Pajamas Media

Is the Hollywood Writers’ Strike a Recipe for Disaster?

The Hollywood writers' strike has been portrayed in the media as a David vs. Goliath battle: poor righteous writers versus the huge evil entertainment empires determined to hang onto their billions in profits from Internet distribution. Steve Boriss begs to differ.

December 7, 2007 - by Steve Boriss

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The dream that each of us will some day get our “piece of the pie” is as American as apple pie. But, like everything else in life, there’s a catch. We must earn our slices again and again by keeping customers satisfied in an economy marked by constant change and innovation. As striking Hollywood workers seek their piece of the pie of online revenues, that’s the hard lesson they will soon have to swallow — and, it is not going to go down easy.

In the 20th century, Big Labor had its own special recipe - it called for a very big pie that fed millions. The key ingredient was a large, dependable flow of cash from hungry, mass audiences who were starved for a product. The “suits” at the mega corporations were expected to grab for the biggest piece they could get away with. The little guy responded by organizing into bigger units, the labor union, which pushed back with strikes and other actions to get the workingman his fair share.

As expected, that’s the script that unionized Hollywood writers are now following. On paper, these creative individuals, many of them freelancers, do not lead the most secure lives. Their fortunes can rise and fall with the success of their projects. So, they banded together into a bigger unit, a labor union, that could push back producers to provide them with a financial package that delivered some level of security. Typically, this recipe calls for accepting less money upfront with the hope of making it up later in residuals when the work moves into syndication and other uses.

This seemed reasonable, as writers had until recently had every reason to believe that this balance of pie-power involving mass audiences, big producers, and big labor would go on forever — particularly because the mass audience was a captive audience. Because of FCC regulations, viewers could only receive 3-4 TV networks in their local markets. These networks had seemingly eternal, guaranteed, stable cashflows to meet the demands of Hollywood talent because government had given them the gift of scarce and valuable broadcasting licenses. Similar dynamics appeared in the film industry, where the economics of geographically-disbursed theater chains favored limited numbers of expensively produced, mass appeal blockbusters.

Over time, flaws did become evident in the recipe, but they went largely unnoticed. Artificially high union wages, overly-protective child labor laws, and other costly work rules imposed by labor unions on the entertainment industry were beginning to send film companies scurrying out of California to other states and countries for production and editing. Also, networks slowly began replacing their programming with content requiring fewer Hollywood resources — first with the influx of newsmagazines like Dateline and 20/20, then with more games shows, and now with a new wave of reality shows. Still, nothing was done to address these issues which made Hollywood less competitive, partly because Hollywood workers were still making plenty of money, and partly because no one dared to challenge those at the top of the food chain who occasionally took production elsewhere.

But suddenly, digital technology has been thrown into the mix, and the recipe for the pie has changed. For one thing, the masses that once starved for fresh Hollywood entertainment programs now have plenty to eat. They can now gorge themselves on a full buffet of video choices, far beyond Hollywood’s relatively limited fare. Screens will no longer go blank when writers strike — alternative content on the Internet, DVD’s, and video games offer a nearly unlimited amount of entertainment, much of which consumers will no doubt discover, sample, and enjoy during a prolonged strike.

But, the biggest threat to the ability of writers to put food on their tables is the Internet. Still following the old script, Hollywood writers simply assume producers’ refusal to guarantee them a slice of the online programming pie is just a tactic to keep a bigger piece for themselves. Not so. All forms of media are now converging to the Internet, which ultimately will be the single medium for virtually all content. Networks are scrambling to move all of their content to the web where, for the first time, they will face stiff competition against multitudes of content providers. This means that the previous high levels of network ad revenues are no longer guaranteed. And, that’s why former Disney head Michael Eisner eloquently called the strike “stupid,” while noting that only Apple CEO Steve Jobs has even identified a business model, iTunes, that generates Hollywood-level profits from digital content and distribution.

So, writers are now striking for a guaranteed slice of a pie that producers are not sure will exist, much less how many it can serve. For Hollywood, this is a recipe for disaster.

Steve Boriss blogs at The Future of News. He works for Washington University in St. Louis, where he is Associate Director of the Center for the Application of Information Technology (CAIT) and teaches a class called “The Future of News.”

50 Comments

huxley:

I don’t get your reasoning at all.

The writers are only asking for a tiny slice of the digital revenues pie. True, that pie may or not be there, that’s the risk everyone takes, but it’s not like the writers’ demand for a share of that pie–whose value they helped generate–will jeopardize the pie. The producers themselves are certainly not foregoing their much larger slice in the interest of the common good.

Dec 7, 2007 - 4:18 am Steve Boriss:

Huxley, One of the many questions in this is how does one negotiate with someone who has no idea what they can afford to give? For instance, one of the trial balloon demands the writers have floated is that they be paid based on the number of times their work is viewed online. The producers do not yet even have a way to think about how much money this would generate, much less if it would produce a profit.

Dec 7, 2007 - 4:47 am Wolf Pangloss:

I thought the writers were simply asking for a percentage cut of the gross income from online operations and advertising. Currently they get bupkis. What’s wrong with that basis for negotiation?

Dec 7, 2007 - 6:20 am Steve Boriss:

Wolf, Because the management is getting less than “bupkis.” Revenues, downloadings, hits, etc. do not yet translate into profits or cover costs. And it’s not just, or evenly mostly, an issue of production costs. The writers need to leave management alone to invest whatever crumbs online distribution may be delivering to invest, experiment, develop a business model, and fight for the survival of the industry. There are no guarantees that the current players are going to make it.

Dec 7, 2007 - 7:31 am DoktorNo:

A bit offtopic, but I think relevant: the protection of creator’s rights in digital era is a tricky business. Frankly speaking, I am against the Orwelian DRM’s, that are binding the consumers to specific players (you can play music from iTunes story only on iPod or Pc/Mac with iTunes). But the recent move of Amazon to make a music from its shop DRM free, and the lifting DRMs from EMI music in iTunes brings some hope…

Dec 7, 2007 - 7:42 am huxley:

Steve — Thanks for the response, but that still sounds silly.

How do producers negotiate with actors when, they–the producers–don’t know how much “they can afford to give” to the actors.

It’s a negotiation in a risky business. Each side does their best and nothing is guaranteed. I’d love to do my negotiations based on what I can afford to give, but that’s not how the world works, at least not with equals.

If you–and the producers–are saying that the writers don’t have a strong enough realpolitik position to bargain for a share of the pie, that’s different, but in that case, be clear that you are arguing power, not what is reasonable or equitable.

Dec 7, 2007 - 7:44 am Steve Boriss:

Huxley, The type of negotiations you are describing take place in an environment with decades of experience that quantify the risk, and in which there is a limited supply of content among which consumers can choose. In this case, there is no experience and there is no business model. The risk is different by orders of magnitude.

Dec 7, 2007 - 8:00 am Bill Bradley:

A percentage is a percentage.

It’s up to everyone involved with the production to create — or grow — to use your metaphor the pie together.

Writers have been conned before you know.

Dec 7, 2007 - 8:10 am Steve Boriss:

Bill, But it makes all the difference upon what that percentage is based. If it is on a percent of revenues, the other parties could be losing money. BTW, some of the demands have been based on metrics like downloads which don’t even translate to money. And still, that doesn’t cover it all. Right now management is investing and experimenting in business models that may help writers later. They are buying companies, building infrastructure, etc. Isn’t it “fair” that writers should be willing to contribute to that?

Dec 7, 2007 - 8:27 am Jeb:

I thought the writers were simply asking for a percentage cut of the gross income from online operations and advertising.

That is what they are asking for.

Because the management is getting less than “bupkis.” Revenues, downloadings, hits, etc. do not yet translate into profits or cover costs.

and they never will, just like movies almost never show a profit.

The current contract gives them residuals on the dominant revenue stream. That revenue stream is moving to another venue (relatively slowly at this point) opening up these negotiations on how that revenue will be distributed.

Residuals are a large part of writers income.
Let’s say your job were based largely on sales of your work and your contract was negotiated such that you received a certain amount on in person sales, a different percentage for phone sales, and nothing for internet mediated sales. You agreed to this when there were virtually no internet mediated sales and there was no obvious revenue stream there. Since you began work internet mediated sales increased dramatically and it looks like these sales will expand explosively while in person and phone sales diminish in importance. Your employer is actively pursuing internet mediated sales and sees large potential profits. Now your contract is up and it is time for you to negotiate a new contract. What do you do? Do you accept a new on the same terms or do you negotiate for a peice of the internet mediated sales?

Dec 7, 2007 - 8:27 am huxley:

Steve — It still seems to me that a risk is a risk, great or small, business model or no business model, but leaving that aside…

If we accept your argument, how should writers protect their interests here? The movie industry is legendary for its creative accounting such that successful movies don’t actually make money on the books.

In the music business, it seems that many record companies have decided that “they can only afford to pay” artists who would otherwise sue them. Small stars are stiffed for their back royalties.

Dec 7, 2007 - 8:36 am Vik Rubenfeld:

Steve, I believe the writers have already taken into account your line of reasoning, and have incorporated it into their approach to the talks.

From a WGA email to WGA members (link):

> To Our Fellow Members:
>
> Yesterday, the WGAE and WGAW presented to the AMPTP a
> response to its proposal on streaming television programs.
>
> We accepted the framework in their proposal of last Thursday
> for a fixed residual in the first year.
>
> But rather than basing the residual for the entire first
> year on a small percentage of the applicable minimum, we
> proposed that the fixed residual be paid on a higher
> percentage of applicable minimum for each 100,000 streams
> per quarter.
>
> This is a readily ascertainable number. In fact, the
> companies are already keeping records of streams for their
> advertisers. Both the advertisers and the companies are
> already using these numbers as the basis for their business
> model.
>
> We believe these formulas will protect the writer even if
> all television reuse migrates to new media. This is our real
> goal - we simply want to make sure that writers keep up if
> reuse moves to the Internet. If new media reuse turns out to
> be additive, both partners will benefit.
>
> After the first year, following the companies’ proposal,
> reuse is paid on a percentage formula. We held to our
> proposal that the appropriate rate for that payment is 2.5%
> of distributor’s gross and the same rate should also apply
> to streaming of theatrical motion pictures.

As you can see, the WGA is not asking for “a guaranteed slice of a pie that producers are not sure will exist, much less how many it can serve.” They are only asking to be paid for usage of the product that actually takes place - i.e. they are only asking for a slice if and when the pie does exist.

To that one might respond, well, there is no guarantee that anyone will pay to see shows on the Net. But the WGA has taken that into account also - they are asking for a percentage of the distributor’s gross profits - not for a fixed dollar amount against potentially non-existent profits.

It appears that your thesis does not match the facts of the talks.

Dec 7, 2007 - 8:53 am ech:

Steve, you are ignoring history.

The writers were given the same story about videotapes - we don’t know how to make money, it’s too uncertain, too costly, etc. - so the writers cut the royalty rate on videotapes, with the understanding that if the business went well, they’d get the old rate. The business boomed and then skyrocketed with DVDs. The studios now want to keep the status quo on DVDs.

The studios claim there is no money in online distribution and it is uncertain, costly, etc. Sound familiar? Yet they tell the investment community that’s the future. And sell ads in the streaming videos they don’t want to pay the writers for.

There is another wrinkle to this you ignore, the other two unions that have “above the line” participation in residuals (actors and directors) have contracts expiring next year. The WGA is the wedge for the others and the producers know it.

Dec 7, 2007 - 8:54 am huxley:

Jeb, Vik and ech — Good posts! I’m curious to read Steve’s response.

“It looks like the writers are shooting the whole industry in the foot–willfully and stupidly,” as Grant Tinker, well-known producer, said about the 1988 writers’ strike.

“Stupid.” Just what Steve quotes Eisner as saying about the writers this time. To the producers, it will always look stupid for writers to look out for their own interests.

But who else will?

Dec 7, 2007 - 9:45 am Naftali:

Don’t you understand, it’s a Hollywood writer’s strike–meaning that is should only last 22 minutes unless it’s a two-part cliff hanger strike. And the guy who looks dead who is a main character will always be brought back to life in some miraculous nail biter of a way.

That is, unless your world is governed by—reality. Which is different than reality programming.

Ooops. Did some group’s worldview accidentally fall on their head like a one ton safe?

What I’m actually saying–I’m not sure, even if the writers are right in every respect, that they’ve chosen the best strategy. The best strategy is to learn to use the new media better, before the producers figure it out. That way you will be in the driver’s seat and the producers will be stuck, standing in the street as the car of the future pulls away, stuck holding the old paradigm and looking foolish, and getting smaller as the camera is in the car. Very symbolic, and it’s brilliant and fresh.

Dec 7, 2007 - 10:16 am Steve Boriss:

Huxley et al, Looks like I might have run into some writers with time on their hands. Let’s look at this from the 50,000 foot level. Up there, this does not look like a slug-it-out battle between management and writers over money that is guaranteed to be there. Instead, it looks like management and writers are on the same side, with livelihoods threatened by outside forces. All previous arrangements are up for grabs, including the whole model of residuals, which is as unproven as everything else is online. In the end, writers might not even find residuals acceptable — they might have to be paid it all upfront to generate the income they feel they need. By challenging management now, writers are hurting and alienating the group that cares the most about them, making themselves even more vulnerable. They should at least give management the time, and allow them the resources and flexibility needed, to find a working business model first. At that point, specific demands, and possibly a strike, would make a whole lot more sense.

Dec 7, 2007 - 10:24 am Gary L. Goldman:

When media companies suffer reduced income from traditional outlets as the result of the inevitable shift to distribution over the internet, writers will suffer along with them from diminished residuals. The cartel expects, however, to see increased income in some form from internet usage of its content. Why should everyone suffer from losses in existing categories but only management benefit from increased in other categories? The conglomerates are trying to use the shift to the internet [and fear of that shift] to improve its position vis a vis talent/labor. Talent wants mainly to preserve its existing position vis a vis management. The shift to the internet is not the only thing happening in the world of media. While uncertainty exists, long term trends indicate that income and profits have been consistently increasing. - Please remember that 20 years ago management used fear of a new technology [home video] to negotiate a need that allowed them to rack up huge profits that it was later able to resist sharing. If media conglomerates do suffer in future, of course they will be able to renegotiate better terms. But why should labor have to subsidize and insure management against fears of the future that may not come to pass, or that may not come to pass within this 3-year contract term?

Dec 7, 2007 - 10:37 am Gary L. Goldman:

When media companies suffer reduced income from traditional outlets as the result of the inevitable shift to distribution over the internet, writers will suffer along with them from diminished residuals. The cartel expects, however, to see increased income in some form from internet usage of its content. Why should everyone suffer from losses in existing categories but only management benefit from increases in other categories? The conglomerates are trying to use the shift to the internet [and fear of that shift] to improve its position vis a vis talent/labor. Talent wants mainly to preserve its existing position vis a vis management. The shift to the internet is not the only thing happening in the world of media. While uncertainty exists, long term trends indicate that income and profits have been consistently increasing. - Please remember that 20 years ago management used fear of a new technology [home video] to negotiate a deal that allowed them to rack up huge profits from income that it was later able to resist sharing. If media conglomerates do suffer in future, of course they will be able to renegotiate better terms. But why should labor have to subsidize and insure management against fears of the future that may not come to pass, or that may not come to pass within this 3-year contract term?

Dec 7, 2007 - 10:42 am Steve Boriss:

Gary, I cannot read minds, but I would suspect that management is much more concerned at this point about surviving the Internet than in chiseling some more money out of talent. I also believe that the fears of the future are very valid, and that the home video analogy does not apply. My sense is that writers are doing what politicians tend to do, fighting the last war.

Dec 7, 2007 - 10:58 am ech:

First, I am not a WGA member or wannabe. I do have family “in the business”, but they work below the line in camera and set work.

By challenging management now, writers are hurting and alienating the group that cares the most about them,

I about choked on my drink when I read this. The studios don’t care a whit about writers. Read stories about the “notes” that come back from producers and other executives asking for changes. If the “suits” had been involved in the New Testament, the Disciples would have rescued Jesus at the last second from the Romans and they all would have ridden off into the sunset.

The industry is overwhelmingly liberal in its world view and politics, but is ruthlessly pure capitalist in its business practices.

Dec 7, 2007 - 11:01 am huxley:

Looks like I might have run into some writers with time on their hands.

Steve — How condescending of you! Nope, I’m a software engineer who reads widely. I’d like to understand this issue and IMO you have done a poor job of supporting the producers’ position.

As you explain it, the readers here and the writers involved simply have to take your word that the producers are “the group that cares the most about [the writers]” and that writers, child-like, should defer to the superior judgment of you and the producers.

I’ll trust the writers to make the decisions about their interest. It’s messy, and maybe it works against them or maybe they get screwed if they leave it up to the producers as you would have it. There is no getting around risk.

Dec 7, 2007 - 11:21 am Steve Boriss:

Ech, Note that I said that management “cares the most about them.” I didn’t say they cared all that much, nor did I say they cared for reasons other than business interests. But in the cold world of business, does anyone else really care at all? Even viewers are fickle. The entertainment industry is likely to go through some painful times. I am trying to be realistic, which I believe is in everyone’s best interests.

Dec 7, 2007 - 11:34 am Roger L. Simon:

To be clear, Steve Boriss’ position does not reflect Pajamas Media’s position on the strike (we do not take positions on things like this normally), nor does it reflect this Guild members’ view. I agree with Boriss that many media matters are up in the air. But I definitely do not agree with him that the writers’ should not demand their fair share in front. Trusting the studios would be idiotic. I have a great deal of personal experience in this and have been the victim of studio accounting. This would be the subject of a long post in itself but trust me - it’s villainous.

Dec 7, 2007 - 11:39 am Jul:

I don’t understand how it can be said that this is an insecure business model for the studios when this article at the Financial Times (http://www.ft.com/cms/s/0/49e3d7a8-9e1c-11dc-9f68-0000779fd2ac.html?nclick_check=1) states that media buyers estimate that ABC, CBS, NBC, and Fox will make $120 million in ad revenue alone this year alone on online streaming of their episodes - of which they pay nothing to their writers because they declare it’s reuse “promotional”. And, that total online video advertising is going to bring $1.4 billion, doubling since last year.

Dec 7, 2007 - 12:13 pm Steve Boriss:

Just wanted to note that the blog I operate is about the future of news, and what’s happening on this page is a good example of it. Rather than get one “objective,” unbiased view we are going to get lots of views engaged in debate. It will be a great time for those who want to seek the truth, albeit not a particularly good one for those with a low tolerance for controversy. This is actually what Thomas Jefferson wanted and expected from the press in America.

Dec 7, 2007 - 12:22 pm M:

Right now management is investing and experimenting in business models that may help writers later. They are buying companies, building infrastructure, etc. Isn’t it “fair” that writers should be willing to contribute to that?

Steve - writers are contributing by offering to sell the results of the talent that they’ve worked hard to develop at a reasonable price. It’s the conglomerates that are being unreasonable, ruthless capitalists (please note here that I did not say “producers” - many of the real producers have been or will soon be put out of work by the Writers’ Strike).

And while I am not one of these “writers with time on their hands,” as you so condescendingly put it, I am above-the-line talent - an actor - and we know that, as it goes with the writers, so it will go with us. As someone who has spent the last seven years on the doubly difficult tasks of trying to eck out an existence in the crazy world of Hollywood while also working on making my “star rise,” I would humbly suggest that you leave your intellectual middle-America ivory tower and spend a few years here, pursuing work as “talent,” before you claim to understand the intricacies of the issues associated with the Writers’ Strike. Heck, it might even change your perspective on media conglomerates.

Dec 7, 2007 - 12:35 pm Dan:

Steve,

The writers of Heroes do not get paid for Internet rebroadcasts of Heroes.

Internet rebroadcasts of Heroes contain commercials. So are you saying that advertisers weren’t charged a cent?

Wow. That’s really nice to see those enterprising media conglomerates giving away such high quality content for free! And I thought they were in this business to profit. Silly me.

Dec 7, 2007 - 12:46 pm Steve Boriss:

M, I am willing to believe everything everyone has said on this page about writers being treated unfairly and conglomerates being ruthless. But in the end, it is going to come down to marketplace forces that right now nobody understands or can control. It is even possible that in the emerging model these studios will not be nearly as powerful as they are now as other investors are placed on a more level playing field. By increasing the supply of producers, this would increase the demand for writers, raising their pay even higher than the cost-of-living-type settlement that I suspect will ultimately emerge here. I think this is time for everyone to be thinking outside the box because this time, unlike with VCR’s and DVD’s, the world really is changing.

Dec 7, 2007 - 12:48 pm huxley:

Scott — Sure, the world is changing and no one knows–including you and the producers–how things will work out.

But one elementary fact will remain. If you don’t look out for yourself, don’t expect anyone else to. Especially not Hollywood producers.

And that’s the point you never address in this thread.

Dec 7, 2007 - 6:23 pm Walter Abbott:

A very interesting conversation with many valid viewpoints. Much, much better than the “command information” model used over the past century or so.

My take is that the “suits” nor the WGA is “entitled” to any money just because that’s the way it’s always been. The WGA members sell a product (talent/labor) to the studios who risk capital to assemble and sell a finished product (entertainment) to the customer.

With so many more entertainment choices now available, the near monopoly enjoyed by Hollywood is gone. There soon may be no money for them to negotiate over, let alone strike.

Throughout business history we have seen some labor unions choose to destroy the business they work for rather than change. I suspect that’s the way this will turn out, too.

Dec 8, 2007 - 4:23 am Steve Boriss:

Huxley, I agree with you that writers need to look out for themselves and that my article does not provide an alternative immediate action to a strike. With as little known as there is regarding what will happen next in online program delivery, I would have opted to sit-tight with similar-to-current arrangements and wait. I sense that this strike tactic used now may have been counter-productive, and the breaking news that producers just walked away from the table seems to support this. I would now predict that the best writers will be able to do is get a fairly stingy cost-of-living-level increase and set a precedent they may regret later for an online revenue sharing model. On the other hand, a strike a couple of years from now, when each side had a better idea of what online revenues were really worth to them, might have worked better.

But I also think that in a few short years this whole environment and the entertainment supply chain with certain producers and networks in the middle may look very, very different. One of the many possible outcomes writers ought to consider is that while, relatively speaking, the producers seem like a hostile force, for better or worse they represent writers’ best chance to hold onto what they’ve got. In that case, using tactics like strikes now that alienate producers and consumers, and that might force them to seek alternative entertainment formats and talent across the web and abroad are not in their best interests.

Dec 8, 2007 - 6:05 am Sam:

A lot of good discussion about who is right and who is wrong in the writers strike. I don’t know enough of the situation to take a side, but here is another perspective. I am a “consumer” of these products, and so far have not been affected in the least by the strike. And I don’t expect to be affected in the future. So you can add “who cares” to “who’s right and who’s wrong”.

Dec 8, 2007 - 9:07 am Bill Marsilii:

Ridiculous. By your reasoning, Steve, none of the authors whose books are sold on Amazon should demand a percentage of those sales, because the jury’s still out on whether or not the Amazon business model will work in the long run. Best to let their books be sold for free on the Internet for a few years, until management decides it’s making enough of a profit to start sharing it with those who provided the content in the first place. After all, it’s management who cares most about writers.

Mind if I collect all of your columns into a book and start selling it at $14.99 a pop? Don’t ask me to pay you — I’ll let you know when I start earning a profit. TRUST ME.

Dec 8, 2007 - 11:05 am Peg C.:

Sam expresses my sentiments. I lived in L.A. a long time and know writers and actors. As a consumer, I can’t be upset about any of this — IMHO (and with apologies to Roger who is a writer and blogger I greatly respect) the product has become virtually worthless. It is nigh impossible to find a well-written story on TV or in a film, so I have zero sympathy for the writers. Fortunately we don’t have to suffer their political views usually, unlike with actors for whom I have active animosity. May the strike go on a very long time.

We are reading more, we already surf while the TV is on, we Tivo everything so we skip all commercials, and we soon won’t miss TV at all. We already skip most movies. We can’t be the only ones.

This is a lot like the newspaper industry. Buggy whips, folks. TV and film writers should not think they supply an indispensable product. I suspect customer satisfaction has been extremely low for a very long time. No pity here.

Dec 8, 2007 - 11:32 am Steve Boriss:

Bill, That’s not my point. I am saying that the writers have poor leverage right now to get an acceptable deal. The producers don’t know how much, if any, dollars will be generated. Moreover, for all they know their very survival may be linked to their relationships with the producers, no matter how awful they might be. A strike right now might send producers into the arms of other talent or programming on the web or worldwide. Same for consumers, whose eyeballs are no longer guaranteed. The tactic is questionable, and I think that is being borne out by its current lack of success.

Dec 8, 2007 - 1:13 pm Jane:

“So, writers are now striking for a guaranteed slice of a pie that producers are not sure will exist, much less how many it can serve.”

Except that’s NOT TRUE, and you’ve based your entire argument around it. The studios insisted they could not just give writers a flat fee, because they couldn’t know how much money would come in. So the writers went to a lot of trouble to structure things as a percentage of revenue — “If you don’t make money, we won’t make money.” They were willing to share the risk.

(As indeed they do now. When a show is canceled, it’s gone that day. The money for the writers stops. Whereas when a CEO is thrown out for incompetence, he gets a 140 million golden parachute. So I would argue as to which role is riskier.)

But back to that percentage. Having agreed that the Internet is still growing, they offered the percentage deal to the studios. Who said — wait for it — “No, let’s do a flat fee after all. How about $250?” (That’s not “thousand,” by the way. That’s 250 bucks.)

I guess you’re aware that the networks are charging ad buyers MORE for episodes on the Internet, on the basis that they can’t be fast-forwarded through? The studios are pocketing the money. But they can’t pay the writers? The writers should wait for the studios to declare a “profit”?

Where have you been living? Don’t you know the studios NEVER declare a profit? I believe The Simpsons is still running at a loss, according to their books.

Dec 8, 2007 - 2:01 pm Jake:

Steve -

As always, right on target. Not sure what all was said above. I got bored after the first couple of comments. Keep up the good work.

Jake

Dec 8, 2007 - 4:03 pm Steve Boriss:

Jane, The comments I’ve been getting from people involved in the industry seem to me symptomatic of what ultimately happens in unionized industries. There’s no way to write rules that are “fair” because human nature is such that everyone wants more, everyone thinks they are worth more, no one believes they are being selfish, and unions by definition impose a false equality that prevent managers from paying people their real market value at both ends of the spectrum. That’s why in the 20th century, unions continued to vanish, and are only growing in the public sector which is immune from free market competition. I think writers ought to be preparing now for a tougher future with either a weakened or non-existent union. The plus side is that those with the most talent may be rewarded even more.

Dec 8, 2007 - 5:37 pm Gozer:

Well I hear where you are coming from Steve though I don’t think you’re getting your point across very well. While I don’t fully agree with you, I do think I get what you’re saying let me see if this sums it up right:

“This strike is too soon. Not enough proven income to fight over and the whole market is changing at the same time.”

Is that it?

Well let me point out a similar fight that’s going on that’s a bit lesser known and has been touched on here: Comics.

Yep, Comic Books and those comics you get in your Sunday Newspaper. Here in America we’ve had the “Big Two” (some might argue more but most people know DC and Marvel) and the newspapers and that’s about it for Comic publishers. Until the internet came along you had to beg to one of these companies to get a chance, and on top of that you most likely had to be an Artist and a Writer to get work. (One paycheck instead of two for the company)

When the internet came along some pioneering folks decided to not play the current games and went out into the net to make their careers. Just like in normal media outlets we’ve got our own “stars” but just like Hollywood there are plenty of creators running around the net making a living off of their work. (I know several personally)

Did they know how to make a living off of the net right away? Heck no! They just wanted full control of their intellectual property and didn’t want anyone standing between their stories and the audience. So by changing the rules the webcomic was born and more and more folks are starting to reap the rewards.

So I guess what I’m saying is that the Writers should fight for everything they can get out of the current system, but with the huge change the internet brings they should also start looking for a whole new system. For instance Sanctuary For All is a Internet Only Television show that goes strait to the fans and ignores the studios. The writers need to do all they can to look out for themselves, and that means looking out for today, and tomorrow.

Dec 8, 2007 - 10:32 pm Steve Boriss:

Gozer, Yes, that is very close to what I am saying. I think the writers need to think bigger because a new business model is coming. I also think they are misreading that this is closely parallel to the VCR and DVD situation, in which it is possible a strike could have gotten them their demands. This time, I do not believe the producers are crying “wolf.” The entire stream of revenues is at risk and producers are beginning to panic, legitimately, that Hollywood-level revenue flows might vanish. They desperately need to find a new business model, Hollywood writers ought to be desperately hoping they succeed, and if possible doing what they can to help. Maybe a strike now may give them a few pennies more than not striking — that is unknowable even though it is not looking good at the moment. But if the strike accelerates the loss of consumer addiction to Hollywood programming or gives producers no choice but to look elsewhere to survive, it could be a worse outcome for writers than if they had gone along for now, waited for a business model to emerge, and then have taken action. But in the longer run, which I suspect is not too far down the line, I think writers are going to find that the market will be a bigger determinant of their compensation than the “suits” who they believe screwed them in the past, and who they are now most concerned with.

Dec 9, 2007 - 1:50 am Clioman:

I’m with Sam. Looking back over the last half-decade or so, the only network television series that I’ve set aside time to watch was 24. When my wife watches tv, it’s usually the food channel, and I get most of my news and commentary from the internet. In the last five years, we’ve been to the movies about that many times…not because we dislike theaters, but because so few recent movies have been worth the price of admission. (The latest string of god-awful anti-war movies simply underscores my point — and their market share suggests many others agree.) Now, remind me again why I should care about a Hollywood writers strike?

Dec 9, 2007 - 5:57 am syn:

I’m not interested in protecting the wealth of 12,000 Guilders.

Hollywood has been inbreeding for so long now that they are killing off their own empire.

Good riddance to the royal Guilders.

Dec 9, 2007 - 6:48 am Curly Smith:

I think what Steve’s saying is on target. In the same vein as “the military is always preparing to fight the last war”, the strikers are renegotiating the last strike. In a static world that’s fine and dandy but in a fluid environment it’s fatal.

The old world of the last strike was, as Steve points out, rather mundane and predictable. Unfortunately, the business model of that world is failing. Television viewership across the spectrum is down and only a misguided fool would believe the primarily reasons are DVD sales and internet downloads. Did music downloads kill the music industry? The correct answer is that the music industry killed the music industry in much the same fashion that the entertainment industry is killing the entertainment industry.

The reason the suits don’t want to give up more of the DVD revenue stream is that they can’t if they hope to stay in business. Their original business model of ads for network shows has been losing revenue for years. The costs associated with network programming have been increasing. They were squeezed between the rising costs and declining revenues and they needed another revenue stream. Luckily, for them and you, they found it in the videotapes and DVDs. Do you honestly believe that the Hollywood suits knew videotapes and DVDs would turn out to be as successful as they’ve been? Review your comments about how stupid the suits are before answering. In 2007, it looks like the writers made a bad deal in 1988 but how did that deal look in 1990? I’m guessing pretty darn good.

Other posters are correct in stating that Hollywood is the center of creative accounting. My response, so what? Quit living in the old world and quit being a victim. If you believe that a big part of Hollywood’s future is on the internet, and it is, then you need to work with the studios to develop an internet business model. Work with the studios to define what a successful internet presence looks like. Once you’ve defined success then it’s a simple matter of divvying up the profit/revenue streams. Remember, if you agree the model upfront then you can’t be hosed later.

You can either start thinking like winners and share the biggest pile of money on the planet or you can keep acting like losers and finish destroying your livelihood. For a bunch of creative thinkers you’re sure not very creative or visionary.

Dec 9, 2007 - 8:59 am Yaakov Watkins:

I haven’t watched TV in years. I don’t have a problem. Go read a book.

Dec 9, 2007 - 10:04 am Walter Abbott:

This was in this morning’s LA Times:

What’s making the networks especially nervous are this fall’s ratings, which were dismal even without the strike. In the most recent “sweeps” period, which ended Nov. 28, every network except Fox logged dizzying declines among the critical demographic of viewers ages 18 to 49 compared with the year-earlier period, according to Nielsen Media Research. Third-place NBC shed 13% as heavily promoted entries such as “Bionic Woman” sputtered. (First-place ABC shed 10% in that demographic, while runner-up CBS was down 8%. Fox was fourth but gained 3%.)
http://www.latimes.com/entertainment/news/business/la-et-channel9dec09,1,4079711.story?coll=la-headlines-business-enter

Can anyone say “makegoods?”

Dec 9, 2007 - 10:50 am Gozer:

I think we can all agree that the Writers have a right to fight for their living, what we’re not agreeing on is when, where or how.
I’m curious though, do you think it’s time for some of the more future looking writers to start “jumping ship” as it were and try and create their own market share and not deal with the Hollywood machine. Don’t get me wrong, there’s plenty of advantages in that huge powerhouse still, but as you say change is in the wind.

As I mentioned before I’ve already seen at least one decent star level cast and crew “break” off from the norm and form “Sanctuary For All.” I’ve also heard rumors of Joss Whedon taking his popular (but not financially sucessful in the current system) Firefly series directly to the internet and fans through Games and Direct to Web TV. Do you guys think that’s the future where the studios are being bypassed and production houses go direct to the fans?

Dec 9, 2007 - 4:25 pm Steve Boriss:

Gozer, Yes. I think the Internet is all about finding new opportunities to reshuffle the middlemen — eliminate the ones who no longer add value because they have lost their indispensability in the supply chain, and develop new middlemen who will add value. Going it alone might make less sense than finding the right team. Incidentally, one of the middlemen I’d place on the endangered species list is local TV stations, as the networks are beginning to play their own middleman-bypass games through a combination of Internet downloads and wireless PC-to-TV bridge technologies (e.g. “media extenders”).

Dec 9, 2007 - 4:48 pm Curly Smith:

from Wikipedia about United Artists:
http://en.wikipedia.org/wiki/United_Artists

“Already hardened veterans of Hollywood, the four film stars began to talk of forming their own company to better control their own work as well as their futures. They were spurred on by established Hollywood producers and distributors making moves to tighten their control on star salaries and creative control, a process which would evolve into the rigid studio system.”

It’s Hollywood, make a sequel.

Dec 9, 2007 - 6:02 pm blogengeezer:

All interesting and extremely well thought out comments on both sides. One has only to look at Globalization and the Digital age to imagine the future. I liked the statement “Viewers are Fickle” associated with the WGA. I also recall the past when “Buyers were Fickle” associated with the UAW. In both cases could ‘Product’ possibly be in question?

Dec 10, 2007 - 9:12 pm Leland:

I think the debators need to read what Sam, Peg C, and Walter Abbott wrote. I have seen a few well written TV shows this fall, but they are getting fewer and far between. Long ago, I switched to non-scripted television. Before that, I was playing video games.

With that in mind, look what is happening before the strike really has had an impact… The last set of movies are bombing. Fall TV ratings are down. It’s pointless for the WGA and AMPTP to argue with one another over revenue and profit. Both are getting smaller than the mouths they must feed.

But if you must, by all means keep up the strike. There are several new games out this season, and I haven’t even managed to find a Wii yet. And when I feel like literature, there’s always a good book or free ice cream at the blogs.

Dec 11, 2007 - 1:31 pm