The Writer’s Strike… Out?

Last week, amid the hubbub over Microsoft wanting to take out Yahoo while Yahoo looked for another date to the prom, the strike between members of the Screen Actors Guild and the studios officially ended with the ratification of a new three year contract by the vast majority of members who participated in the vote. This ends the worst such strike in the past 20 years. According to one report, the 101 day strike led to $1.3 billion in lost revenue by Hollywood-dependent businesses and $750 million in lost wages to production crews of various film and television projects put on hold during the 14 weeks. And, in a report issued just yesterday by Jack Kyser, the chief economist for the Los Angeles County Economic Development Corp., we must add an additional $500 million to the sum of those for a grand total of $2.5 billion. That’s a big number, one worth remembering, making the $60 million lost by the quasi-cancellation of the Golden Globes seem like a drop in the bucket. Fortunately for us all, mainly the party-planners and gift basket creators, and with a big thanks for the Directors Guild of America for paving the way, the strike will not impact this year’s Academy Awards being held this Sunday.

When asked who won the strike, Joe Adalian, co-television editor for the entertainment trade publication Variety felt that neither side really won – both gained in some areas while they each conceded ground in others, or as he stated, like any good outcome in a labor dispute, both sides ended feeling less than 100% happy. While the strike encompassed a rather large list of demands, the main points of contention revolved around the Internet, and even though the strike involved all members of the writers guild, television content makes up the majority of the focus online, turning this strike into a de facto television strike. During this time the writers haven’t done much, as they couldn’t, but it gave the studios time to focus on their business, or more specifically how they might want to change their business. Listening to some of the results, it sounds like our industry during the stock bubble burst of 2001 with more than a dash of the housing collapse, with companies saying they won’t commit as much money as quickly and that they will scrutinize deals more closely before funding. In Hollywood specific terms this means a change to the way big networks order up test shows, their pilots.

As for the specifics of the agreement, writers will receive double their existing rates for television shows and films sold as Internet downloads, once certain break-points are reached, also the studios agree to hire union talent on content produced specifically for the Web. I believe this comes out to something like $1500 per year per episode streamed. Again according to Joe Adalian of Variety, the studios have allowed writers into the "Internet hen-house," and they will have a tough time getting them out. The precedent has been set; when the web makes money, the writers make money. It’s that "when" that could turn out problematic. In addition to money, the writers also gain "unfettered access" to the studio’s books with regards to Internet revenues, helpful if you want to make sure what they say you earn matches the reality of what you should earn. Perhaps biggest of all, during the strike, the writers dispelled with the common conception that having them act like a unified force amounts to herding cats. What does this mean for Joe/Joann viewing public? New episodes of their favorite comedies should return by the end of March, and some of the dramas could return in early May. Fans of shows like "24" and "Heroes" must endure a longer wait, as these so-called "serialized shows", where the plot develops weekly, take longer to restart; fans of "24" for instance will have to wait until 2009 before they see Jack Bauer in anything other than a rerun or on DVD.

Speaking of DVDs, this strike had less to do with the Internet than it did with DVDs. In what will amount to oversimplification at best, writers create great content but not necessarily great deals. The studios arranged for writers to receive around four cents, yes four pennies, per DVD sold. Somewhat accurately, for roughly the past twenty years that DVDs have existed, the writers receive no more today than they did in the 90’s. Their work has earned the studios billions, hundreds of billions, and while they earn some money, account managers at Internet companies earn more proportionately than they do. As, Roger Smith a former Hollywood executive and current founder of a Global Media Intelligence a research service for major investors into entertainment space said, you can’t change the past, but you might think that the writers would have focused this strike on the present and correcting the injustice they feel has occurred for years. It turns out, that they couldn’t. Part of the deal for the two sides – writers and studio representatives – to even start to talk about talking, meant putting three of the biggest issues off the table permanently – DVDs, reality television, and animation. Leave alone reality television and animation for which writers stood little chance. That the studios said to them the equivalent of we will wait the strike out indefinitely instead of even talking about renegotiating the DVD percentage should have signaled a huge red flag.

As Roger Smith bemused, the writers looked down the wrong end of the telescope; they didn’t necessarily get tricked, but the studios appear to have pulled a Brier Rabbit on them, asking them not to take away their precious Internet revenue. In the interest of appearing informed and current, the leadership of the writers bought into the hype of online entertainment revenues, making it a central issue in the strike. They were right but wrong. They were right in that it is an issue. They were wrong in that it’s an issue now. Remember that $2.5 billion from above. It doesn’t just equal the economic damage, it also equals the project total revenue that online entertainment will generate – from ad revenue to stream revenue – in 2011, the last year of the writers’ three year deal. Let’s say the Internet goes nuts, and that number equals $5 billion. Do you know what DVD sales and rental income should hit in 2011, even with this supposed slumping market for the little silver disks – about $17 billion. The writers have a larger piece of the pie, but it’s a larger piece of a small pie, and no matter the size of the pieces that won’t make the pie any bigger. The real winner again are those that understand the Internet. It has changed the way we access content, removing the barriers created by formats like the DVD, but no one knows what the revenue model will look like; that’s why this is a lesson to us all to make sure we understand the real issue before agreeing to a solution to the wrong problem.