HRH-Tube

In a first for the British monarchy - and perhaps kings and queens everywhere - Queen Elizabeth II has posted her 2007 Christmas Message on YouTube. The religious tone may not be for everyone, but that fact that this tradition-bound establishment now has its own channel on YouTube is quite something.

Now, I don't imagine HRH posted the video herself, but her handlers did. She probably doesn't have email either. QEII@hotmail.com? I doubt it.

Nonetheless, quite a change for a Queen who 10 years ago was tone deaf to public reaction over Princess Diana's death.

The Guilds Will Survive

Kevin Morris and Glenn C. Altschuler have an Op-Ed piece in today's Los Angeles Times in which they predict the demise of the Hollywood guilds, or at least, of the WGA and SAG. Their scenario is that massive numbers of primarily high-earning writers and actors - screen writers, television show runners, movie stars and celebs - go financial core, weakening the guilds beyond recognition.

"Financial core," for those not attuned to the vagaries of labor law, is a status in which members withdraw their formal membership in the guild (as far as the guild is concerned), but are still considered guild members for legal purposes. See NLRB. v. General Motors, 373 U.S. 734 (1963) and CWA v. Beck, 487 U.S. 735, 745 (1988), both of which are Supreme Court cases.

Under the law, Fi-Core members are no longer subject to guild discipline, and can thus cross guild picket lines to work during a strike. The can also work non-union as well as union jobs, and continue to receive all benefits of guild membership, when they work a union job. They also continue to pay almost full guild dues.

Since Fi-Core members can work during a strike, the guilds would lose enormous leverage. This is because the guilds would lose the ability to shut down the industry. Production would restart, and the guild becomes a mere echo of its former self. The guilds become organizations of the disenfranchised - non-working writers and actors, and those whose stature in the industry commands only low wages. Eventually even they begin to defect. The guild survives (because Fi-Core members pay dues), but loses the ability to strike, and thus to bargain effectively.

This sounds pretty awful. But, there's a flaw in the argument: show runners and screen writers would no doubt threaten to change their status to Fi-Core go to the WGA in massive numbers before actually doing so (likewise as to celebs and stars with respect to SAG). This is exactly what ended the 1988 strike. At that point, even the hardline guild leadership would probably listen. There would probably also be a movement among the rank-and-file to go Fi-Core as well.

As the Op-Ed piece points out, this doomsday scenario could happen. But will it? Probably not. Before it does, more moderate heads in the guild will prevail. Self-preservation is a strong instinct.

This article first appeared in the Huffington Post.

WGA Strike: A More Optimistic Scenario

Here's a more optimistic scenario than my recent prediction. It's all speculation, but maybe this is a pathway to a solution:

1. The DGA does a deal on new media residuals that's close to what the WGA wants (due in part to pressure from the WGA, as well as, of course, due to its own hard work, leverage and research), but not quite what the WGA is looking for.

2. WGA leadership rejects the DGA deal as a template, but returns to the bargaining table, perhaps by conceding on reality, animation and sympathy strikes.

3. SAG leadership, meanwhile, rejects the DGA deal even more strenuously.

4. The WGA achieves a slight improvement in the new media formulas, in part by pointing out that SAG will be even harder for the AMPTP to deal with. The WGA concedes on reality, animation and sympathy strikes (if it hadn't already in step 2), and also confidentially promises to sell the new media deal to SAG leadership. See also my suggested resolution for other deal points. The AMPTP concedes on other issues to close a deal and avoid the horror show of two guilds on strike.

5. The DGA would probably have a "favored nations" clause in its deal requiring the AMPTP to offer it any improved deal. So, the AMPTP grants the DGA, as well as SAG, the benefit of the improved new media formula.

This scenario allows everyone to claim victory and save face - the DGA gets to make the deal, the WGA gets to improve on it, SAG gets to help close the new media deal and also avoid a strike, and the AMPTP gets significant concessions. Here's hoping.

Tip of the hat to the anonymous friend who helped me brainstorm this scenario.

This article originally appeared on the Huffington Post today.

International Outsourcing to Evade the Strike

NBC is planning to run shows produced overseas, written by non-WGA writers, reports the Wall Street Journal. This is in addition to NBC's and CBS's plans to re-cut, then rerun, shows from their sister cable networks.

This makes it all the more important that the WGA hold firm on its little-discussed "Industry Standards" proposal. That proposal would require that all subcontracting by signatory companies be subject to the terms of the MBA (the Guild agreement with the companies), which would discourage such subcontracting.

However, since the guild agreement has expired, this provision would do nothing to prevent such subcontracting now, so far as I know. Hopefully, the Guild-organized solidarity marches last month will discourage such writing.

Holiday Wishes

On a personal note, I want to send my thoughts and best wishes to everyone affected by the strike - writers, actors, directors, below-the-line workers, and suppliers and service providers within and outside the industry, as well as those executives who'd prefer to be working with the writers rather than in opposition to them. This is a difficult time for many people, but it will eventually pass - sooner rather than later, one hopes.

NLRB to be Slow as Molasses

The NLRB review of the WGA charges filed against the AMPTP is likely to involve special review by the agency's Washington office, says the Hollywood Reporter. This will make the process even slower than normal, increasing the likelihood (as I previously blogged) that the agency review will come long after the DGA has concluded a deal.

Strike $ Impact

LA County economist Jack Kyser told the City Council this morning that the strike has cost the local economy $220 million to date, reports Variety's strike blog. Steve MacDonald, head of Film LA (film permitting organization), told the council the strike is costing $135 million in lost production spending and has cost about 10,000 jobs, the blog reports. Production on 71 TV shows has shut down.

Corporate Tool

No, not the AMPTP. (Well, not just the AMPTP.) This time, I'm talking about Kevin Martin, the preppy-boy chairman of the FCC. At his initiative, and on an a 3-2 vote (and apparently without public hearings), the FCC just relaxed newspaper-TV cross-ownership rules, reports the LA Times. That move makes it easier for a media company to own both a newspaper and a TV station in the same market.

More media consolidation - what a perfect gift for the holidays.

Feedback, Please

It'd be great to get feedback on the blog - is it useful, how does it compare to other media coverage and blogs you're reading etc. You can email me at jhandel@att.net, or post a comment on this article.

Extensive Interview

I'm the subject of an extensive interview today in Media Life, where I offered thoughts on the anticipated length of the WGA strike, roadblocks to negotiation, and the viewpoint of other unions.

Wedge Issue in the Hollywood Strike: New Media Residuals

The directors guild (DGA) and writers guild (WGA) are meeting soon to discuss new media. That's a hopeful sign, but does it mean the WGA leadership is likely to support the new media deal that the DGA and studios ultimately agree to? Maybe not, for several reasons.

First, as I've previously discussed, the WGA leadership may be subjected to scathing criticism if it looks at the DGA's deal and simply says, "yes, I'll have one of those too." (See WGA Strike: How to Restart the Talks, And Why, section entitled "Why It's Important to Do a Deal Before the DGA Does"). Rightly or wrongly, people will question whether a bruising strike was necessary at all; why not simply have worked without a contract for a few months instead, and let the DGA do their deal?

Second, the DGA places less emphasis on residuals than the WGA or SAG do (see sec. (1) of Writers' Strike: Why They're Talking). This means that the DGA will probably emphasize other issues, such as compensation minimums, somewhat at the expense of new media residuals, in the eyes of the other WGA and screen actors guild (SAG).

Third, each new media residual dollar that the DGA obtains will cost the studios more than twelve dollars. That's because, if the DGA deal on new media residuals serves as a template, the studios would have to pay corresponding amounts to the other unions: in other words, $1 to the DGA means also paying $1 to the WGA, $3 to SAG (there's a 3x multiplier), $4.50 (a 4.5x multiplier) to the IA (the IATSE, which is the union that represents technicians and craftspeople), and around $3 (another 3x multiplier) to the AF of M (musicians union). See Reflections on Residuals: Go Forth and Multiply for discussion of this phenomenon, called pattern bargaining.

Those multipliers are definitely a problem, because they create a wedge that the AMPTP (studio negotiators) can exploit between the DGA and the other two unions. For instance, suppose the DGA were to say to the AMPTP during negotiations "give us $10 more in new media residuals, and, by the way, we know the WGA would probably be happy with this amount too." Sounds nice. However, the AMPTP would look at this proposal and realize that the actual cost to the studios would be more than $120, because of those multipliers.

In response, the AMPTP might say, "no way, but we'll instead give you $50 in additional minimum compensation" (the money that gets paid to a director upfront). In that scenario, the DGA gets more than it asked for ($50 rather than $10), but the other guilds and unions get nothing, because minimums are not mirrored across the various guild and union agreements.

In other words, there's no pattern bargaining, and no multiplier effect, when it comes to minimums or other non-residuals issues. Thus, the AMPTP is more willing to give a dollar on a non-residual issue than on residuals. And - as mentioned above - those non-residual issues are precisely the ones that are somewhat more important to the DGA anyway.

So, the DGA might well accept the AMPTP counteroffer, since $50 is a lot more than $10. Now, that's no criticism of the DGA. Its duty is to represent its members. And, of course, the DGA are not pushovers, and they come to the table armed with almost $2 million worth of research on new media issues, plus a veteran entertainment lawyer, Ken Ziffren, as a consultant. But this "wedge issue" does create a problem when it comes time to sell the new media deal to the other two guilds.

The resolution to this problem has less to do with math and more to do with words: if there are no words on the page, there's nothing to direct. And if there are no actors to speak those words, there's still nothing to direct. Nothing to direct means no work for the DGA member. So, the DGA will need to balance its members' on-paper financial interest with the real-world scenario of one or even both of its sister guilds on strike.

At the end of the day, the DGA and the AMPTP will reach a compromise that, hopefully, incorporates the interests of the other two guilds indirectly as well. In our example, perhaps the DGA and AMPTP would agree on a $5 increase in new media residuals plus a $15 increase in DGA minimums. That would be a $20 total increase for the DGA (better than $10, though worse than $50), a $5 increase for the WGA (better than nothing, but not as good as $10), and corresponding increases for the other guilds in accordance with those multipliers. The cost to the AMPTP would be $75 ($5 times twelve, plus $15), which is not as costly as $120 but is more so than $50.

The key, then, is for the DGA - as well as the AMPTP - to believe that the WGA is serious about the strike, and willing to stay out for months no matter what the loss of income to writers, directors or others (actors, IA, and everyone else). That's a brutal truth, but with direct talks between the WGA and AMPTP stalled, keeping the DGA under pressure may be the WGA's only option.

This article was first published on the Huffington Post on December 18, 2007.

WGA Strike: How to Restart the Talks, And Why

There may still be time – a small window at best – to negotiate a solution to the WGA strike before the DGA does its deal. How might this be done, what’s the deal the WGA and AMPTP should do, and what will happen if the DGA does negotiate a deal first? Read on; but first, some background.

Background

The WGA’s trying to compel the AMPTP to return to the table by filing charges with the National Labor Relations Board (NLRB). This might work, since three of the AMPTP’s non-negotiable demands (“roadblocks”) – distributor’s gross, fair market value and, arguably, industry standards – relate to compensation, which is a subject of mandatory bargaining under the National Labor Relations Act, 29 U.S.C. §§ 158(a)(5) & (d). A caveat – although I’ve spoken to several labor lawyers (both pro-labor and pro-management) on the issues discussed in this section, I’m not one myself.

Thus, the AMPTP in my view has no right to walk out on talks over two or perhaps all three of those issues, at least until an impasse is reached. Given the apparently desultory nature of the negotiations so far, this does not yet appear to be the case. (See WGA Strike - Negotiation Issues (sec. 2(a) of memo) for explanation of the AMPTP’s roadblocks.)

The problem with the charges, however, according to at least one labor lawyer I spoke with, is that the process is so slow that the DGA will probably be done negotiating before a final decision on the charges is reached.

The WGA is also trying to force each of the companies – the 6 majors plus CBS, at least – to negotiate separately, notwithstanding that they usually negotiate as a multi-employer bargaining unit, the AMPTP. I’ve not yet had a chance to research this issue.

However, as a strategic matter, the charges that the WGA filed with the NLRB make the AMPTP, and the companies individually, less likely to bargain voluntarily, because now they would seem to be caving to legal pressure. That’s not good, and that’s why I called the charges “ill-advised” in an AP story. (I also called the charges “inflammatory,” which was probably a bit strong.) The charges also probably all but destroyed back-channel efforts to restart talks.

In any case, if the Guild leadership does have legal justification for forcing individual negotiations, it should have taken this tack months ago, before alienating the companies with invective and legal charges. This move would have resonated with the public from day one, because almost everyone outside the companies is concerned that media conglomerates have grown too big and too powerful. Even some Republican members of Congress have expressed misgivings.

Moreover, at least two of the WGA’s demands – jurisdiction over reality and over animation – are not subject to mandatory bargaining, according to three labor lawyers with whom I spoke. These issues are two of the AMPTP’s six roadblocks. Thus, the WGA has no right to force the AMPTP to bargain over these issues.

Why does the Guild care so much about reality? In my view, it’s primarily so that the Guild can choke off reality as well as scripted product the next time that negotiations take place, in three years. With no access to reality, the networks would have nothing to substitute for scripted programming in the event of a strike, whereas, this time around, such substitution is exactly what we’ll see starting next month.

That would be great for the Guild, but such extreme loss of leverage is unacceptable to the companies. Pigs could sprout wings and fly up and down Wilshire Boulevard, and the Guild would never get this jurisdiction. Not now, not ever.

There’s another reason the companies won’t grant jurisdiction, and that’s because the IA is organizing reality already, more successfully than the Guild, in fact. The companies won’t step into an inter-union fight – and if they did, they’d favor the IA, because it’s a larger, more powerful union, and because it apparently tends to drive an easier bargain.

This latter point applies to animation as well, which the IA has organized for many years, although the Guild has also had some success. Nonetheless, this area doesn’t affect many existing WGA members, and it’s hard to escape the conclusion that the focus on animation is due to the occupation of the Guild president, Patric Verrone (hint: he’s an animation writer).

The sixth roadblock, the Guild’s demand that it be allowed to honor another union’s picket lines, such as SAG’s, may or may not be subject to mandatory bargaining; my quick research suggests the matter is unclear. Nonetheless, such a sympathy strike provision is completely unacceptable to the companies, since labor peace is a key benefit of the bargain for the companies when they sign a union agreement. This is another non-starter.

How to Restart Talks

So, what to do? The companies started this mess by presenting incendiary proposals in July and sticking to them for months. The Guild’s not blameless either; it’s pushed for reality and animation since July as well. Since then, both parties have deployed vitriol in equal proportions, and, by most reports, negotiating sessions have been marked by lectures, inefficiency and infantile pranks more often than serious negotiation.

At this juncture, the AMPTP is to blame for walking out, and the Guild should keep up the pressure on companies to bargain individually. The AMPTP is structurally a problem – each of the companies has a veto right, which means that hardliners may prevail for quite some time. Moreover, the AMPTP’s president and chief negotiator, Nick Counter, reports to the CEO’s of all eight or so member companies. That situation inherently breeds caution and stalemate, ensuring that Counter will resist Guild demands even if there were some he’d otherwise be inclined to agree to (which there may not be, however).

So, unfortunate though it may be, to restart talks, the Guild will need to take a bold step: accede to three of the AMPTP’s demands and drop reality, animation and sympathy strikes. The WGA’s never going to get these, and everyone knows it. Indeed, Verrone recently began to back down on reality, stating that "It's not a sticking point . . . there is room to negotiate." Without these steps, the companies and the AMPTP are unlikely to return to the bargaining table in time to head off the DGA.

The Guild should also step up the pressure to make writers less dependent on the studios in new media. Training classes on technology, software, business models and entrepreneurship; negotiated discounts on software; awards to foster new media creation – all of these steps should have been taken at least a year ago, but better late than never.

What’s the Deal They Should Make?

Here are key points to the deal the parties should make:

* Guild’s Proposals re Reality, Animation and Sympathy Strikes. Not happening.

* Industry Standards. This is the Guild’s proposal that, if the companies subcontract work, the sub will have to comply with the guild agreement’s requirements. Completely reasonable; otherwise, subcontracting becomes a hole in the agreement big enough to drive a Teamster’s truck through.

* Fair Market Value. This is the Guild’s proposal that self-dealing transactions – such as program licensing deals between two divisions of the same conglomerate – be valued at fair market value, in order to protect residuals from being artificially depressed. Also reasonable. But, the companies are concerned that an overzealous arbitrator could dramatically overvalue a transaction, creating disproportionate liability for the company. That would create uncertainty for business projections and financial statements. My compromise: cap the increase in value the arbitrator is permitted to impose. The Guild gets a degree of fairness, and the companies get a degree of risk protection.

* New Media Residuals. See WGA Strike - Negotiation Issues (secs. 3(b) & 4 of memo) for my proposals. Distributor’s gross is one component of the new media residuals issue. The Guild will probably have to compromise here.

* Other Issues. See WGA Strike - Negotiation Issues (sec. 6 & Ex. A of memo) for details.

* Tri-Guild New Media Adjustment Committee. The revised Guild agreement should establish a Tri-Guild New Media Adjustment Committee. See Memo to DGA - Please Propose a Tri-Guild New Media Adjustment Committee.

* DVD Residuals. The Guild was seeking to double the DVD residual, but has withdrawn this proposal (and publicly confirmed the withdrawal). This removes a major impediment to a deal, although I think it’s a mistake. See Slipped Disc: Why DVD Residuals Still Matter — and Always Will.

Why It’s Important to Do a Deal Before the DGA Does

If the DGA negotiates first – it’s planning to commence negotiations in early January – it will probably conclude a deal promptly. Since the DGA cares less about residuals than the WGA or SAG do (see sec. (1) of Writers' Strike: Why They're Talking), the DGA’s deal on residuals will probably be unacceptable to both of the sister guilds (the DGA will trade for a better deal on other issues). The WGA, for its part, has already signaled as much, stating “We wish [the DGA] well [in its talks], but they do not represent writers. Our strike will end when the companies return to negotiations and make a fair deal with the WGA.”

In addition, after more than two months of a bruising strike, it will seem untenable to the WGA leadership to admit that the DGA was able to accomplish what the WGA couldn’t. The WGA’s already trying to defuse this issue by arguing that the WGA has “softened up” the AMPTP for the DGA to strike a decisive blow, but the loss of face would nonetheless be real.

More importantly, the criticism from the IA and other sectors of the industry – including WGA members themselves – would be loud and unrelenting, and could even result in a movement to oust the leadership in the next election. In fact, such a movement is likely unless the WGA achieves significant gains. The WGA leadership is playing a high-stakes game, and has painted itself into a corner that may turn out to be the edge of a precipice.

Thus, I fear that both the WGA and SAG will reject the DGA deal. The WGA leadership will urge its members to hold on and keep the faith until the cavalry arrives, in the form of the 120,000-strong SAG, which will be free to strike after June 30, when its contract expires. We’ll then face the prospect of both of those guilds on strike, arrayed against the DGA, as well as the IA (which has consistently criticized the strike and the WGA’s leadership) and probably the Teamsters (whose support has apparently slipped away in the last few weeks).

The WGA leadership is betting that this approach will bring the companies not just to the bargaining table, but to their knees. The companies are likely, however, to continue to resist, because the financial structure of their businesses are at stake. Maybe this approach will work nonetheless – but it’s a scorched earth policy that could bring the entire industry to the brink of ruin. How much better it would have been for both parties to have negotiated reasonably from the beginning. What a disgrace.

This article first appeared on the Huffington Post on December 17, 2007.

Memo to DGA - Please Propose a Tri-Guild New Media Adjustment Committee

Since the WGA negotiations have devolved into nuclear winter, it looks like the next move will be talks between the studios and the DGA. Here's a suggestion/request for the directors: please include, in your proposal to the studios, a tri-guild New Media Adjustment Committee.

What does that mean?

"Tri-guild" - the committee should have members from management and from all three above-the-line guilds (WGA, DGA, SAG), assuming each guild ratifies a similar contract proposal (so that all three guild agreements would contain the same language establishing the committee). The committee might also have members from the IA (IATSE represents many below-the-line workers, i.e. craftspeople), AFTRA (a performers union), and AF of M (musicians union), both of which also have new media issues (since both also receive residuals); however, these latter two unions haven't generally been part of multi-guild committees in the entertainment industry. The committee should also have more-or-less non-aligned members from the legal and agency world, academia, and elsewhere.

"New Media" - the committee's focus would be the issues associated with new media.

"Adjustment Committee" - the committee would have the power to propose and pre-negotiate changes to the WGA, DGA and SAG agreements, so that new media issues aren't dealt with in an almost-indigestible lump on the eve of (or after) contract expiration, which is part of what led to the current, bitter strike.

The committee should meet quarterly or even monthly. It will need research support (sharing of data) from all parties, and a small budget for purchase of research reports and other such expenses. The committee would build relationships with major players and information sources (agencies, attorneys, other guilds, academics, research firms, tech cos., etc.).

The WGA had a Contract Adjustment Committee in the 1990's, with a general focus (it had nothing in particular to do with new media), but I understand that it was not very effective. This time the stakes are higher, because technological change, like the Terminator, will never stop.

This means more of what we've been seeing for the last 10 years: software keeps evolving, business models keep changing, hardware gets smaller, faster and cheaper, data capacities and transmission speeds increase, new web sites spring up overnight with instant audiences, and new technologies are developed on a regular basis.

Where all this leads is unknown, but one thing is clear: Silicon Valley is not going to suddenly take an Ambien and stop innovating. Yet, when it comes to guild agreements, the entertainment industry seems content to snooze between contract renewals.

The guild agreements are multi-hundred page accretions of hard-fought gains, historical accidents, and tough compromises. Unless the entertainment industry establishes a mechanism to modify those contracts on an ongoing basis - rather than attempting to do so under looming deadlines - we may face repeated strikes and near strikes (de facto strikes) at regular, three-year intervals. The 2007 strike is no fun, to put it mildly. Do we really want the same thing in 2010 as well?

DD CGI CO TO IPO

Digital Domain, a major visual effects company (CGI, Computer Generated Imagery aka Computer Graphics Imagery), has filed for an IPO, reports socalTECH.com. They're looking to raise $100M.

"Don't Touch My Body (of Work)!" Vivid Tells PornoTube

Vivid Video, a major adult video producer, is suing PornoTube, a YouTube knockoff, reports the LA Times. The suit alleges that Vivid's copyrighted content is available on PornoTube. Suit is conceptually similar to the Viacom suit against YouTube and Google.

The LA Times story also notes in passing that the widespread availability of free short clips on the Web hurts porn producers (whose content is often long-form) because "consumers of adult fare often get what they are looking for in clips of five minutes or less." Indeed.

Vudu Works Its Magic, Releases HD Movies Day-and-Date With HD DVD and Blu-ray

For the first time, a movie will be available (legally) in electronic form on the same day it's released on physical media, the LA Times/AP reports.

The movie is The Bourne Ultimatum, and it will be available this Tuesday in high-def on the Vudu box - a hybrid download/streaming device - the same day as the DVD is released. The film industry term for this is a "day-and-date" release.

Usually, electronic releases are not available until the pay-per-view or pay-TV window, which is usually a month or so after the DVD release. Most such releases are in download or streaming form via the Internet, whereas Vudu is a somewhat unique device that attaches to the television set.

Still, if the experiment is successful, it could lead the way to accelerated online delivery of more films - a development that the big DVD retailers (Wal-mart, Best Buy and Target) might strenuously resist, but that might be favored by download vendors such as Apple (iTunes) and Amazon.

This development will contribute to the debate over release windows - the film industry practice of releasing a movie in phases via different media - first theatrically, then DVD, then pay cable, basic cable, and finally syndication. The industry maintains that this approach maximizes revenue, while critics suggest that refusing to make films immediately available via some form of home media encourages piracy and frustrates consumers.

Interestingly, there has been some collapse of windows related to foreign release patterns. In the past, foreign theatrical releases followed domestic. Today, due to the Internet's effect on both piracy and worldwide publicity, many large "event" films ("tentpoles") are released in some international territories day-and-date with domestic.

Too Funny - AMPTP.com

If you want to visit the AMPTP website, go to AMPTP.org. But if you want to see a hilarious and sharp-tongued parody site, visit AMPTP.com, at least until the lawyers make them take it down (it may amount to cybersquatting). The first sentence on the home page sets the tone:

We are heartbroken to report that despite our best efforts, including sending them a muffin basket, making them a mix CD, and standing outside their window with a boombox blasting Peter Gabriel songs, our talks with the WGA have broken down.

There are five pages in all. The owner of the site, Tactical Edge Group's Bill Davis - an experienced prop master and armorer (weapons master for TV show and movies) - tells me he's rented the site for a limited time to a group of striking writers. He's owned the site for several years, along with several hundred others. A visit to the Internet Archive's Wayback Machine (which archives past versions of websites) shows that the site has been parked for several years. Check it out at http://web.archive.org/web/*/http://amptp.com .

Tip o' the hat to Dave McNary at Variety for mentioning the site to me.

Expanding the IP Empire

A bill introduced in the House would expand enforcement of IP laws regarding movies, fashion and other areas, reports Variety. The bill would establish an IP czar in the White House and an IP division in the Justice Dept. Too early to tell what the bill's prospects might be.

DVD + Hi Def = $20 billion in 2012

"By 2012, standard DVD discs will total $10 billion in U.S. consumer sales, HD DVD $5 billion and Blu-ray $5 billion," per Adams Media Research, as reported by Video Business.

This compares with 2006, in which DVD was a $16.5 billion business, according to the Entertainment Merchants Association trade org. (Unclear if this also includes hi def, but the difference is probably not great either way.)

That growth, even in the face of the continued hi def format war (Blu-ray vs. HD DVD), means that the WGA's failure to achieve an increase in the DVD residual (see WGA Strike - Negotiation Issues) will continue to represent a significant loss, as I previously predicted. See Slipped Disc: Why DVD Residuals Still Matter — and Always Will.

WGA Strike - Negotiation Issues

I've written a detailed memo on the current state of the proposals in the writers strike. It includes several summary sections in plain English, as well as more detailed analysis.

WGA Strike - Confusion Reigns

Let's see the proposals - the studios (AMPTP) and writers (WGA) need to release the full text of their latest proposals so the entire entertainment industry can form an informed opinion on the negotiations. Here's why:

Streaming Ad Market Worth $120m to Nets in '07

The Financial Times is reporting that the four major U.S. networks will reap $120 million in 2007 from ads connected with free streaming of their content. The number is expected to sharply increase next year. The FT's source is Starcom, described as a leading media buying agency.

The WGA wants 1.2% of such ad revenue, which suggests $1.44 million would have gone to the WGA for 2007. However, the Guild is willing to give the nets a residual-free promotional window of several days (i.e., the first several days that a particular program is available would not trigger residuals). Thus, the WGA's take would be less than the math suggests.

The cost to the nets and/or studios would be 9.5 times as much, because the residual formulas in agreements for the directors, actors and below-the-line craft workers would contain similar residuals formulas.

WGA Strike - Confusion Reigns

Are the talks between writers and producers headed for a breakdown, or are we on the road to a deal? It's impossible to tell. The producers say their new proposals represents an increase in compensation to the writers. The writers say it represents a decrease.

In addition, it appears that the writers have a proposal on the table too. Yet, the writers' public statement omits details of their proposal, while offering some details of the producers' proposal. Meanwhile, the producers' statement has no details of either.

The writers' statement is bitter and angry, yet they say they're going to study the producers' proposal -- even though they've already attacked it. In contrast, the producers' statement implies that talks are on the way to a fruitful conclusion. We're being spun by at least one party, and probably both. The parties should release the full text of their proposals and let the public judge.

Writers' Strike: Why They're Talking

The writers and the producers (studios and networks) returned to talks this past weeks, following a three-week period, during which no talks occurred, after negotiations collapsed on November 4. What persuaded the parties to resume discussions?

The writers are back at the table for these reasons:

(1) The Directors Guild of America (DGA) is Waiting in the Wings. The Writers Guild knows that if they don't do a deal soon, the DGA will commence negotiations with the producers and do a deal first. (Even though the DGA's contract doesn't expire until June 30, they like to do their deals early.)

The home video and new media aspects of that deal would then become the template for the writers' deal, because all three guilds (writers, directors, and actors) mirror each other in the home video portion of the agreements. And, the directors' deal would be more favorable to studios than the writers' deal would be.

The reason the directors would be less assertive is that the directors don't care about residuals as much as the writers, because two important DGA constituencies don't relay on residuals as much as writers do: film directors generally receive more upfront money than writers and are less reliant on residuals; and assistant directors and other non-director personnel, who are 40% of the DGA membership, receive virtually no residuals. (This leaves middle-class TV directors somewhat in the lurch.)

Also, film directors probably view themselves as quasi-management (which is accurate - they tell people what to do!), and would thus be less aggressive from a labor union perspective.

(2) Unity is Beginning to Crack. Writers are also returning to the table because unity is beginning to crack. For instance, many showrunners - the writer-producers who write and supervise TV shows - are apparently returning to their producing duties (though not their writing duties). This will allow shows to continue producing scripts they have on hand, giving the networks a new lease on life, even though no new scripts are being written.

Also, the Teamsters (truck drivers), who had expressed unity with the writers, are now apparently crossing the picket line in significant numbers. Their support had been key, since their refusal to deliver equipment can shut down production immediately. If nothing moves, nothing shoots.

In addition, the IATSE (union representing "below-the-line" workers such as cinematographers, production designers, hair, makeup, etc.) has continued to be critical of the strike, since many of its members are out of work as a result.

The producers (studios and networks) are back at the table for these reasons:

(1) TV Shows Went Dark Faster Than Expected. The fact that the showrunners ceased their producing duties meant that many shows (several dozen so far) ceased production much sooner than the studios and networks expected.

(2) Movies Began to be Postponed. The average studio movie costs $100 million to produce and distribute. Without a writer on standby to touch up (or even rewrite) the script during production, studios, stars and directors are reluctant to begin production. And, once a movie is postponed, it becomes difficult and expensive to restart it: stars and directors may be unavailable because they're working on other projects, locations become unavailable, options may expire, etc.

(3) Pilot Season is Imperiled. The networks select new shows for next fall season by ordering pilots - sample, initial episodes of prospective TV series. Scripts are written, some are selected for production as pilots, then the resulting pilots are viewed and some are selected to become new series. This process happens during January through early April. Without scripts, there's no pilots and no pilot season. Without pilots, there are no new series, at least under the current system (some execs suggest that this process is inefficient and overly expensive in any case).

(4) The Studios and Networks Were Losing the PR Battle. The studios and networks were unprepared for the PR onslaught -- blogging, YouTube videos, international demonstrations, rallies, statements of support from politicians and from other unions, and the like. Surveys of both the entertainment industry and of the public at large show overwhelming support for the writers.

Both parties are back at the table for these additional reasons:

(1) The Industry as a Whole Wants Them to Negotiate. People are losing their jobs, the industry is shutting down, and the community saw both sides trading vitriolic barbs rather than engaging in serious negotiation. Anger was building against both parties.

(2) Agents Began to Mediate. Agents don't make money unless deals get made. This put them on the firing line. Also, agents have a foot in both camps: they represent the writers, but they dress, talk, think like, and lunch with the execs. Also, they spend their day making deals, every day. They're uniquely positioned to induce the parties to negotiate, and to reach a solution, and they stepped up to the plate and engaged the parties.

All of these pressures and efforts bore fruit in getting the parties back in the room. Now it's time for them to complete the process and reach an agreement.

This article first appeared on The Huffington Post on 11/29/07.

Blogging for TV Shows During the Strike

Eriq Gardner at The Hollywood Reporter's Entertainment & Media Law Blog points out, even though "The Office" is dark, its blog continues to be updated. The blog, of course, is in the name of various characters from the show, but someone's writing it. If that someone is a Guild writer - seemingly unlikely, given how outspoken The Office's writers have been - is that writer violating the strike rules?

Eriq noted that I had previously blogged on a related matter, and asked me to comment. My reply, which he ran as part of the post today, was as follows:

Can a WGA member write for [a struck-company owned TV show] blog during the strike?

I spoke with WGA spokesman Gregg Mitchell, and his answer was an emphatic "No." A TV show's fictional blog is just "an extension of the same show," he stated, and the writing is therefore prohibited.

Let's drill down. The strike rule applies to writing in connection with new "programming" for non-traditional media, but doesn't define that term. Does a series of blog entries constitute "programming" on the Internet?

Probably so. We can find guidance in the Sideletter on Literary Material Written for Programs Made for the Internet (2004 Writers Guild MBA, p. 561). This Sideletter provides limited, optional jurisdiction for new media writing. Two provisions are key.

In one place, the Sideletter refers to "literary material written for the Internet or other similar delivery systems." The term "literary material," in turn, is defined in the MBA (Art. I.A.5) to include, among other things, "dialogue, ... sketches, ... narrative synopses, routines, and narrations." This would seem to encompass blog entries.

Also, the Sideletter refers to "audiovisual entertainment programs made for the Internet of the type that have traditionally been covered under the WGA Basic Agreement as well as other types of programs made for the Internet." I've added the emphasis to make the point: in new media, the Guild's concerns are not limited to audiovisual programming.

So, my analysis is that the strike rules do indeed prohibit blogging for struck-company-owned TV show blogs. It's odd to think that blog entries - unadorned text - constitute "programming." But so it goes in the crazy world where new technology collides with an abstruse, 600-page Guild agreement.

Exclusive: The AMPTP YouTube Video the Writers Don’t Want You to See

WGA writers, whose pencils are (mostly) down and PC’s off, have lately occupied themselves walking picket lines and chanting protest slogans. Many have found time for a bit of auteurism, creating a growing number of YouTube videos explaining the writers’ position (reportedly an astonishing 750 videos to date). The videos — by turns impassioned and humorous — have collectively attracted notice.

But, like the dog that didn’t bark, the real mystery is why the producers haven’t produced. The Alliance of Motion Picture and Television Producers (AMPTP) has created no YouTube videos of its own, opting instead for the old-media alternative of occasional paid advertising in the NY Times, LA Times and trades, and an op ed piece in the LA Times. I wish I could offer you a link to the AMPTP’s new YouTube video — like my headline promises — but I can’t, because there isn’t one (that link will just give you a blank screen). The companies’ strategy has been more NoTube than YouTube.

But why? With all their resources, why haven’t the AMPTP companies produced and distributed video content of their own? It’s not for lack of writers; the companies could use non-WGA writers if they wished, since new media is not a covered area, and in-house promotional activity presumably isn’t either (and, in any case, the WGA agreement expired October 31 and is no longer in effect). Nor is it because the companies don’t have a case to make; they do, although I disagree with much of it.

And, the companies’ audio-visual silence does not represent a failure to understand the importance of public opinion — otherwise, why buy the ads and write the op-ed piece? Nor can the absence of company content be explained by pointing to the success of the AMPTP’s traditional PR methods, because there’s nothing to point to. On the contrary, the companies are losing the PR battle, and badly; for instance, over two-thirds of respondents to a Variety survey said that the writers were representing themselves more clearly, forcefully, honestly and forthrightly than the companies. In addition, half the respondents see the AMPTP in a more negative light as a result of the strike.

The only remaining explanation is that the studios and networks — the country’s largest media companies — just don’t understand new media, or they have carelessly allowed their representative, the AMPTP, to function without comprehending the importance of new media. Online, and on cellphone and iPod screens, is increasingly where the eyeballs are, not to mention the hearts and minds (thankfully, that’s as anatomical as we need to get). Newspapers, and television, also matter, a lot; but ignoring a fast-growing, young-skewing medium makes companies seem stodgy at best, and ever more the villain — or, “the man,” if you prefer — at worst.

Does it matter? Yes. A business that loses the love of its customers might soon find itself more busy suing them than selling to them. The studios seem to have inadequately taken note of the lessons the music industry offers, so here’s one that bears repeating: piracy is hard enough to combat, but even more so if there’s no love lost between consumer and company.

In addition, a company that can’t figure out how to use new media on its own behalf will have an even harder time understanding how and why its customers use new media. Not for nothing have Silicon Valley companies successfully portrayed Hollywood as an industry that doesn’t get it. The AMPTP’s inaction only reinforces that conclusion. It’s time for the execs — or the AMPTP — to grab their camcorders and start making some video.

This article originally appeared in The Huffington Post on November 27, 2007 at http://www.huffingtonpost.com/jonathan-handel/exclusive-the-amptp-yout_b_74237.html?refresh_comments=1.

Reflections on Residuals: Go Forth and Multiply

Just four cents per DVD — that’s the writer’s home video residual, we’re told. More specifically, the hated DVD formula is 1.5% (or 1.8%) of 20% of the studio’s gross on DVD sales. That odd looking set of percentages is equivalent to 0.3% or 0.36% of the studio’s gross. The 1.5% or 0.3% applies when the studio’s gross on a title is less than or equal to $5 million; the 1.8% or 0.36% applies thereafter. If the studio gets about $11 on an average $22 DVD, the writer(s) get a total of three to four cents.

That sounds small, and it is. The WGA made a proposal to double those residuals — that would be a four-cent raise per DVD — then withdrew the proposal at a bargaining session two weeks ago. Now the proposal may or may not be back on the table when talks resume next Monday, but even eight cents per DVD sounds modest. Why are studios resisting?

Then there’s new media. Here, the Guild is looking to double its take on streaming (from 1.2% of studio’s gross to 2.5%) and an eight-fold (not eight cent) increase on downloads (from 0.3% of the studio’s gross to 2.5%). That last one is large in relative terms, but the actual dollar amounts are small today (though will be larger in the future). Hence, again, the question: why are the studios fighting the Guild so vociferously?

The answer on DVD dates back to what many of us inadequately learned in third grade: multiplication. On new media, throw in a bit of geometry as well. What are the facts and figures, and are they persuasive? Here’s the 411.

Multi-Guild Residuals — Almost Ten Times the Fun

A four-cent per DVD increase sounds like a no-brainer. But in the world of Hollywood unions, four cents is actually almost forty cents. This is true for a simple reason: the WGA isn’t the only union in town.

As it turns out, all three guild agreements (WGA, DGA and SAG), plus the IATSE agreement, have similar DVD residual formulas. Any amendment to the WGA’s DVD formula will almost certainly be made to the other unions’ as well. It’s called pattern bargaining; the deal for one is the deal for all — but with a twist: SAG’s formula is three times as large as the WGA’s, and the IA’s is four and one-half times as large. (The DGA’s is the same as the WGA’s.) New media formulas can be expected to mirror each other across unions in the same fashion.

So, if writers get a four-cent raise, actors get an extra twelve cents. That’s not because actors are three times better than writers, but because there are so many more of them on any given movie or TV program. The actors split the residual among themselves based on a formula that reflects both salary and time worked on the show. Thus, each actor’s share is less than the writer(s)’ share. (Writers too have to split among themselves when there’s more than one writer on a project.)

The DGA raise would match the writers’ — four cents. Most of that would go to the director. Yet, 40% of the DGA membership are below-the-line workers who receive a miniscule share of DVD residuals (less than one-fifth of a penny per DVD). Doubling the formula would make little difference to them, which is one reason why DGA support for a strike over residuals is so tepid.

The IA raise would be 4.5 times the writers’ — an extra eighteen cents per DVD — yet IA members receive no residuals directly. Instead, the residuals are used to fund the IA’s health and pension plans. So, residuals matter to IA members, but in an attenuated way.

Bottom line: whatever increase the writers achieve in DVD or new media has to be multiplied by a factor 9.5 to determine what the studios will be paying out. (9.5 = 1x for the WGA, 1x for the DGA, 3x for SAG, and 4.5x for the IA. If you want to read the contract language for yourself, check out the WGA agreement (Art. 51.C.1.b), DGA agreement (Sec. 18-104), SAG agreement (Sec. 5.2.A.(2)), and IATSE agreement (Art. XXVIII(b)(2)).)

DVD — The Shiny Little Disc Just Keeps Spinning

How do these numbers play out in practice? The studios and the WGA each have their own numbers, and so far as I know, are not releasing them publicly. But we can take a stab at it.

Start with DVD. Let’s reject the conventional wisdom that physical media don’t matter. DVD is a $16.5 billion business (domestic sell-through in 2006). That’s a far bigger business today than downloads and streaming (see below). When the Blu-ray / HD DVD format war gets resolved, people will probably start buying more product, and that number will spike up. And in the more distant future, even if discs are replaced by chips, holographic data storage, or little nano-somethings, the “DVD formula” — i.e., the home video formula — will still apply. So, the formula matters.

Now let’s do the math. $16.5 billion retail gross equals an approximate $8.25 billion gross to the studio (assuming a 50% margin). Multiply by 0.3% or 0.36%, yielding a $24.75 million to $29.7 million single-guild residual. Multiply by 9.5, to arrive at a 4-union figure of $235 million to $282 million. Now, multiply by 3 — the guild and IA agreements are three-year contracts — to arrive at a $705 million to $846 million cost over the term of the contract.

This calculation assumes that the DVD business (standard def plus Blu-ray and HD DVD) neither grows nor shrinks materially over those three years. This was true of 2006 as compared to 2005, and some analysts predict little growth over the next few years (see chart in 12/19/07 print edition of LA Times, p. A15; not available online). I believe the actual figure would be higher if one of the high def formats takes off, but that’s unlikely unless and until one of the formats prevails and the other drops by the wayside. When, or even if, that will happen is anyone’s guess.

The WGA wants to double the residual, which would add an extra $705 million to $846 million cost to the contracts, whereas the studios want to keep the formula unchanged. So, the parties are $705 million to $846 million apart on the issue of DVD residuals.

Let’s look at the numbers another way. Can the studios afford to increase the DVD residual? Yes. There were 1.3247 billion units of DVDs shipped in 2006. $16.5 billion divided by 1.3247 billion units yields a mean (average) price of $12.45 per unit. The cost of manufacturing a DVD in quantity, including insert, packaging and shrink wrap, is frequently quoted to me as only $0.25 - $0.35. That leaves a lot of profit ($12.10 - $12.20). But, there are also marketing and distribution expenses. One well-regarded book (p. 130) estimates manufacturing, marketing and distribution costs at “less than $5 per unit.” That implies net receipts per DVD of about $7.50. A $0.38 increase in the residual is a 5% additional cut out of $7.50.

However, from this $7.50, we should deduct some allocation of the cost of production of the film. How much this allocation should be is hard to determine. For one thing, it depends on the negative cost of the film. This, of course, can vary widely. In addition, there is probably some correlation between negative cost and DVD sales, but this would be contained in proprietary studio models which I don’t have access to (and which would be protected by confidentiality agreements in any case). How strong this correlation might be is unclear in any case.

Also, there might be some correlation between negative cost and DVD manufacturing, marketing and distribution costs, since negative cost might correlate with the quantity of DVDs manufactured, and also with how elaborate the packaging and insert might be. (Clearly, there’s correlation between these latter items and domestic box office, since studios will spend more on the DVD for a successful movie; but whether there’s also a correlation with negative cost is less certain.)

In addition, deciding how much of the negative cost to allocate to the DVD revenue, as opposed to how much to allocate to theatrical and other revenue streams, is somewhat arbitrary. Should all of the negative cost be allocated to theatrical, since this is the initial market? Should the allocation be proportionate to the revenue received from each window? Or should the allocation proceed in some other fashion?

So, that $7.50 figure has to be reduced, perhaps significantly. Thus, the $0.38 increase in residuals represents a greater than 5% additional cut of the studio’s net, perhaps significantly greater. Conclusion: on some DVDs, a $0.38 increase might be too high to be reasonable, but it’s hard to tell. So, it’s probably appropriate for the Guild to settle on some compromise between leaving the residual unchanged, on the one hand, and doubling it, on the other. This is why I have previously proposed a 1.25x – 1.5x increase.

New Media —Now Playing on a PC and Cellphone Near You

On new media (streaming and downloads), much of our work is already done. Using various research data, Michael Learmonth has estimated that the parties are $7.2 million apart in 2007, with that gap increasing to $71 million in 2011, on a single-union basis. Assuming for the sake of simplicity that the growth between then and now is linear, this results in a single-union three-year gap of $117.6 million ($23.2 million in 2008, plus $39.2 million in 2009, plus $55.2 million in 2010). Multiply by 9.5, to arrive at a 4-union figure of $1,117 million. Michael’s figures don’t include revenue from banner ads and subscriptions, which the WGA rightly wants a piece of. Those revenues are probably larger than the revenue from in-stream advertising (ads in the videos themselves) — though who knows — so I would at least double this figure to $2,235 million.

Can the companies afford the increase? Yes. Distribution costs are negligible, since there is no manufacturing cost, and marketing costs can best be described as moderate, since films and TV shows have built-in name recognition (no need to spend astronomical sums to drive traffic to the company websites). Even after allocating a portion of negative cost to new media, the companies’ profit will ultimately be quite high. This is why execs have been effusive in their embrace of new media and their predictions as stated to Wall Street.

Divide and Conquer

Adding the home video and new media gaps yields a total gap of about $3 billion on the residuals issues. That’s more than the pocket change implied by “four cents per DVD” — or is it? After all this multiplication, now it’s time for division. Divide by 8, yielding $375 million as a per-company average, to roughly account for the fact that there are six majors, one quasi-major, and many smaller companies in the AMPTP. Then divide by 3, yielding a gap of $125 million per major per year.

Remember too, the WGA doesn’t realistically expect to get all the numbers it’s asking for; a negotiation is a compromise, not a diktat. Let’s assume the parties split everything down the middle. That’s about a $60 million increase per major per year. $60 million? It’s a small fraction of the typical revenue and profits the conglomerates are achieving. The numbers are complex, but the conclusion is simple: the producers can afford to increase the residual payments, and it’s time for them to do so.

PS: The LA Times (11/19/07, p. A15) has new media numbers that are slightly higher than Learmonth's in 2007 and significantly lower in 2011. The difference on a per-studio per-year basis is not great.

Also, note that the above article only discusses residuals. The WGA proposal also includes an increase in minimum compensation rates for film and TV writing, and a request for jurisdiction over writing for new media. Both of these requests increase the studios' costs by an amount that is difficult to determine.

Oh, a couple definitions might be helpful too. "Negative cost" means the cost of making a movie, including writing, development, preproduction, production and postproduction.

Negative cost does not include the costs of distributing a movie theatrically (such as the cost making prints of the movie and paying for advertising, marketing and publicity -- so called "prints & ads" or "P&A") nor the cost of releasing a movie on DVD or television.

"Majors" means the six major studios - Disney, Fox, Paramount, Sony, Warner Bros. and Universal.

The quasi-major I refer to in the article is MGM, which was once a full-fledged studio with its own studio lot and an extensive library (catalog) of films. It now has, instead, an office building and a small library, but retains some other attributes of a studio.

I also mention in the article that there are many smaller companies in the AMPTP. More precisely, there are many smaller companies that are signatory to the WGA Agreement. Not all of these companies are actually members of the AMPTP, but the distinction makes no difference to the economic analysis. A list of signatory companies can be found at http://wga.org/subpage_member.aspx?id=2537.

This article originally appeared in The Huffington Post on November 23, 2007.

JLH widely quoted re Writers Guild strike

I've been quoted and interviewed on the WGA strike several dozen times by local, national and international newspapers, magazines, television and radio, including CNBC, local television, KCRW, Variety, the LA Times, Wall Street Journal, Canadian TV (several 5 minute interviews, two of them live), BBC Radio. The coverage is listed here.

Internet Interdit for WGA Writers?

Can WGA writers write new media content (Internet webisodes and cell phone mobisodes) during the strike? There's disagreement, but my analysis is yes - if the employer (or purchaser) is not a signatory to the WGA agreement. WGA strike rule 1 only prohibits such writing for struck companies. And, new media writing is not within WGA jurisdiction, so writing such content for non-signatories is not prohibited.

Remember - this blog is not legal advice. Consult your lawyer or the WGA for a definitive answer.

Here's the relevant portion of the rule: "With regard to programming made for non-traditional media (such as the Internet and cellular telephones), this Rule prohibits writing services performed for a struck company in connection with new programming intended for initial release on non-traditional media and the option or sale of literary material for this purpose."

Game Over for State of Play?

Brad Pitt has dropped out of Universal's film "State of Play," reports Variety. The studio contends that he had a pay-or-play deal, and is reserving the right to sue him if they can't get the picture recast. Pitt's people say he didn't have a pay-or-play deal.

Unclear from the story is whether there is written contract. If not, then we're in the treacherous territory of oral agreements. In most cases, the law doesn't require contracts to be in writing or to be signed. Thus, when emails and oral statements go back and forth, it can be hard to tell when a deal has actually been reached or not.

Pitt's reps say he hasn't approved the script (big stars often have approval rights). Revision of the script is, of course, impossible during the writers strike (at least if a WGA writer is to be used).

A pay-or-play deal, for non-Hollywood readers, is a Hollywood construct that requires an actor or director to do the movie if the studio wants him to, and requires the studio to pay him regardless of whether they decide to use him or not. A-level talent won't agree to do a movie without the deal being pay-or-play.

Script Magazine column

A reminder: I write a column on legal issues for writers in every issue of Script Magazine. To get the column promptly, you have to subscribe to the magazine, but you can find past columns here.

How to Write LOIs and Term Sheets

UPDATED: My short book on writing LOIs and term sheets is available on Amazon.

Writer's Strike — Give Peace a Chance

It's punishment time. The WGA's on strike, determined to inflict maximum pain on the producers. Meanwhile, the AMPTP has compared the WGA to McCarthyites and announced that its next bargaining sessions will probably be with the DGA, in an attempt to cut an early deal with the directors, undercut the writers, and spank the WGA for striking. And, at least one studio has fired showrunners' personal assistants, many of whom are probably young aspiring writers to whom the showrunner is a mentor. "Make the pain personal" seems to be the theme. Neither party is willing to return to the bargaining table without conditions, and even backchannel discussions have largely ceased.

It doesn't have to be this way. Every few days, the newspapers carry a heartwarming story about great forgiveness between people wronged. If lions can lie down with lambs — and I'm not talking about the Redford movie — surely the writers and producers can cross the chasm that divides them. But how?

Start small, because small steps matter. Here's a modest proposal. The WGA should unilaterally impose a moratorium on picketing one day a week — say Tuesday, Wednesday or Thursday (so there are no jokes about the moratorium being an excuse for three-day weekends). The strike would stay in effect, but picketing would stop for a day a week. And, for their part, the studios and networks should unilaterally provide writers on the picket lines with pizza and drinks one day a week. Execs — not just assistants — should deliver the eats, and share a bite or two on the line as well.

Meanwhile, the negotiators should plan a social outing for themselves: perhaps a group tour of the Dali exhibit at the LA County Museum of Art, or maybe a trip to Catalina (although that might be even more chilly than the climate in the industry). Substantive discussion should be optional for now. Instead, the conversation ought to be about art or wildlife. What these people need is a good road trip.

Sound crazy? You bet. Pollyannaish? Yes. But we've really reached the point where pizza and a time-out would count as progress. Mixed signals are better than the unremitting hostility that now prevails. Each side needs to confuse the other with kindness, and remind itself that both parties are partners in an industry that can ill afford a long walkout. Perhaps a bit of unconventional thinking can break the impasse and restart the talks.

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This article originally appeared in The Huffington Post on November 14, 2007 at http://www.huffingtonpost.com/jonathan-handel/give-peace-a-chance_b_72560.html

Slipped Disc: Why DVD Residuals Still Matter — and Always Will

Until last Sunday, the WGA's proposals included doubling the home video residual. But that day, at a last-ditch bargaining meeting, the WGA rolled over and dropped its proposal, trading it off against gains in new media residuals and jurisdiction. Big mistake. Why? Two reasons: because now the home video residual becomes a major impediment to settling the strike; and because the home video residual matters enormously, even in the world of Internet and cellphones.

The home video residual will be a major impediment to settling the strike because of what happened in that room on Sunday — namely, as everyone now knows, the talks collapsed. It's unclear why. The AMPTP made concessions on streaming and on Internet jurisdiction, although they hadn't yet moved on Internet downloads.

By the way, the distinction between downloads and streaming is misguided and will lead to trouble in the future. It rests on an assumption that streaming video can be promotional and is free to the user, but that downloads are neither. Yet, this is not true: downloads are sometimes promotional, just as streaming can be; and streaming video is sometimes sold, just as downloads often are. Moreover, some technologies, such as the recently introduced Vudu box, are hybrids. (The box downloads and stores the first 30 seconds of thousands of movies on its hard disk, but then streams the remainder of the selected movie.) How will they be treated?

But leave all this aside. The AMPTP's concessions sound like progress, but for some reason that wasn't enough to deter a strike. When the clock struck 12:01 a.m. in New York, the east coast branch of the WGA went out on strike, even though talks in LA were still ongoing. Predictably, the producers walked. And we find ourselves in the middle of a bitter strike.

The problem is, now the producers know that the WGA is willing to give up on DVD residuals, even though the guild refers passionately to "the hated DVD formula." Now that the producers smell blood, they're less likely to ever concede on this issue. And the guild, having once been burned for conceding on home video residuals, is less likely to do so again. Fool me once, shame on me; fool me twice … well, you know the rest.

But does it even matter? Conventional wisdom is no. The Internet and cell phones are the wave of the future, we're told. Streaming and downloads beat physical goods every time: infinite selection, no manufacturing cost, content on-the-go, and no need to run out to the video store, or pay late fees.

All true. Yes, streaming and downloads will one day be huge. But not yet. The predictions I've read say that even five years from now, the majority of in-home revenue will be from physical media: DVD and Blu-ray and/or HD DVD. Indeed, when the studios finally settle their self-defeating fight over high-def formats, they can expect a wave of new revenue as consumers re-purchase videos they currently own on DVD.

Meanwhile, efforts to connect PCs to television sets have faltered. Devices are awkward to use, and haven't proved popular; and, of course, anything with a Windows PC in the mix is likely to be crash-prone and flakey. That means that getting all that wonderful Internet-based content to people's home theaters and expensive plasma screens is tough. Advantage DVD.

Still, one day those problems will be solved, and Blu-ray or HD DVD will eventually be left in the dust. Doesn't this mean downloads and streaming will ultimately vanquish packaged goods once and for all?

No. The fallacy in the conventional wisdom is assuming that packaged media will develop no further than Blu-ray or HD DVD. That ignores history. Storage densities in hard drives, for example, have increased by an astonishing ratio of 500,000,000 — that's 500 million — in the last fifty years. Even today, physicists are working on nano-scale devices that could further increase densities by a factor of 10 to 100 in the next few years. These devices, like hard disks, are magnetic media; optical media, such as holograms, might offer even higher density.

Density matters, because higher density means more data on smaller media. More data means more content, at higher resolutions. One day, for example, we'll probably have wall-sized displays, as seen in sci-fi movies. Those displays will be paper thin. Perhaps they'll be sold in rolls like so much wallpaper; maybe they'll be painted on the walls. No one knows. But large scale displays will require ultra high-def content.

We'll probably also see some form of 3-D entertainment in the future — first using on-screen technology, and ultimately, perhaps, via holographic images of actors playing out a story in our living room, or a bare-walled media room. This kind of movie/stageplay hybrid would require enormous amounts of data to be delivered and processed at high speed. Also, with new types of images come new requirements for sound. More speakers — more channels — mean more data is required to store that sound.

Couldn't all this content be delivered over the Internet? Maybe one day. But if history is any guide, pipes will always lag devices. It has always been possible to deliver more data, more quickly, on a physical device than via telecomm lines into the home. That's why, even today, you buy most software in physical form rather than via download. That's also why CDs are higher quality than MP3s — the latter are compressed, the former aren't. There's no reason to think that physical media won't always have the edge when it comes to timely availability of large amounts of data. For a leading-edge experience — wall-size displays, holographic movies, or whatever else — physical media will probably always have the advantage, and transmission lines will always lag.

Now, nano-scale devices and holographic media don't sound much like DVDs or video cassettes. Perhaps the home video residual formula won't apply? Guess again. The Guild agreement defines "videodisc/videocassette" as a "disc, cassette, cartridge and/or other device serving a similar function which is sold or rented for play on a home-type television screen." See Art. 51.B.1, p. 277 (italics added).

This means the home video formula is likely to apply far into the future. Wall-sized displays will be the television screens of the future. Linear 3-D entertainment on-screen falls easily within the definition as well. And holographic entertainment, even absent a screen, might well be covered by this definition as well, if such entertainment replaces 3-D entertainment delivered on a screen. This kind of argument by functional analogy is one way courts, for example, analyze the scope of old contract language as new technologies arise.

The Guild agreement is an archeological document. The basic cable residual formula is named after old TV shows like Alfred Hitchcock Presents and the term "producer" is defined in terms of the duties of Samuel Arkoff and Alan Ladd in 1977. See App. 2.b.(2), p. 501 and Art. 1.B.1.a, pp. 14-15. Decisions that get made today will still have meaning decades into the future. The Guild shouldn't roll over on home video residuals. They're important now, and always will be.

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This article originally appeared in The Huffington Post on November 12, 2007 at http://www.huffingtonpost.com/jonathan-handel/slipped-disc-why-dvd-re_b_72245.html.

Writers and Producers: Here’s the Deal They Should Make

[Note - this article was first published about 10 days ago.]

As the deadline for the writers' strike bears down, Hollywood waits with anticipation and fear. The effect of a strike, if not averted or delayed, would be programs off the air, movies delayed, and people out of work throughout the industry and the local economy. It doesn't have to be that way. There's room for a deal on all the major issues:

DVD Residuals. DVD residuals are the writer's cut when a movie or TV show gets released on DVD. The current formula – which the WGA calls "the hated DVD formula" – is crazy. It dates to 1985, and is adapted from an old record industry royalty formula. What's more, it's based on the assumption that "videograms" – videotapes, at the time – are expensive to manufacture. That's no longer true; DVD's in quantity are $0.25–$0.35, shrink-wrapped with inserts and ready to sell.

Of course, there are other expenses – shipping, recoupment of production and advertising costs, etc. – but still, the studio profit is large. Meanwhile, the writer gets under $0.05 (five cents) per unit sold. That's ridiculous. The writer's want $0.10 per unit. Not a huge increase, but the actors and directors will get parallel increases too. The parties should compromise on $0.075 (seven and one-half-cents) or $0.0625 (six and one-quarter cents) and call it a day.

Residuals for Internet Downloads. The studios want to apply the DVD formula to downloads as well. This, too, is ridiculous. The DVD formula makes no sense any more for home video, let alone for downloads, where the manufacturing cost is zero. The studios' position amounts to paying the writers 0.3% of the studio's gross on downloads, whereas the writers want 2.5%. They should compromise on 1.2%, which is the figure used for videogames and pay TV (HBO and Showtime).

Residuals for Internet and Cell Phone Streaming. The studios' position is unclear. They say they want to apply the DVD formula, but they also reserve the right to deem any streaming (and even download) usages as "promotional" – even if the studio receives revenue – which means no residuals would be payable at all. Piggy, piggy, piggy. Give the writers the 1.2% unless the studio receives no revenue on the usage.

Jurisdiction Over New Media. When writers create content directly for new media (webisodes and mobisodes), the WGA wants the guild agreement to apply. That's a bit much. The agreement is 625 pages and is so incomprehensible that the day I started working at the Guild (I'm a former WGA Associate Counsel), my boss told me not to bother reading it because none of it meant what it said anyway. Plus, setting minimum compensation levels for writers, when business models are unknown, is not feasible.

However, there is a voluntary Internet Sideletter (p. 561 of the agreement) that a few studios have signed on a project-by-project basis. All it requires is that the studios pay pension and health insurance benefits (P&H). The compromise: make the Sideletter apply to all new media (such as cell phones), add a provision requiring credit parity (require that the writer get credit on-screen if the director or actors do), and make the Sideletter mandatory. Done.

There are some other issues as well:

Animation. The writers want jurisdiction over animation writing, which they've received on a case-by-case basis. Trouble is, a rival union, IATSE (the "IA"), also claims jurisdiction in this area. Ironically, the president of the WGA is an animation writer. Still, this one's probably a lost cause.

Reality. The writers say they want jurisdiction over this issue, but their strike rules don't even bar such work (in contrast to movies, scripted TV, and animation – the writers can't do any such work during a strike). They're signaling that they'll pass on this issue at the end of the day.

The CW. The writers want to treat the CW like a full-fledged network for compensation and residual purposes. It isn't; treat it like Fox in the '90s and set the levels in between network levels and the current lower rates.

MyNetwork TV. The writers want higher residuals here. Please. MyNetwork TV? This channel is more like no one's network TV.

So, a deal is possible. The parties should make one and let the town get back to work.

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This article originally appeared in The Huffington Post on November 5, 2007 at http://www.huffingtonpost.com/jonathan-handel/writers-and-producers-he_b_71157.html

Life is Not a Bowl of Blackberries

Research In Motion, the manufacturer of the Blackberry device, has sued LG for trademark infringement, reports Law Day. The complaint relates to LG's use of the names Black Label, Strawberry and Black Cherry for its cell phones. In addition, last December, RIM sued Samsung over its BlackJack phone.

Sounds to me like RIM has a case, in all of these instances, except perhaps Black Label. The others just look or sound too similar, or are too similar in meaning, to Blackberry. The trademark standard is "likelihood of confusion" - if the later trademark is likely to be confused with the first one, then the later mark is an infringement.

A Cuckoo Time to Release Hulu

The News Corp. - NBC site Hulu.com has launched in public beta, reports Variety. It's an ad-supported web site for viewing TV shows and movies, with non-skipable commercials included in the video stream.

The timing's not great though: the studios and networks are busy trying to persuade the Writers Guild that new media is irrelevant as source of income. A new and exciting Internet platform is scarcely persuasive.

Online Pirate Faces the Music

A women found guilty of sharing 24 songs, out of 1,700 she had on offer through her Kazaa account, will have to pay $222,000 in damages for copyright infringement to a group of record labels, reports the Los Angeles Times.

That's a jury verdict of $9,250 per song. Under the copyright act, the Minnesota woman, Jammie Thomas, could have been forced to pay as much as $150,000 per infringement. The record labels involved were Arista Records, Capitol Records, Interscope Records, Sony BMG, UMG, and Warner Bros. Records. The RIAA issued a statement hailing the decision. The industry has brought 26,000 lawsuits over the past four years. 10,000 of those cases have settled, typically at less than $5,000 each.

I think the industry's victory will have some deterrent effect, but not enough to sink all the pirate ships a' sail. Ultimately - sooner rather than later - all online music will probably be unprotected MP3's, and price points will probably have to come down as well, for individual songs or for monthly subscriptions.

Radiohead Sings "OK Consumer"

Rock band Radiohead is selling its next album as a £40 ($82) special edition - and as a name-your-price set of MP3's available online, reports Reuters via the Los Angeles Times. The special edition includes a CD, a supplemental CD with music not (legally) available online, and two vinyl albums for the truly low-tech.

Radiohead can afford to sell its music for potentially close to zero because of its huge fan base. And it has the freedom to experiment because it's currently unsigned. There'll be a traditional CD available next year, for those whose tastes are material, but modest.

Nokia Unstacks the Deck in Mobile Video

Nokia has been embedding video links in its new-ish N95 handset pursuant to a deal with News Corp., Sony Pictures, and CNN, according to the Hollywood Reporter.

This allows video to be streamed from those companies' sites without being included on the carriers' decks, or menus. Content companies find those decks to be expensive, and crowded, pieces of real estate.

In separate news, Nokia is buying mapping data company Nav-teq, a major player in that field.

Possible Free Tabloid from LA Times

The Los Angeles Times may start a free daily tabloid, in a bid to up its circulation, reports Reuters via Yahoo! News. Sister paper Chicago Tribune already has such a paper, called Redeye, which reaches 600,000 readers - a large number for a newspaper - many reportedly in the desirable 18-34 demographic.

Several newspapers publish such freebie papers to counter loss of subscriptions and paid ads resulting from popularity of the Internet.

No Honey for Pooh Family

An appellate court upheld a ruling from 2004 dismissing a suit by the owners of Winnie the Pooh against Disney, reports the Los Angeles Times. The suit had claimed that Disney had failed to pay hundreds of millions of dollars in royalties for merchandising, software, and home video.

The ruling, against the heirs of Stephen Slesinger, who obtained the rights to the famous bear from the stories' author, A. A. Milne, was based on a finding of misconduct against the family - specifically, that they had hired an investigator who broke into Disney offices and rifled through the company's trash.