SAG Thinks, Blinks

The Screen Actors Guild bowed to the inevitable yesterday and set a concrete date -- April 15 -- for commencement of talks with the studios. Had SAG not done so, it faced the prospect of a rival actors' union, AFTRA, setting a date for talks first, and thereby setting a template for SAG's negotiations.

That prospect -- which seems unlikely now -- would have undermined SAG's leverage, a situation unacceptable to SAG. That's because SAG represent movies and almost all primetime television shows, whereas AFTRA represents no movies and only three primetime shows. The contract being negotiated concerns movies and primetime shows (as well as some other areas).

The problem for SAG is that AFTRA may not be looking for the same deal points SAG is. The situation's unclear, because the committees of both unions reportedly agreed on the same package of demands. Yet, the recently-agreed AFTRA daytime pact (an agreement that is soley negotiated by AFTRA) doesn't track with SAG's publicly-stated demands, suggesting that AFTRA may be more willing to compromise than SAG. That's been SAG's concern with AFTRA in general; each union has a rationale for the approach -- hard line or conciliatory -- that it takes.

In any case, the key publicly-discernible differences are as follows (for detailed explanation of these issues, see my previous blog article):

First, SAG wants improvements over the WGA deal in new media, apparently in at least two areas: elimination of the 17-24 day window during which no residuals are payable for ad-supported streaming of new television shows; and elimination or reduction of the budget floors below which certain shows produced for new media are not covered by the union agreement.

Second, SAG wants compensation for forced endorsements (product placement on steroids). AFTRA's daytime agreement gained some improvement in a related matter, which is announcer endorsements of products, so perhaps the unions are close on this issue.

Third, SAG wants improvement over the writers deal is DVD residuals. These rates (percentages) have been low since 1984, when the directors accepted what the writers and actors view as a bad deal, one which has persisted to this day. AFTRA, in contrast, did not obtain (nor, presumably, seek) such improvements when it negotiated its daytime deal.

Another point worth considering: if SAG does strike -- which seems less likely now -- will the strike rules prohibit SAG actors from working not only on SAG projects but also on AFTRA contracts? (Although this by definition exceeds the jurisdiction of the SAG agreement, recall that the WGA strike rules prohibited writing for animation, even though this is beyond the WGA's jurisdiction.) If so, the 44,000 dual cardholders -- i.e., members of both unions -- would be put in an untenable position if working on AFTRA-covered shows: violate the rules and be subject to SAG discipline, or obey the rules and face discharge by their employers for breaching their employment agreements. Quite a dilemma.

Format War Over: Toshiba Drops HD DVD

It's official: Toshiba has discontinued HD DVD, reports Variety Asia. That's the end of the format -- Toshiba is the owner of the format -- and of the high-def DVD format war. The move follows a string of recent setbacks for HD DVD, and should give a boost to that format. It may also delay adoption of Internet downloads as a format, at least until there's a better way to get Internet content onto TV sets. Blu-ray wins - unless the Internet does.

Blu-ray Wins

In the presidential campaign, the battle between blue states and red states hasn't yet begun, but in the DVD format wars, there's finally a victor, reports the New York Times (although the LA Times is a little less certain), and it's blue. Blu-ray, that is.

HD DVD suffered a quick succession of body blows: Last year, Target stores dropped HD DVD (though Target still sells the players and discs online ). Then, in the last six weeks, Warner Brothers, Best Buy, Netflix, and yesterday Wal-mart, in a coup de grace, each abandoned the format.

A question worth asking - and neither article does - is why Blu-ray prevailed. Perhaps because the discs have greater capacity, perhaps because the format (my sources tell me) have better technology, or perhaps even because the name is cooler (never underestimate the power of branding).

The other question, for Blu-ray and its backers, is how much of a window of opportunity they have to push their wares. On the one hand, many consumers may see little reason to upgrade their players and libraries for only an incremental improvement in quality. And on the other hand, digital downloads are growing in popularity, albeit slowly. The Blu-ray hardware companies will have to reduce their prices, and the studios will have to do likewise with disc prices, if they want to overcome consumer resistance, and establish significant market share before downloads become a real threat.

And not to forget the just-settled writers strike, the battle between discs and downloads will have an effect on writers residuals. See my article on DVD residuals and my analysis of the WGA deal (note discussions of download residuals and DVD residuals).

Meanwhile, Toshiba, the primary backer (and owner) of the HD DVD technology, is apparently not expected to withdraw the technology anytime soon - Microsoft still supports it, as do three studios - but the format war is over. According to the NY Times, Toshiba execs wouldn't even return calls.

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.

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.

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.

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

No End to DVD Format War In Sight, Report Says

The high def DVD format war will continue at least through 2011, predicts a report by Screen Digest, as reported in Video Business Magazine. The sales split between Blu-ray and HD DVD will be 50-50 at that point, and both formats will have widespread support from consumers, and probably from all studios. In other words, if the report's right, there probably won't ever be a single winner.

Feel the Burn

Retailers and individuals will now be able to burn copy-protected DVDs using the same copy protection technology, called CSS, that's used on commercial DVDs, reports Variety.

The announcement, which came after years of negotiation between studios and consumer electronics companies, opens the way for burn-while-you-wait kiosks at Wal-mart, for example, which plans to deploy such a system. Also possible: download-to-burn at home, though this requires a new DVD burner for your PC, and special blank discs.

The technology will especially benefit indies and niche libraries unable to attract shelf space. Approval was required from the DVD Forum, which controls the DVD format, and the DVD Copy Control Association (DVD CCA), which controls CSS.

What's unclear is how much effect the new systems will have on illegal download-to-burn, which works with existing DVD burners and discs, has no copy protection, and is, obviously, free.

Blu-ray v. HD DVD

Recently, it looked like Blu-ray was winning the format war in high-def DVDs. Sales were 2-to-1 in Blu-ray's favor, several studios were Blu-ray only (HD DVD had only one exclusive studio partner), and retailers were beginning to line up in that direction as well.

Last week, though, Blu-ray suffered a major reverse: Paramount, and sister studio Dreamworks, announced that they were dropping Blu-ray and going HD DVD only. Suddenly, the high def war is back in high gear. And today, reports Video Business, Canada’s Venturer Electronics announced a $199 Chinese-manufactured HD DVD player for Q4.

But while the industry fiddles, consumers do a slow burn. A very slow burn: most consumers aren't interested in any of this, and smart ones will stay away until the battle ends and one format prevails.

Don't hold your breath though: there's so much money in licensing fees at stake that we may not see a resolution for another year or two, at best. At that rate, standard def DVD will live on for a long time to come, at least until download to TV becomes a reality. Maybe the upcoming Vudu box will make that happen (I've seen it and it's pretty sweet).