Tuesday, July 29, 2008

Dueling Press Releases

[Note - I have revised this post in a few places based on information provided by the AMPTP and SAG after the original post appeared. This is indicated by "REVISED".]

Last night saw an extensive press release by the AMPTP reacting to various statements by SAG over the last few weeks, followed by a short release from SAG responding to some of the AMPTP’s points. Who’s right? Here’s the language from the two releases and my analysis, interleaved so that you can see what items respond to what. Note that the AMPTP press release cites (in paraphrase) various SAG statements. To avoid confusion, I’ve used boldface to sort out who is speaking – AMPTP, SAG, or me (JLH).

AMPTP press release:

July 28, 2008 Hollywood Reporter – Doug Allen

SAG Statement: The problem is they're asking us to accept a deal that doesn't have the minimum standards necessary to protect actors and has negative consequences that could last for decades and really affect the professional actor in maintaining their lives and families without having a second or third job.

The Facts:

* While SAG members currently have almost no new media production rights, the Producers’ new media framework grants SAG shared jurisdiction with AFTRA over original new media programs, including low-budget projects that employ a single “covered actor.”

SAG response:

The AMPTP’s statement on their proposal for “covered” performers completely misses the point. For any original production that is made for new media at a budget threshold of less than $15,000 per minute, the producer would have the right to make that production without ANY covered performers if they so choose. That means that the producers would have the right, under our SAG contract, to produce non-union simply by not hiring covered performers. Further, it is possible that some SAG members could be categorized as "non covered" performers.

JLH analysis: Both sides are correct. They disagree on the appropriateness of the carveout (and also the effect, as is clear from other statements each side has made). However – and here SAG is missing a point – when new media starts to generate significant revenues, and becomes readily viewable on living room TV sets, budgets are likely to rise dramatically, just as they did for video games as that medium became popular. The studios, of course, will try to raise the thresholds next time the union contracts are negotiated, in three years, so this will probably continue to be a point of contention.

AMPTP press release:

* All of the new media terms in the Producers’ final offer, including those related to original new media programs, are subject to a sunset clause that protects both performers and Producers by allowing the two sides to reevaluate all of the new media terms in three years and bargain from a point of greater knowledge about the market’s development.

SAG response:

The sunset clause provides no guarantee that provisions in the agreement being negotiated that end up harming actors will be excluded from the next contract. Any such harmful provisions would have to be bargained out. If management likes how they work, they will fiercely resist excluding them from future contracts.

JLH analysis: SAG is correct. Moreover, the sunset clause is a meaningless fig leaf, as I have blogged since the concept was first touted, in the DGA deal. That’s because the entire contract expires every three years, so to add a sunset clause that says the new media provisions expire in three years is to state the obvious and add little of substance.

AMPTP press release:

SAG’s July 17 Message to Members

SAG Statement: It makes no sense for SAG to agree to allow the studios and networks to exacerbate our problem by giving them a pass to produce entirely non-union under a SAG union contract.

The Facts:

* Since 2001, the Producers have been unrestricted in producing derivative and nonderivative new media projects non-union under Sideletter 21 of the SAG Basic Agreement and Sideletter H of the SAG TV Agreement. The Producers currently have the right to produce union or non-union. For seven years, the SAG collective bargaining agreement has given Producers the right to do just what SAG now claims is unacceptable.

* The Producers’ proposal grants greater rights to SAG by significantly restricting the Producers’ ability to produce new media programs non-SAG.

SAG response:

We have jurisdiction under the current contract. The AMPTP Producers are contractually obligated to give SAG 60 days notice of their intention to produce a program made for the Internet. After notice is given, the producer may either produce programs made for the Internet under the terms of the existing collective bargaining agreement, or they may tender a letter of adherence to cover such a program with terms negotiated with SAG as provided in the sideletter.

JLH analysis: [REVISED:] The existing sideletters to the SAG agreement are ambiguous on what happens if a producer chooses not to sign a letter of adherence. The AMPTP contends that the producer would then be free to shoot non-union, whereas SAG contends that the producer would then be bound by the entire SAG agreement. It’s not clear which side is right, but it also doesn’t really matter once a new contract is agreed on (if and when that happens), since the sideletters will be replaced by the new media language now under negotiation.


AMPTP press release:

* All original new media programs employing a single “covered actor” would be automatically covered under the SAG agreement. This represents a significant concession on the part of the Producers.

SAG response: Discussed above.

JLH analysis: Discussed above.

AMPTP press release:

* Only low budget productions that do not employ a SAG “covered actor” would be outside the scope of contract coverage. This is intended to allow Producers to effectively compete and experiment with low budget original new media without being priced out of the market by expensive and restrictive contract terms.

SAG response: No specific response to the second sentence.

JLH analysis: The first sentence of the AMPTP release is correct. As to the second sentence, I agree with the AMPTP position. In a world of UGC (user generated content) and non-union content from all over the world available to anyone, instantly, companies do need the flexibility to experiment. SAG’s position, as they’ve previously stated it, is that this flexibility could or would lead to much or most new media content going non-union. The concern is real, though I think somewhat overstated, since budget levels will rise, bringing more production into the union fold, as new media content becomes more professional. This disagreement reflects a fundamental conflict between the goals of unions and management.

AMPTP press release:

SAG Statement: The DGA and WGA agreed to allow producers to make new media productions entirely non-union, at the producers’ option, for projects below budgets of $15,000 per minute (effectively, almost all new media productions for the foreseeable future.)

The Facts:

* Those new WGA and DGA contracts extend union jurisdiction to new media productions budgeted below $15,000 per minute whenever a qualifying member, e.g. a ‘professional writer,’ is employed. The proposal to SAG does the same thing so that whenever a “covered actor” is employed, the production is also covered.

SAG response: None.

JLH analysis: The AMPTP is correct. Note that they (and SAG, elsewhere) are shorthanding the threshold: the $15,000 figure is actually just one of three dollar thresholds. See Guild Agreement New Media Thresholds.

AMPTP press release:

* The definition of “covered actor” is broad enough to capture most professional actors (those with two TV or film credits, a national commercial, work on an audio book). These provisions also ensure union coverage for all actors, union or otherwise, if a single “covered actor” is employed.

SAG response: None.

JLH analysis: The AMPTP is correct. BTW, the definition is even broader than they state: it also includes stage actors who have professionally-produced credits (Broadway, national touring companies, etc.).

AMPTP press release:

SAG Statement: AMPTP’s recent offer to SAG doesn’t include residuals for programs made for new media and streamed again on ad-supported new media platforms.

The Facts:

* The Producers’ final offer includes residuals for both ad-supported and consumer pay reuse of new media programs derived from existing SAG television series. The Producers have proposed a more limited residual payment for original new media programs.

SAG response:

If an original made for new media production is streamed on new media, the budget is irrelevant because no residuals will be paid. There is one single exception for original new media productions that are produced for $25,000 per minute or more and distributed on a consumer pay platform for sale or rent (like iTunes). This is a highly unlikely and improbable circumstance. SAG has signed more than 500 producers to contracts for original new media productions. The average budget range has been $2,000 per minute.

JLH analysis: SAG is correct. Their description of the proposal is accurate – so far as we know from both sides’ press releases and from the disclosed language of the WGA and AFTRA daytime deals. Also, not the squishy language used by the AMPTP: “a more limited residual payment.” SAG is also essentially correct regarding budget levels: the actual figures I’ve heard are $2,000 to $5,000 per minute, with very occasional programming at $10,000 per minute. All of those figures are obviously way below $25,000 per minute, a figure that we’re unlikely to reach until in the next few years. However, when new media budgets rise (see my comment several paragraphs above), the $25,000 threshold may not be so distant.

AMPTP press release:

* The Producers are unwilling to agree to the residual structure suggested by SAG for original new media programs because current economics indicate that the Producers are unlikely to even recover their production costs.

SAG response: None.

JLH analysis: Hard to know without access to the studies.

AMPTP press release:

* For the same reason, under the new media terms offered to SAG and accepted by the WGA, DGA and AFTRA, original new media programs budgeted at or above $25,000 per minute as exhibited generate residuals at 3.6% of distributor’s gross on consumer pay platforms such as paid streaming or download-to-own.

SAG response: None.

JLH analysis: True. (The WGA and DGA figures are actually 1.2%, whereas the actor formulas are 3.6%, but this is because there is customarily a 3 to 1 ratio in the figures for certain types of residuals, a structure that reflects the fact that there are more actors on a movie or TV show than there are writers or directors/ADs/UPMs.)

AMPTP press release:

SAG Statement: The template doesn’t protect actors … we don’t believe the template works for SAG members.

The Facts:

* The 33 pages of new media rights and residuals laid out in the AMPTP’s final offer give SAG members numerous terms that have never previously existed in the SAG contract.

* Until SAG’s negotiators secure a new contract, its members will continue to work under the expired terms, which include little in the way of new media residuals or jurisdiction.

* The Producers’ final offer would immediately give performers their first-ever residuals for ad-supported streaming and made for new media programs while doubling the rate that has been paid for permanent downloads. SAG members deserve to share in the same new media revenue that the other Guild members are already getting – and nothing short of a new contract will allow that to happen.

SAG response:

We have tentatively agreed to most of the AMPTP’s new media “template”. The few AMPTP new media proposals with which we disagree are extremely important core areas like coverage and residuals for made for new media productions re-used on new media. That is clearly the direction the industry is headed and at a much faster pace than anyone could have imagined just 7 months ago. Management has been extremely rigid. They are not bargaining, but rather are simply demanding that we agree to the new media “template” without modification.

JLH analysis: The studios are right, but their answer doesn’t respond to the point that SAG’s making, which is that, in SAG’s opinion, what works for writers and directors doesn’t altogether work for actors. The AMPTP might have added that AFTRA disagrees, but this would just have thrown fuel on the fire. I disagree with SAG on some of its points, as discussed above, but the larger difficulty for SAG is that the union has little or no leverage. (Also, btw, the claim that things are happening “at a much faster pace than anyone could have imagined just 7 months ago” is hyperbolic.)

AMPTP press release:

SAG’s July 28 Message to Members

SAG Statement: This does not mean that new media is our only focus. We know that you are also concerned about such bargaining priorities as product integration, force majeure, background actors’ issues and mileage. We will be communicating with you in more depth on these and other bargaining priorities in the coming days.

The Facts:

* SAG members continue to work under an expired contract for one simple reason: SAG’s negotiators are holding on several exceedingly expensive and unacceptable proposals that the Producers have rejected since these talks began over three months ago.

* SAG’s negotiators have sought to focus attention on one narrow dispute in new media, while failing to mention that proposals such as a DVD residual increase remain on the table.

SAG response: None.

JLH analysis: The AMPTP is correct regarding its reference to DVD residuals. SAG has slowly begun to downplay this point though, and I expect that it will eventually be abandoned.

AMPTP press release:

* The Producers’ final offer includes significant gains in minimums, Pension and Health contributions and increases benefiting guest stars, background actors and other working performers.

SAG response: None in the press release, but SAG has generally said that these increases are inadequate.

JLH analysis: The gains in minimums are at the higher end of what’s customary (customary is 2.5%, 3.0% or 3.5% per year, and the AMPTP proposal is 3.5% for the first year, 3.0% for the second year, and 3.5% for the third year). I don’t have any analysis of the other figures.

AMPTP press release:

The Producers’ final offer of more than $250 million represents more than a 25% gain over the 2005 contract, which SAG-AFTRA described as “the most lucrative deal in the history of actor/producer collective bargaining.”

SAG response:

Regarding the value of management’s proposals (the purported $250 million in raises): Management has not offered $250 million in raises in their proposal. Their calculation includes their projections of overscale payments to certain actors over the life of the new agreement. It is impossible to estimate an increase in overscale compensation and more importantly, this is not even money that is collectively bargained. It is instead, individually negotiated by the actors who are able to bargain an overscale deal. Given actors’ recent experiences with salary compression, we know management’s projected value numbers are highly inflated.

JLH analysis: An AMPTP source acknowledged to me that the $250 million includes some (though not all) overscale, and explained that this is customary (with estimates for all the unions, not just SAG) and results from the fact that earnings reports provided by the union pension and health funds include a certain portion of overscale compensation in the figures provided. There’s apparently no other data available.

[REVISED:]

Bear in mind that some overscale is essentially collectively bargained, because some overscale is keyed off of scale. The key example of this – and maybe the only significant example – is “scale plus ten,” i.e., scale plus 10%. That’s an overscale amount (literally, because it’s 10% above scale), yet it is effectively the result of the collective bargaining process.

In any case, SAG is right that not all of the $250 million is attributable to the contract proposal, and their concern about salary compression (actors being pushed down from their quotes) also is justified. The AMPTP’s number, although it may be the best that can be estimated given the data problems, may nonetheless be misleading (depending on the magnitude of the overstatement, which could be small or might be significant), but it's impossible to tell.


1 comment:

  1. It's amazing how little traction this is getting in the press, save perhaps for industry rags and the LA Times. High-profile labor relations apparently aren't newsworthy.

    Prediction: Strike.

    ReplyDelete