Friday, May 30, 2008

Looking Back At The Writers' Strike, Part 1

Article on the recent writers' strike in Hollywood (part 1 of 2) by the always erudite Craig Mazin.



Perspective requires time. Has enough time passed since the end of the strike for a reasonably sober view of it all? Probably. There’s no doubt that more time still will be required to draw the most purposeful conclusions, but here’s an early attempt on my part.

If nothing else, it will give us all something to scoff out down the road if I turn out to be completely wrong.

The obvious question is “Did it work?” That’s a decent amalgam of “Did we win?” and “Was it worth it?”

Next week, I’ll take on the issue of the strike itself as a tactic, as well as the ramifications of our labor action. This week, let’s just start by looking at the deal itself.

There are those who think this deal is very good (John Wells), and there are those who think it’s the end of days (Justine Bateman of SAG and Harlan Ellison of the WGA). I imagine most people fall somewhere in the middle (because that’s how most people fall on most things, including our own leadership), but it’s fairly obvious that the majority of WGA members either leaned towards Wells’ viewpoint or felt that the deal was good enough to put the picket signs down and go back to work.

Let’s go through the terms.

Sales and Rental Residuals

The deal works well here. It’s not as good of a deal on New Media as we got in 2001, when Wells and McLean somehow managed to pull the 1.2% for internet rentals out of a hat without striking. That rate, which is the gold standard for residuals, is really the only significant rate right now if you’re a theatrical writer. A lot of people, including me, were convinced that internet rentals were a non-business, and the majority of the residual load would end up in internet sales.

Wrongo. Turns out the companies are rather jittery about selling movies outright on the web, because they’re freaked (justifiably) about piracy. They prefer to rent them via, say, iTunes. The Wells/McLean 1.2% on rentals is going to be lining our pockets for some time, so I salute them.

On the other hand, the sales rate resulting from Verrone/Young isn’t bad at all. Sure, it’s not the 1.2%, but after a reasonable amount of units are sold at the DVD rate, our percentage bumps up to roughly double the DVD rate.

Not bad at all. In fact, I’d call that very good. If this entire negotiation was predicated on the notion that DVDs would one day disappear, to be forever replaced by digital distribution, then quintupling the rental figure and nearly doubling the sales figure has to be viewed as strong progress.

There’s been a bit of hay made over the fact that our deal is now in terms of the total company gross, as opposed to the hated “producer’s gross.” That is, instead of saying we get 1.8% of 20% of 100% on initial internet sales, our deal now says that we get .36% of 100% on initial internet sales. Somehow, this is supposed to position us better and um, make us feel better, or……something.

Being a fan of math as I am, I could care less. They could have said we’re getting 180% of 2% of 100% or .036% of 1,000%. Who gives a damn? What’s the check gonna be? That’s all that matters.

Residuals for Streaming Media

This was the big one. How much would the companies pay writers when they reran television programming on the internet? The fear at the core of this issue was very real and very justified. There is a sense that internet reruns will someday replace network reruns entirely. It was critical to get this one right.

Did we?

I’ll go with a “yes, for now.”

Here’s how it works. When a network airs an episode of a show, they get 17 free days in which to run it on the internet without paying residuals (24 days if the show is in its first season). A lot of people hate this provision, and there’s certainly nothing nice to say about it. However, there is at least one mitigating factor. The 17 (or 24) days must be either immediately after the show’s run on the network or be running during it. That’s a clue as to how the companies may be planning on using this window. It’s likely that some of those free days will be used in advance of the initial airing of the episode, particularly for new shows. In other words, a week before an episode’s airing, the network may run a portion (or all) of the episode on the internet to generate some buzz or interest.

Once we get past the initial hump of the free window, the money kicks in. Sort of. Again, it’s not great, but it’s okay. The problem for the unions was one of calculation basis. When a company licenses its show for internet distribution, what does it get back?

Anything? Something? Nothing? All three of the above are currently true, and the fact that the production company is often licensing the show to another division of the same parent company only confuses things further.

The compromise was to go with a fixed residual for the first three years following the initial broadcast airing, then go to a percentage of license. For an hour-long program, the first three years will net a total residual of $4,262. Following that, the residual switches to 2% of whatever the license fee is.

Thanks to Steven Schwartz from the WGA NegCom for correcting me here. The compromise is to go with a fixed residual for the first year following initial broadcast, and then it’s a 2% of true gross after that. That fixed residual, however, increases each year of the contract’s life, so if that first year occurs in the third year of the contract, the fixed rate is higher than it would be if the first year were in the second year of the contract.

Silly mistake on my part.

Now, you may have heard that we improved upon the DGA deal for the third year of our contract. We did not. We get exactly what they get, down to the penny. The difference is the language. They went with a fixed number, whereas we went with a percentage of distributor’s gross…except we impute the distributor’s gross in the third year to be a number that gets us to the same fixed result the DGA got.

Why the linguistic rigamarole here? Well, it appears that the WGA felt this would position them better for future negotiations. Seems like wishful thinking to me. The number is the number.

Much has been made about the difference between these residuals and the network rerun residual. The first network rerun of an hourlong, for instance, is worth $20,000 in residuals for the writer. So…how can we possibly look at this new rate for the internet as a good thing?

There are two things to consider when comparing this apple to this orange. First, many, if not most hour long programs do not get network reruns. The ones that do are typically the hits. Even those reruns, however, are in danger. The networks are keenly aware that the rerun business is dying. As DVRs proliferate and audiences grow more accustomed to simply time-shifting the first run of a program, it becomes less and less profitable to run the rerun.

As such, it’s unlikely that the $20,000 vs. $1300 argument is a sound one. Most writers aren’t getting that $20,000.

Secondly, what this formula sacrifices up front, it potentially makes up for in the back. As shows are rebroadcast into the ground, the amount they pay out dwindles. Under the internet formula, library shows become potentially more valuable for the writers. The amount doesn’t dwindle. Rather, we have a set 2% of the gross of the license fee.

If (and this is a big IF) the license fees can be verified and held to market standards (and we have some provisions for this), writers can and will come out ahead in the long run…IF…and here’s the other big IF…

…IF streaming on the internet becomes a legitimate business.

The difficult truth is that we were all collectively guessing on this one. We guessed that this would become a legitimate and big business. Let’s pray we were right.


This one was the sleeping giant of this past negotiation. Without a guarantee of jurisidiction over made-for-internet programming, our union would have been seriously crippled heading into the future. It’s not that broadcast will ever go away (and for the record, if networks switch their distribution from satellites and airwaves to some kind of IP-based system, that doesn’t count…”internet” means stuff you watch in a browser), and movies will continue to run in theaters, but there’s every reason to believe that made-for-internet will become a viable business for the companies at some point.

We needed to automatically cover that work. And now we do.

Reality, Animation, DVDs

Zippo, zilch and squat. As predicted.


On its face alone, this is a good deal, and I was happy to assign my proxy to Patric Verrone and help ratify it. It’s not a perfect deal (was anyone expecting one?), it’s not a tragic loss (at least, not in the context of our 60+ year history), and it will serve as an okay basis for the next negotiation.


…was it worth the strike? Was the strike necessary? Was it well-run? Could we have gotten this without a strike? And did we really get it at all? Stay tuned for part two.

You might be surprised by some of my answers.


Brian M Logan

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