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DVD, Web Key to Hollywood Labor Dispute

1 Jun, 2007 By: Erik Gruenwedel

The three-year contract between the Writers Guild of America (WGA) and the Alliance of Motion Picture and Television Producers doesn't expire until Halloween. But battle lines are being drawn already for what could be Hollywood's most contentious labor unrest in nearly 20 years.

At ground zero of the negotiations, which begin July 16, are demands for increased residual compensation for DVD releases, as well as compensation and residuals benchmarks for the nascent but potentially lucrative electronic-sellthrough market.

The WGA, which represents movie and TV writers, last week issued its “Pattern of Demands,” which also sought increased compensation for reality programs, animation, product integration and upstart sister networks such as The CW and MyNetworkTV, to its members for ratification.

Studios and television networks, which in 1988 endured a 22-week WGA strike over syndication compensation supported by the Screen Actors Guild that threatened prime-time programming, reportedly are stockpiling episodes in anticipation of a possible work stoppage this fall.

“This negotiation is the most important negotiation in the last 20 years,” said WGA East president Chris Albers. “Our members recognize that our bargaining issues will shape their economic lives well into the future. Our job is to make sure that every time a writer's work is watched or heard, the writer is fairly paid. If ever there was a negotiation that really counts, it's this one.”

The AMPTP countered it has been paying residuals on money-losing programming for too long. The group believes it is time to re-examine the entire economic landscape, which includes new media and traditional media.

“It is an assault on the entire industry, those above and below the line,” said AMPTP president and chief negotiator Nick Counter. “We are committed to making a deal — one that is fair to both sides, one that is realistic, reasonable and respects our contributions and our business needs as well as theirs.”

Putting DVD, Net on Par with TV

For more than 20 years, WGA members writing for VHS and DVD product received 1.5% of 20% of the producers' wholesale price for each unit sold. The guild would like to up that to 1.2% of 100% of wholesale, according to the WGA.“The rate the guild is looking for is currently in existence [for pay TV], but the producers don't want to apply it,” said WGA spokesperson Gregg Mitchell.

When home entertainment began primarily as a rental industry for videocassettes, writers and producers agreed to set residual-based wholesale revenue, which both parties agreed was an amount most easily verified.

“They argued if they got a percentage of net, they could get screwed,” an AMPTP representative said.

She said the DVD business changed when many major studios became distributors in addition to producers.

As a result, studios with internal distribution units cashed in twice on a DVD, while independent producers were paid once.

“The producers are arguing ‘why should the guilds get any more when they aren't getting any more?’ the AMPTP spokesperson said.

Electronic Benchmarks

The guilds consider the emerging electronic-sellthrough market a form of paid television and would like residual compensation to mirror its DVD demands.

WGA spokesperson Gregg Mitchell said minimum compensation for writers for original short-form webisodes, mobisodes and related platforms remain a work in progress.

He cited recent agreements between the WGA and Touchstone/ABC and CBS as negotiation starting points.

The deals call for writers of two-minute online mini-episodes of “Lost” and daytime soaps “As the World Turns” and “The Young and the Restless” to receive a minimum of $800 for each story, along with pension and health contributions and residuals if the programming was repurposed.

You say ‘Distributor,' I say ‘Producer'

Among the many issues on the table during negotiations between the WGA and AMPTP will be clarifying exactly who is the distributor and producer.

With electronic sellthrough considered the same as DVD for movies and TV episodes, receiving 20% of the producers' wholesale price gets confusing if the distributor is Apple iTunes and the entity selling the TV episodes are the TV networks rather than the original producer.

Technically, the producer is the employer of the WGA, and the distributor or TV network is not. When syndicating content on TV, it is the production companies, not the networks that negotiate the deals.

With electronic sellthrough, however, the lines are blurred.

The distributor in this case is the network, the retailer is iTunes and the producer is the producer. Apple becomes a retailer just like Blockbuster or Wal-Mart.

“We don't know what the wholesale price is or what the networks are getting, said an AMPTP spokesperson. “To put it one way, there are a lot of pennies going back and forth.”

She said the producers are not any happier than the guilds about this because the networks are now acting as distributor, which the producers always believed was their right.

In addition, producers from Warner Bros., which doesn't have a network, do direct deals with electronic sellthrough channels, including the download services.

“It is very confusing, and there is no standard right now. There is just an interpretation,” the spokesperson said.

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