the moment, the writers present a unified front, but the strike is easier on some than others. Unlike most labor unions, which represent members with incomes in the same general ballpark, the salary spread among the roughly 11,500 WGA members consists of millions of dollars. Working union members make anywhere from $50,000 or less to $5 million a year, and 48 percent of the WGA West is unemployed. In fact, the majority of the union is made up of young writers, about 7,500 of which were in high school or college during the 1988 strike. Head writers who pull in millions may not miss the paychecks, but for the union’s many junior writers, the real struggle of the strike is making ends meet.

CBS reported that to reduce the financial strain, Late Show host David Letterman’s independent production company, Worldwide Pants, Inc., picked up the tab during the strike. A few other talk show hosts adopted Letterman’s largesse, but it is not the norm, and for many striking writers, times are lean.

Although a few personalities, like talk-show host Ellen DeGeneres, have crossed picket lines to resume their shows without union writers, industry-wide support may not last forever. The strike has also caused lots of resentment among the 15,000 below-the-line workers who lost jobs because of the strike. In addition, the Los Angeles economy is losing an estimated $21 million per day, and by the sixth week, the networks had lost an estimated $60 million in ad make-goods.

On the other hand, the AMPTP’s members don’t seem to be united. Some studios, especially those with networks, are more affected than others. For this reason, some are even suggesting that the studios negotiate individually with the WGA, or that collective negotiations be handled by a studio executive such as Fox’s Peter Chernin.  

This overview was written by Erin Somers, with contributions from VideoAge reporters in New York and Los Angeles.