Writers Strike: Writers Gift to the Studio,Deal Could Wrapped by Christmas

As negotiations resume, the two sides could get together before Christmas, but trust has become an issue. They agree on a flat fee instead of a percentage for some new media, but disagree on the amount and whether it would include escalators for hits.
By Alex Ben Block for HOLLYWOOD TODAY

HOLLYWOOD, CA. (RUSHPRNEWS) December 5, 2007 – Despite an air of pessimism, there is a deal to be made in the short term between striking screenwriters and Hollywood’s major studios and broadcast networks as negotiations resume today after a controversial four day break.

But there is a relatively short window to get it done from now until the week before Christmas or this strike could spill into next Spring or even next Summer. Aside from the real issues, a major obstacle threatens the talks – a deep distrust between the two sides, who continue to bicker, back bite and bark at one another in the media.

Consider the controversy over the break in negotiations. The AMPTP has said loudly and publicly that they did not want to break off talks for such a long period (four days) with time so short. “While we strongly preferred to continue discussions, we respect and understand the WGA’s desire to review the proposals,” the AMPTP said in a statement which was the first public utterance after a four day press blackout that each side claims the other ended/violated.

The writers say that the AMPTP asked for time to complete and deliver the rest of their proposals, in addition to those presented for the first time on Thursday morning. The writers say they not only wanted time to study the proposals, but also wanted to see the complete presentation.

Late last week, a group of WGA members put up answers to questions on the Hollywood United quasi-official WGA web site, that said: “On Thursday, the studios and networks gave us some of their proposals, and said they needed more time to fashion the rest. Therefore talks were scheduled to resume on Tuesday.”

Nikki Finke is reported Monday evening her “Deadline Hollywood” blog that, “The WGA has been informed that the AMPTP is indeed on Tuesday going to make the second-half of its proposal when contract talks resume for Talks Day #5.”

My sources tell me a different story. A person with knowledge of the AMPTP’s plans said Monday evening that “there was never any plan or promise to give them more proposals,” explaining that the AMPTP gave the WGA their proposals on Thursday and expected a response that day or the next. So the reports that the AMPTP will deliver more proposals is, says the source, “simply not true,” adding: “The ball’s in the writer’s court and the AMPTP expects a response tomorrow.”

If management did have any more proposals, they may have been snuffed after the WGA gave a quicker than expected, and extremely negative response, on Thursday to what they had heard that morning, declaring the key proposal “a rollback.” That created the atmosphere of pessimism that any settlement can be reached in a timely manner. It also brought a warning from the WGA that reports a deal has been made in the backroom already are false and misleading.

What is true, as Finke writes, and both Variety and The Reporter report today, is that the WGA negotiating team worked over the weekend and will present to the AMPTP what goes beyond just a response to the Thursday package, to encompass a new set of proposals that incorporate more of the concessions they are seeking, especially in new media. That is and will continue to be a battleground issue.

More than ever the writer’s feel their business is transforming to Internet distribution and they are determined not to be left behind. At the same time, management is digging their heels in saying that they are not going to saddle the rapidly changing new world of media with the old cost structure; but want to see it develop and operate at many levels.

The AMPTP wants the right as well to declare almost any streaming video as promotional, which the writers say is unfair when they are streaming entire episodes or whole movies. It also is an open-ended invitation for the distributors to declare just about everything promotional.

The moguls are also adamant that they are going to stick to the lower home video rate for both physical home video and electronic delivery and downloads of movies and TV. The writers seemed to give up on this issue before, and while there is clearly a lot of wiggle room in other areas, it is unlikely that management will reverse course on using the lower royalty rate.

One thing the two sides seem to be coming together on is the use of flat fees to cover some payments rather than a residual based on a percentage of income. However, the writers are seeking much larger payments than what the AMPTP has offered so far.

A source close to the AMPTP was asked why they didn’t just use a revenue sharing formula based on a fixed percentage that fulfilled the simplistic but logical strike line chant – “If they get paid we get paid!”

The source close to management said they did offer that to the writers, and it was roundly rejected. What that means is that the AMPTP proposed payments based on the gross amount made by the production entity that produced a show, which is the legal and official entity that the WGA has a contract with for their services. The WGA response was that they want a cut of the larger distributor’s fee on Internet distribution, and that in most cases the production entity is a sister company of the network or distributor, although technically they are separate.

The writers also said that it would be a nightmare for them to check the books of the companies constantly to make sure they were getting their entire percentage, and even then they would be suspicious of Hollywood accounting, where so many fees are drained off that even big hits can technically remain in the red by the time it comes to sharing the profits down the line.

So the solution is a flat fee, which doesn’t require an audit, and is far simpler to calculate. Now the question is how much? As recently as yesterday, WGAW President Patric Verrone told writers on a picket line at Paramount that the offer of $250 for the right to stream an hour long network show for a year was unacceptable.

The Writers are looking at the payment as the second run of a show; and compare it with the current fee for a second run on a broadcast network of about $20,000. They point out some shows are running far fewer repeats, and the Internet run is effectively the rerun.

That’s because repeats are not working, says the source close to the AMPTP. The entire model for TV is shifting, and viewers have so many choices they don’t have to watch repeats. The Internet stream is a second showing, but it generates far less income from advertising that the second run of a show did on network TV; so the fee has to be far lower.

In its Tuesday edition, The Hollywood Reporter says the WGA proposal will incorporate fixed compensation, but that rates would be “graduated in increments tied to viewership rates…’If the number of eyeballs go up, then our residual would go up,’ a source close to WGA negotiators said.” In other words, if the viewership is very low, it might trigger a fixed payment of as little as $250, but if that viewership goes up and up, it could reach the $20,000 level that writers now get for a second network run.

The AMPTP connected source also did the familiar lament about what a bad business investing in TV and movies is these days. That has some truth. Costs to manufacture and market are up, and the audience size is smaller and spread across more distribution platforms. Numerous studies have shown that entertainment, compared to say hedge funds or software, offers a poor ROI (return on investment) when accounted for strictly based on its own merits.

Then why do these big companies keep jumping over that cliff and investing billions? For a couple good reasons. First, there is constantly new money flowing into the business for various – from greed to ego — and those reasons are not always logical reasons. In addition, the value of the content goes beyond simply the direct profit and loss, to include its importance in driving the value of other corporate assets, such as cable channels, satellite services and TV networks and affiliates. People tune in to watch a show not a network. The show is the real brand.

A source close to the WGA said that the surprise number the AMPTP has been using since negotiations ended that values their new proposal at an additional $130 million for writers over the three year life of the contract is good news. He points out the writers last proposal was only for $151 million in added value, which means the two sides are not that far apart on money. Of course, that doesn’t account for all the little bombs in the minefield, of individual points that each side feels they must score (i.e. the WGA demand that features be covered for royalties when streaming). The $130 million figure was never presented at a previous negotiating session, and has never been fully explained by management.

There seems to be a sincere desire on both sides to find common ground and make a deal, but there are serious sticking points that could derail these talks and set the stage for a very different endgame in which the DGA makes a deal first, and writers keep marching until they are jointed at the negotiating table and possibly picket lines by actors, whose contract is up the end of June.

In an ad appearing in the trade press today, according to an article in the Tuesday issue of Variety, the AMPTP says that its new proposals are not a “take-it-or-leave-it offer.”

Variety says the ad also is “designed to allow both sides to engage in the kind of substantive give-and-take negotiation that can lead to common ground. The WGA leadership asked for five days to respond. So with the ball in the WGA’s court, we look forward to what they have to say when we meet today.”

Variety notes that the tone of the ad is much softer than in past public statement by the AMPTP. This may be a softening of the management position, or it may be part of a revised PR campaign in the wake of the exit of hard nosed Barbara Brogliatti as chief PR strategist. “Notably absent is the finger-pointing that marked company execs’ reactions in previous missives,” reports Variety .”And the execs’ private frustration at the writers is substituted with a benign ‘We look forward to what they have to say.’”

“This is not a zero-sum campaign where there is one winner and one loser,” Variety also quotes from the ad running today. “We need the writers and the writers need us. And we need to work together if we are to navigate the rapids of this increasingly complex, high-tech economy.”

There are huge consequences for the studios and networks as well as writers. The lack of scripted programming will add to the on-going audience erosion which has seen the number of viewers it takes to make a hit show drop significantly over the past twenty years. While the big companies actually make money in the short term by laying off, suspending and firing thousands, if this goes into the Spring it will disrupt the pilot season, throw a monkey wrench into the upfront process, and threaten the fall 2008 season as well, which could hit 2008 and 2009 profits.

The networks won’t have to wait that long to feel the pain either. Some advertisers are already discussing getting additional free ads or cash back because without the big scripted shows or top talk shows, audience levels are falling, which means the networks won’t be able to fulfill the guarantees made to advertisers in the upfront sales season of mid-2007. It’s bad enough to have money machines like “The Tonight Show” and “Letterman” shuttered; but to have to start giving rebates to advertisers will make the pain much greater.

It will be harder for the writers to take a long strike than deep pocket corporations but so far, the striker’s spirit remains high. On the picket line last week a writer told me the union has never had more solidarity and togetherness.

Yesterday a prime time TV Showrunners told me it is also untrue that many of the Showrunners have quietly gone back to work. In fact, said this person, at a meeting on Monday night the sentiment was strong that they must continue to back the union. The Showrunners group, United Showrunners, may gather again at a low key meeting as soon as later this week.

The negotiations are also complicated because both sides know that any deal they make at this point will set a precedent for directors and actors, as well as their own future. “It’s a struggle that’s not just about us but the entire creative community,” WGA East President Michael Winship wrote to his members recently, echoing the feeling on both sides. “What we do now will affect generations to come.”

By Alex Ben Block for HOLLYWOOD TODAY

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