Why Strike II

What's This All About Then, Oy?

For those of you not knee-deep in this -- John August explains it best here:

If you know absolutely nothing about the issues — or if you have to explain it to your grandmother, who’s upset that her favorite soap opera is off the air — here’s my very short summary of the situation.

• Writers for film and television are paid a small fee when the things they write (movies and television shows) are shown again on re-runs or DVD. These are called residuals, and they’re much like the royalties a novelist or a songwriter gets.

• Residuals are a huge part of how writers are able stay in the business. These quarterly checks pay the mortgage, particularly between jobs.

• There’s widespread belief that the rate paid to writers for DVD’s is too low. It was set 20 years ago, when DVD was a nascent and expensive technology. DVD’s are now cheap and hugely profitable, yet the rate remains fixed.

• Downloads will eventually supplant DVD’s. That’s why it’s crucial to set a fair rate for them now, and avoid the same trap of “let’s wait and see.”

• There are other creative and jurisdictional issues (such as animation and reality television) which are also on the table. According to the AMPTP, residuals are the major stumbling block, however.

There are certainly other issues in play -- separation of rights, etc. Craig Mazin has all that stuff covered very well, and he's certainly far more knowledgeable than I am. Just go to his site and scrawl backwards for a few pages, you'll get the whole shebang.

For a perspective from somebody who's been through a few strikes go (1) read (2) Ken Levine.

A few quick clarifications before we move on:

There is some grumbling in the press and business humans that this strike is all about artistic types "sticking it to the Man". No. Are writers "artistic types?" Sure. Every television showrunner is also the project manager overseeing a $30-50 million per year business. And if they're bad at it, they get fired. In under a month. Movie writers negotiate corporate hurdles and deadlines, not to mention shaping their product to budgets acceptable to the Mother Company commissioning the work. (Don't blame us if those crazy directors fuck it up and go over budget ...) The 'Man' will ever be there. Please assume we're smart enough to know that. It's show business, people, and anybody who's lasted longer than their first development deal knows and lives the difference.

There is some grumbling among industry types that we should have waited until SAG went out, or even at least taken a few weeks with the federal mediator. That may have made sense if a.) it wouldn't have meant even more stockpiling of material, to help blunt the threat of a strike and b.) the AMPTP was negotiating in good faith, which I don't believe it was, as I'll discuss below.

There is some grumbling among the screen-bloggers of various levels that the strike is being driven by the rich writers who can afford to take some time off work. That the middle class writer will be hosed. This is a bullshit complaint. I keep saying this, over and over again, and will restate it before the end of this post: We are all writing for the box set now. There will be no middle class of writers if we don't get a good deal on internet downloads, just as there'd be more working writers now if we'd gotten a better deal on DVD/home video back in the day. I have immense amounts of sympathy for young beginning writers who are seeing their first staff jobs evaporate, and for all the below the line people who will suffer when production stops. But we gotta do this now.

Why now? John August had a good short explanation of what it's about. The longer version, of why we're doing this now, is aptly summarized in John Bowman's opening remarks to the negotiations, which I'm going to quote in full here. From Craig's site:

"First of all, I want to congratulate our corporate partners at CBS, Time Warner, News Corp., Disney, Viacom, and NBC-Universal on what appears to be another great year for entertainment revenues and profits. Box office is up, and broadcasters are getting ad rate increases across the board, driven largely by digital content created by many of the people in this room. We are all of us very fortunate to be working in an industry that is thriving. It is thriving not only because of the content created by members of the DGA, SAG, AFTRA, and the WGA, but also because the CEOs of these companies are proving to be extremely adept at finding ways to monetize the Internet and other new technologies.

There is a real disconnect, however, between what the companies are reporting to Wall Street and what they’re saying to the talent community. Investors are hearing about the changing landscape in entertainment and exciting new markets to exploit. In contrast, the AMPTP communicates nothing but problems to the Writers Guild. Problems like-and this was mentioned by AMPTP at a recent press conference-ad skipping, even though NBC Universal had just announced a one billion dollar DVR deal. And while WGA member revenues have not kept pace with industry growth-we are a line item that is definitely under control-the companies balk at giving us a fair and reasonable share of the industry’s success.

I don’t think anyone in this room is arguing about the right of writers, actors, and directors to residuals. As collective authors of a work, we are entitled to a portion of the revenue generated by that work. But you have publicly stated that you no longer want to pay us residuals on shows that are not in profit. Here’s why that is untenable:

Writers are a cost of doing business. They have no say in production, marketing, on advertising and publicity, directors, casting, the decision to spend tens of millions of dollars advertising, etc. They can’t be expected to be paid from profits when they have no say in the costs which affect those profits. Profits are under the control of CEOs and their executive staffs.

Intellectual property has rights, just as physical property does. Management has no problem paying the person who made the DVD box before a film turns a profit; they shouldn’t have any problem paying the artists who created the intellectual experience that came in that box either. To claim that intellectual property has lesser rights than physical property is a dangerous argument for anyone in our business to make. You are making the same argument to us that digital pirates make to you.

According to Hollywood accounting, The Simpsons is not in profits. How can we trust that kind of bookkeeping? What other business but ours has the accounting term, “monkey points?”

Residuals from shows not in “profit help” support a writing middle class, and keep writers in the business until they finally create that one great thing. Do away with residuals, and you do away with late-blooming careers like Marc Cherry and David Chase - they couldn’t afford to stay in the business. Your proposal transfers money from developing, promising writers, actors, and directors who need them the most to established pros who need them the least. It’s bad for the business.

Ultimately, your complaint is not about unprofitable shows, it’s about the portfolio nature of the entertainment business. Risk is spread out among many shows, some of which are unprofitable. This economic fact will never be changed, even if writers work for free, as you propose they do on the Internet.

Now let’s turn to your proposal that we do a three year study before bargaining about the Internet. Your reasoning is exactly the same as it was in 1985. Models haven’t emerged, the environment is uncertain, we’ll take care of you later. Well, we know what happened then. Home video and DVD sales soared, and nobody got taken care of later. But this isn’t 1985, when TV writers didn’t envision that their shows would someday end up on DVDs, and they’d get stuck with a .3% return. This time, TV writers can see how important the Internet is - our shows are already there. And, unfortunately for your argument, positive economic events are daily giving the lie to your doomsday scenario.

But if you insist on a study - I used to do studies for a living - I’ll give you one now. The Internet is a distribution channel with no major fixed costs, no media costs, no shipping or handling costs, and margins that are the envy of even the cigarette industry. Though you lose your monopoly on distribution, you have a strategic advantage that nobody else has: strong relations to the talent community. Above all else, nurture this relationship. If you don’t-if, for instance, you insist that members of that community not get paid for three years, or get paid, at most, a .3% residual rate, what possible incentive would they have to work for you? What incentive do they have to help you fight video piracy, when they’re only getting .3%? If you don’t pay them someone else will-Yahoo, Youtube, who knows? It won’t happen overnight, but it will happen, and very quickly indeed, if you bargain so unreasonably that you force talent to go elsewhere for a fair deal. Of course this study is flawed, but then all studies are - you can make them come out any way you want to.

I can imagine an NBC-Universal Wall Street press conference, 18 months from now. Revenues are down, profits are down, due to a work stoppage which you, the AMPTP, collectively, forced. Shareholders are restive. They ask the company this: “Your industry paid 84 million to fire Tom Freston, 300 million to invest in “Last FM.” Yet at a time when it was absolutely crucial that we establish a presence on the Internet, you chose to alienate content providers, the best strategic advantage you had. And you made this catastrophic decision over how much money?"

Today you’ll receive our proposals. They are designed to help writers keep up with the overall growth of revenues in our business. Our operating principle is simple: if you get paid for the reuse of our material, we get paid. So let’s now back away from the edge, get real, and get to work. Studies and profit-based residuals are not serious proposals. They have no legitimate basis in the economics of this industry. They are non-starters for this committee and membership. Our response to such proposals will be a polite “no thank you.” But there are serious issues to discuss, issues that come directly out of our real relationship. Those issues are:

How we will share new media income

How we will produce material together for new media

How we will deal with the non-union shell companies that you’ve created to avoid paying the talent, especially on reality and animation

How talent will get a fair share of home video money

How we will work together on issues like piracy

How we will work together to make sure that new technologies are a boon for all of us

These are real issues. Writers and the talent community deserve to keep up and we have not been. All of our proposals will be focused on that central fact. Writers have to keep up with the industry growth that we help create. It is simple and fair. We look forward to your response, and thank you."

That is one smart sonvabitch. Now, to my monkey ramblings ...

We Set A Bit of Context:

One of my favorite jokes, just a lovely piece of writing, is Chris Rock's bit about the time one of Siegfried and Roy's tigers mauled Roy.

"Everybody's mad at the tiger. 'That tiger went crazy!' That tiger didn't go crazy ... that tiger went tiger."

This is how I feel about corporations in general, extended to the Studios in particular. There are those who rail at the AMPTP for being profit-maximizing heartless, soul-less bastards as if that were a bad thing. It's not.

A corporation's job is to make money, and if necessary fuck you in the process. Just like a tiger's job is to eat, and if necessary kill you in the process. I'm okay with that. I like capitalism. A lot. I like tigers. A lot. That doesn't mean I trust corporations not to try to screw me and everyone next to me when negotiating. Nor would I trust a tiger not to attack me in the wild. Nor am I personally offended when they try.

All this to say that the Studios have not been negotiating in good faith, nor probably did they ever intend to. Why? They went tiger.

How Did We Get Here?

The negotiations started like this:

Writers: "We want residuals in internet downloads, let's start at a 2.5% for a negotiating point, an increase in our DVD residuals from .3% to a nominally less pathetic .6%, and a bunch of other bullshit that's on the table for negotiating purposes."

Studios: "How about ZERO PERCENT, not only of the new stuff but we also redefine existing residuals so that you won't get any of those, either? Oh yeah, and here are some other rollbacks, all financially punitive and some actually morally objectionable!"

Tiger.

Right before the strike, when the Studios realized that the Guild was actually serious this time and was about to announce the results of a Strike Vote, they took the residual revamps off the table. (Pardon me for referencing Artful Writer all the time, but he is indeed the best, most thorough commentator on the subject on the Web right now.)

This is one of the points where I respectfully disagree with Craig. Some people took this as an offer to negotiate. I, like many others, saw it as "Fine, we won't rape and murder you. We agree only to murder you. Now, it's your turn to give up a deal point."

Yeah. Let me get right on that.

Tiger.

(Sidebar: Craig is generally a conservative, by the way, and this reminds me of my maxim on American politics: "Liberals have an irrational childlike faith in the government. Conservatives have an irrational childlike faith in corporations. Libertarians have an irrational childlike hatred of both.")

Then, at the last minute, after the Guild yanked a bunch of its proposals off the table, the AMPTP made it plain that they weren't going to budge at all on the one issue driving the entire strike, the internet download issue. That they would, indeed, go tiger over it.

The Studios Cannot Be Completely Off-Base Here, Can They?

The Studios' position on internet streaming is patently ridiculous. It is not "promotional" to show an entire episode, with commercials. Trailers are promotional. Clips are promotional. An entire episode, and again son, pay attention heah, with commercials --

-- with commercials --

-- WITH. COMMERCIALS. --

-- is a frikkin' rerun.



The Studios' position on "studying" the new media is equally as ridiculous, if only a wee less obviously so. They would like to take a few years, figure out how they're going to monetize the internet download system, and then come to a deal. As John Bowman reminded us in his opening remarks, that's exactly how we got hosed on DVD's. And the bitch of it is, we cannot let a bad deal on internet downloads become institutionalized as "facts on the ground", because once it is it is almost impossible to change. Even Craig -- not to demonize him -- but even a union stalwart like Craig considers the DVD increase a nonstarter because we've eaten the current rate for so long.

In my conversations about increasing DVD residuals and also even doing Direct to DVD TV series, I've had perfectly rational friends of mine look me right in the eye and say "Well, sure, the DVD business was booming for a while, but now DVD sales are flat" as an explanation to why asking for an increase now is unreasonable.

So let me understand this. Back when the income flow was expanding beyond everyone's wildest dreams and money was raining out of the sky (even though it took a while for those numbers to be reported), maybe then we would have been justified in asking for an increase. But now that DVD's are nothing more than a relatively steady income flow, growing at a mere 4% a year, generating a measly $16.4 billion (with a b) a year, we're insane to try to strangle this dying media format in its crib by asking for an extra .3%.

The appropriate response rhymes with "Snow me."

But this is the way it is, has been for a decade, and perfectly reasonable people shrug and want to move on. Because, hey, facts on the ground. Let me promise you: if we don't get a good rate on the next delivery industry, the same types of people will be shrugging twenty years from now at our poor share in the billions in downloadable content and insisting that we can trust the Studios on this new quantum brain transmission system. Let 'em study it for a few years ...

What's more, the whole "study the situation" tomfoolery doesn't resemble anything I've seen work in the free market. They have stated that they need they need the flexibility of not paying residuals in order to experiment with digital models. Why are they "experimenting"? Well, in theory, to find the digital model that is the most efficient and most profitable. Aces. A system that will work flawlessly even though they've developed it without a chunk of its operating costs in place.

Remember the EEBC? The Everyday Extrapolated Bullshit Comparison? That is, if an exotic situation properly translated into the same context in your everyday life seems like bullshit, it is bullshit. Now, if your brother said he was going to open a bar and see how it went without paying for any alcohol or hiring bartenders or figuring out the cost of a liquor license, and then if that succeeded he'd add the booze and personnel and get the paperwork nailed down, you'd rightly think he was an idiot. Studios say the same thing annnnnd ...

Now, are billion-dollar multi-national corporations idiots? Generally, no. The alternative is ...

... Tiger. "Go ahead, human pal, look over there for food. We're just chilling over here in the petting zoo. No, no, nothing going on. We promise if there's any meat to be found, we'll share it. Honest."

Or to reference our previous metaphor: the cake is a lie.


In Which I Agree With the AMPTP

Now, there is one place in which my geekery allows me to fall into step with the AMPTP's general attitude toward electronic sell-through. They stated:

…no further movement is possible to close the gap between us so long as your DVD proposal remains on the table. In referring to DVDs, we include not only traditional DVDs, but also electronic sell-through — i.e., permanent downloads. As you know, we believe that electronic sell-through is synonymous with DVD.

First off, notice the conspicuous absence of streaming, or broadcast on the web, in there. The one place they are making advertising dollars, they don't want to go defining that, quite yet ...

Anyways, some people freaked. After all, "DVD" is an acronym with a literal meaning. It means discs. Physical production of said discs. Overhead. Internet distribution has an entirely different economy --

-- that we should ignore. Because, frankly, tying residual deals into the specific economies of distributive technologies is demonstrably dumb. It's what got us into the mess with DVD's, as a matter of fact. The actual economics of the original specific home video delivery technology -- VHS originally -- were hazy, so we took a flier on the supposed profit margin. As technology advanced, overhead dropped, profits grew, we got hosed.

I, nothing more than an avid hobbyist, can reach into my internet community of smart folk and industry insiders and pull out a half-dozen nascent delivery systems, any one of which might not fall under "home video" technically, or "broadcast", or "internet download" as they are precisely defined. What about kiosk-sold video tied to an updating branded hardware platform? Is something an "internet download" even if it's tied to a physical download location using wifi? What about a 4 Gig flash drive holding 13 episodes sold in stores? What if that 4 gig flash drive can be traded for other flash drives or even content switched on a subscription model? How about a "six episode" subscription model based around streaming, or if Comcast combines its cable modem with its pvr and then goes to an a la carte pay per episode fee, but the episodes and movies are dumped directly onto your pvr hard drive ....

A chunk of those aren't financially feasible, by the way, nor even work quite the way they're described, but you get my point. We're all writing for the box set now. Substitute "unimaginable near-future delivery tech" for "box set", and the statement is universalized. Although I know nothing about the inner workings of the studios, I can certainly see why, knowing what they know about tech, they went for the controversial definition:

1.) Writers have a shitty deal on DVD's, the current home video tech.
2.) Permanent downloads would be the new home video tech.
3.) If we define old home video tech = new home video tech, then
4.) Old Shitty deal = new shitty deal!

Bonus round:

5.) In the future, state every new tech = old tech, therefore
6.) Every new deal = old shitty deal! Forever!

If I were a stockholder in one of those companies, I'd actually appreciate that.

I say -- and this ain't gonna happen, but what the hell, everybody else is Monday-morning QB on this one -- I say we accept that definition. Go platform free as long as we stay profit free -- that is, we do not tie residuals to profit, which is a dangerous precedent undermining our rights of authorship. Sure, we'll come way, way down from our original 2.5%. What's the halfway point between 2.5 and .3 ... 1.4% let's say we open at 1.2%. We cut our demand more than in half, for chrissake. Come on, that's more than reasonable. It's just that, since we're platform free, and you're the ones who argued DVD's are the same as sell-through, you also have to bring DVD's up to that number. No? Come one, how about you come up not even halfway to that point on DVD's, say %.5 or .6%? and we'll even notch new tech down to a nice round 1%?

Without a DVD bump of at least that much, by the way, I wouldn't make a deal. No. This puts me in the minority, but I'm a geek and in the same breath I can point out the multiple funky techs coming down the pike, I can also remind you that new technology is adopted slower than you think. 2006 was the first year DVD players outnumbered VCR's in America. 2006. And DVD players were really just a technological variant of the same viewing habits put in place in the 80's by VCR's. In the same way, although the iPod revolution seems shocking, it's conceptually not a big jump from Walkmen and mix tapes, just with different mediums. It was the technological culmination of entertainment habits evolving over twenty years, not some paradigm shift.

A paradigm shift, though, is what it will take to get people to completely merge their internet presence and their TV viewing. I've talked about this before, but for the majority of houses in America the TV is over here, and the computer is over there. The concept blurs for younger generations, but it's not gone. Add to that the less than stellar broadband penetration in the US, factoring in that the fat pipes necessary for a broadcast-like experience for many Americans just isn't there ... I'll leave out some black swan event like XBOX or Comcast waking up and realizing they could run entertainment, and make the fairly safe guess that it'll be ten to twenty years before fully digital downloadable material completely, culturally replaces DVD. I lean toward twenty, but let's say technology runs rampant, the US government get serious about building infrastructure (heh heh heeee), oh, I'll spot you tennish. Say twelve.

You want to eat that shitty .3% DVD deal for the next twelve years that DVD's still the fat pipe? For the medium that will increasingly be the one paying your bills? Good for you.

What Will Probably Happen?

We do indeed settle for that .3% and get a not-too-horrible deal on internet downloads. After at least four months of lost lives, blown mortgages, bankruptcies, and network television probably losing another 10% of its viewership. But there's a reason that studio entertainment system is rotting away, and decisions like this -- forcing a strike out of short-sighted greed -- are symptomatic of larger problems. If and when things do indeed get really desperate for these guys, rather than just "not as insanely profitable as expected, but still more so than last year", then you'll really see the blood and marrow on the streets.

That's why some of us talk about new distribution channels, open source film-making, new financing models ... but for those who just write, whose gift, craft and years of hard work allow them to tell stories to the audience, take viewers away for that little sliver of time ... they deserve fair share of the fruits of their authorship. Residuals pay their bills, their mortgages, and allow them to continue writing, continue striving to create the successes which in turn create more jobs for other writers, below-the-line workers and even suited humans.

Moral issues aside -- fair residuals mean more working writers, more working writers mean more product, more product means more physical production jobs, media sales, corporate profits and shareholder value. That's what we're striking for.