Writers Guild Strike Hurts Everyone Involved

By: Alex Schaefer

Posted: 1/31/08

The Hollywood writers strike has filled the news lately, with the main buzzword being residuals. When a member of the Writer's Guild of America (WGA) sells a script, both parties agree that it is worth a considerable sum, but to facilitate the inception of the project they agree on an initial payment that is much less than the actual valuation of the script. To make up the difference, the studio pays the writer a residual, or a percentage of the gross sales, whenever that movie is played or a TV show is aired. It's pretty simple. It's the equivalent of an author getting paid each time a copy of his novel is sold.

The main issue of contention is that the writers are not contractually compensated for any sales or profits earned by the studios through electronic business. There are two ways that studios earn money in this manner. The first is electronic "sell-through," the term given to services such as iTunes, or Amazon.com where users pay to download a show or movie and then save it onto their computer's hard drive. The other method is called streaming. This is when a video is played on a Web site or media player, but is not saved to the computer. Companies earn their cut here through ad revenue. It would seem reasonable that the writers, who helped create these products, would be compensated, just like they would be if a video was rented or sold in a store.

This seems fair enough, but the AMPTP (Alliance of Motion Picture and Television Producers) has stated that they do not turn much of a profit from their internet sales. They say it is used as more of an advertising platform to get people to watch their shows on television and go out and see their movies. The writers disagree, but moreover, they don't want to see history repeat itself.

The origins of the current strike stem from the agreement reached at the conclusion of the previous writer's strike, in 1988. That one lasted a little over 21 weeks and the main point of contention was the burgeoning home video market. It was a relatively new medium in terms of mass distribution of films and at the time the major studios were skeptical, at least publicly, about its true revenue potential. They ultimately negotiated a deal that paid the writers 0.3 percent of the first million reportable gross sales with that number increasing to 0.36 percent as sales grew. At the time, VHS tapes were expensive to produce and companies only realized 20 percent of the gross sales as profit. As the industry transitioned to DVDs, the studios began living out a real life version of the scene from the movie "Blow" where Johnny Depp sits in a room completely surrounded by cash attempting to tally the stacks. Because DVDs typically only cost about 60 cents to make, they are sold for massive profits and have become the main stream of cash flow for the industry.

The writers felt like they had been victims of some sort of heinous scam. When their contract with the AMPTP ran out in November, they made it a point to make sure they were not getting slighted again. Their demands called for home video residuals to double, in addition to the current request for residuals from all electronic media. This was the main sticking point for them and they wouldn't budge.

Even the most rational causes can be derailed by poor tactics and this seems to be the case with the WGA. They won the initial battle, as evidenced by the halt in production of most of the major television shows, including the late night talk shows. They even gained support from the other unions, including SAG (Screen Actors Guild) and DGA (Directors Guild of America). Their support was most visible when the actors decided to boycott the Golden Globes - relegating it to a mere press conference that had all the pomp and regalia of a custody hearing.

What they did not accurately forecast was the scope of collateral damage their actions would inflict and how it would impede their effort. When all these shows halt production, every person involved in the process stops getting paychecks. And the majority of these people earn a modest living and cannot afford to just take three months off of work. This is the reason most of the late night talk shows felt pressure to return to the airwaves, even without the help of writers. And this is why you may have recently noticed a considerable decline in quality. The return of these shows was a victory for networks and they carried this momentum forward.

The other factor that has suddenly put the WGA in a bad position was the DGA's contract negotiations. Their contract also expired recently but rather than throwing the proverbial temper tantrum they began "soft" talks with the AMPTP well before their contract expired in hopes of avoiding a similar confrontation. They reached a relatively amicable deal that effectively signals the probable culmination of the writers strike. Their ability to reach a settlement means that the writers either need to work towards a compromise, or dig in for the long run. The main tenets of the deal include doubling the residual rate for home videos and determining a residual rate for the advertiser-supported streaming services. They were also able to reach an agreement on electronic media that makes a lot of sense. The contract states that the DGA agrees that this relatively new-media's profit potential is largely uncertain and it includes a provision calling for a revision of the assessment in 2011 when projections are more apparent.

This exemplifies the fundamental error of the WGA's steadfast stubbornness. They refused to see the other side of the argument, and while they might have been essentially right, the fact of the matter is that the AMPTP holds the most bargaining chips, and thus controls the situation. The AMPTP called the WGA's bluff, and now they are left as the odd man out. While the WGA is vital to the industry, they have created bad blood that will, to a certain extent, inhibit future relations. This strike will come to a close in a few weeks, but its been a very trying time for those with careers at stake.

Alex Schaefer is an 8th-semester accounting major. He can be reached at Alex.Schaefer@UConn.edu.