Dueling Press Releases

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

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

AMPTP press release:

July 28, 2008 Hollywood Reporter – Doug Allen

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

The Facts:

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

SAG response:

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

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

AMPTP press release:

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

SAG response:

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

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

AMPTP press release:

SAG’s July 17 Message to Members

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

The Facts:

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

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

SAG response:

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

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

AMPTP press release:

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

SAG response: Discussed above.

JLH analysis: Discussed above.

AMPTP press release:

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

SAG response: No specific response to the second sentence.

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

AMPTP press release:

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

The Facts:

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

SAG response: None.

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

AMPTP press release:

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

SAG response: None.

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

AMPTP press release:

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

The Facts:

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

SAG response:

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

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

AMPTP press release:

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

SAG response: None.

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

AMPTP press release:

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

SAG response: None.

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

AMPTP press release:

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

The Facts:

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

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

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

SAG response:

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

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

AMPTP press release:

SAG’s July 28 Message to Members

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

The Facts:

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

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

SAG response: None.

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

AMPTP press release:

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

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

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

AMPTP press release:

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

SAG response:

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

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

[REVISED:]

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

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

Guild Agreement New Media Thresholds

This is a rather technical post:

Regarding the AMPTP-proposed SAG agreement, the media has been saying “The thresholds for new media work are $15,000 per minute, $300,000 per program, or $500,000 per series, whichever is lowest.” This is meant to describe what work is covered and what is not. (Note that there’s another prong: if any of the actors on the show is a “covered performer,” which roughly speaking means a professional, working actor, then the show is covered.)

However, “whichever is lowest” is meaningless or unclear: $15,000 is lower than both of the other numbers. Does that mean that the $15,000 threshold is what always applies, and the other figures don't mean anything? No, obviously not. Instead, the summary is loose and inaccurate.

The actual relevant language (from the WGA agreement, the AFTRA daytime agreement, and presumably from the other agreements as well) is:

[A production is not covered if] the actual cost of production is either: (a) $15,000 or less per minute of program material as exhibited, or (b) $300,000 or less per single production as exhibited, or (c) $500,000 or less per series of programs produced for a single order....

The better way to summarize this is:

Productions aren’t covered if the production cost is either $15,000 or less per minute, or $300,000 or less per episode, or $500,000 or less per single order.

BTW, note also that the media often say the $500,000 is “per series,” but it's actually per order. If the producer orders 22 episodes, then another 15, for instance, the $500,000 applies to the 22 episodes and/or the 15 episodes, not to all 37 episodes.

Note also the problem with “per order,” not “per series”: What if the production costs $20,000 per minute, $310,000 per episode, and $550,000 for the first order. It would be covered, because all of the figures are above the thresholds.

But then suppose the second order, of 15 episodes, costs $410,000. This below the threshold. Is the production suddenly non-covered? The language doesn't specify.

Also, suppose the order is reversed. Now the program starts out non-covered, then becomes covered. This presents problems as well. Again, the contract language doesn’t address this issue.

It’s a hard problem, since having a program flip-flop between covered and uncovered status is problematic, but having it permanently keep its original status doesn’t seem consistent with the spirit of the agreement (but maybe that’s the only solution). Also, the problem can’t be solved by saying “per series,” because a series could run for several years, and one wouldn’t know the series cost until the end. Also, “per season” would present the same problem as “per order” (and what is a “season” in made for new media anyway?).

There’s another problem as well, though maybe more theoretical than real: what if some episodes include “covered performers” and others don’t – are all episodes covered? Again, the language is silent.

SAG Challenge Slate to Oppose Hardliners

A slate called Unite for Strength has arisen to challenge the hard line Membership First faction of the SAG Board. Their goals: unseat Membership First, make a deal with the studios, and merge SAG and AFTRA. The move was first reported by the Los Angeles Times yesterday, and in today's hardcopy edition.

The challenge raises hope that reason may eventually prevail in SAG, although this would not be for two more months, since balloting doesn’t close until September 18. The group’s goals include making a deal with the AMPTP and moving towards merger with AFTRA.

However (with all due respect to the slate members), the slate doesn't have any A-list stars on it, although some of its members are well-known. That reduces the likelihood that it will be able to wrest control of the Board from Membership First, notwithstanding the fact that MF's margin on the Board in rather slim – I’m told that a change of four or five members on the Board would apparently change the balance of power.

In contrast, MF does have at least one bigger star on its slate, Keith Carradine. In the next few days, when the list of all candidates will be officially announced by SAG, we’ll see whether MF has any big(ger) stars running. That would make it harder for the challengers to gain traction, because SAG members often vote based on star power.

In any case, these developments make it even less likely that there will be a deal before balloting ends. That's because doing a deal now has little but downside risk for MF, and delay has little but upside.

The downside for MF to doing a deal now: if they do a deal now, the deal would be severely compromised from their platform, leaving them vulnerable to charges from UFS and other critics that MF dragged the Guild and the industry through turmoil, only to achieve nothing that they couldn't have gotten without the work slowdown / partial stoppage.

The upside for MF to delay: if MF refuses to do a deal before balloting closes, they get to tell SAG members "don't change horses in mid-stream, stay the course." Many voters wll find that a powerful message.

If the challengers don't succeed in winning, then there's no assurance that MF would do a deal even after the election. Indeed, MF would no doubt (and accurately) take the results as an endorsement of its hard line position. The AMPTP (studio alliance) and MF are dug in, and the stalemate could drag on for a long time. Recall that SAG hasn’t had a franchise agreement with the talent agents for six years.

If UFS does succeed in wresting control of the Board, it would probably move to fire the SAG executive director and change the composition of the negotiating committee. The studios, in turn, would probably sit down with the new SAG team pretty promptly and negotiate a deal. It’d be a complete game-changer, in the words of the AP.

SAG has a Board meeting scheduled for this Saturday. It’ll be interesting to see how the meeting is affected by the latest developments.

WGA MIA?

By shutting down the Golden Globes (and threatening to do the same to the Oscars), SAG helped the Writers Guild close its deal and end the writers strike earlier this year. SAG members -- both rank and file and a number of stars -- walked the picket lines and were vocal in their support of the WGA.

With this in mind, I asked the WGA for a statement on the current status of the SAG negotiations ... does the WGA support SAG's positions ... and why haven't WGA leaders made any public statements of support (other than a brief appearance at SAG's small anti-AFTRA rally in June)?

The WGA's spokesman responded with a short statement: “As we have stated many times, and as everyone in Hollywood knows, the Writers Guild supports SAG’s efforts to achieve the best possible deal for its members.”

Everyone in Hollywood may "know" that the WGA supports SAG's efforts, but everyone in Hollywood also knows that the writers are nowhere to be seen in the current debate -- which suggests that they, like most of the industry, are unsupportive of a second work stoppage.

SAG Hollywood Meeting Yesterday

Several hundred SAG members attended a Hollywood branch meeting yesterday, with the Hollywood Reporter estimating 400-500 people and Variety reporting the Guild's estimate of 735. The two Allens received standing ovations and enthusiastic support. They attacked the AFTRA deal and insisted that the studios were still negotiating, but did not provide details on strategy. The Guild didn't release any comment on the meeting.

AMPTP Ad in LA Times tomorrow

The AMPTP (studio alliance) is running an ad in tomorrow's LA Times. Here's the text:

“This is the BEST DEAL the guild has bargained for in 30YEARS.”
Patric M. Verrone, President of WGAW

“This has been a great ACHIEVEMENT for the DGA.”
Michael Apted, President of DGA

“This is a SOLID DEAL... another groundbreaking agreement for AFTRA.”
Roberta Reardon, President of AFTRA

“Two words describe this agreement–GROUNDBREAKING and SUBSTANTIAL.”
Gil Cates, Chairman of the DGA’s Contract-Negotiating Committee

THE DEAL
let’s keep working

A FIFTH MAJOR LABOR AGREEMENT THIS YEAR • AN INCREASE OF $250 MILLION FOR SAG MEMBERS OVER THREE YEARS • SIGNIFICANT ECONOMIC GAINS IN MINIMUMS, PENSION AND HEALTH CONTRIBUTIONS, AND TERMS FOR WORKING ACTORS • THE SAME GROUNDBREAKING NEW MEDIA TERMS THAT HAVE ALREADY SERVED AS THE CORNERSTONE OF FOUR OTHER MAJOR LABOR AGREEMENTS THIS YEAR.

SAG commentary

No deal yet between SAG and the studios. This commentary explores why:

Letter from SAG

SAG and the AMPTP seem to be holding firm to their positions. Here's an email SAG sent to their members today, and the AMPTP response:

July 17, 2008

It’s Not New Media – It’s NOW Media

Dear Screen Actors Guild Member,

I want to tell you why your national negotiating committee has not accepted the June 30 offer put across the table by the Alliance of Motion Pictures and Television Producers (AMPTP.) For one reason and one reason only: It’s not a good offer. It doesn’t address enough of your priorities (as outlined in past SAG Contract 2008 Reports), particularly in new media.

The AMPTP ‘s current offer to SAG, which is nearly the same for new media as the deals that the DGA, WGA and AFTRA accepted, has come to be called “the template.” Some of you may be wondering why we don’t just agree to the template established by the other unions.

The template doesn’t protect actors, and while we may be the last union to come to the table, we still have the obligation to address the issues that are most important to you. We have had the extra time to effectively assess the impact of rapid technological and marketplace changes, and after careful analysis, we don’t believe the template works for SAG members.

In the six months since the Directors Guild of America reached a deal with the AMPTP, the landscape in digital media has dramatically shifted. The seven global conglomerates that own the motion picture studios and television networks are so confident in digital media prospects, that they are putting up huge dollars to fast track their technology deals.

The DGA and WGA represent writers and directors, not actors. Their resolution of the new media issues may work for them, but they don’t address your specific needs. The DGA and WGA agreed to allow producers to make new media productions entirely non-union, at the producers’ option, for projects below budgets of $15,000 per minute (effectively, almost all new media productions for the foreseeable future.)

Most union directors and writers don’t have to worry about large non-union pools of trained and talented competitors, but union actors do. Non-union principal and background actors already compete for your jobs, especially outside of New York and California. It makes no sense for SAG to agree to allow the studios and networks to exacerbate our problem by giving them a pass to produce entirely non-union under a SAG union contract. We are a union, and our mission and obligation to all of our members nationwide is to promote union jobs.

Another example of how the new media template negatively impacts actors is its effect on residuals. The AMPTP’s recent offer to SAG doesn’t include residuals for programs made for new media and streamed again on ad-supported new media platforms. So a program originally made for ABC.com could be available for re-viewing on ABC.com, or any other ad-supported Internet outlet, as often as possible and forever with no residuals, no matter how much money is generated or how many times it is shown. (There is one minor exception if a program is made for and re-run on a pay platform like iTunes and the budget is more than $25,000 per minute.)

Just as we have shown we can work successfully with low-budget filmmakers, we are flexible and can accommodate fledgling new media productions under SAG contracts. We have offered to base made-for new media residuals on a percentage of revenue with no fixed obligation. If there is no money generated, no residuals are paid. But if revenue is generated from programs available over time, actors should receive residual payments. So far, management’s negotiators have rejected SAG’s reasonable solution, while management’s proposal could mean the beginning of the end of residuals.

What some among our employers – the major global media conglomerates -- insist on terming “new media” it’s really “now media.” It is urgent, instant and immediate. That’s why achieving a fair compensation formula now, in all forms of media, and confirming jurisdiction from the first dollar of the production budget, are core objectives of the SAG national negotiating committee. [Click here to downlink the full version of our “Now Media” white paper including the index of recent new media entertainment developments.]

Your national negotiating committee takes its responsibility very seriously. We want to make a deal as soon as possible, but we don’t want to make a deal that hurts actors. No deal is better than a bad deal that allows non-union productions by our employers and snuffs out residuals for projects made for and rerun on new media platforms. We don’t need to experiment on the backs of actors. Our real world and practical experience has taught us how to provide union benefits and protections in low budget productions.

Management’s resistance is frustrating but we have to be patient. The stakes are too high to concede jurisdiction and residuals for programs made for new media. That future is now and, if we ignore it, it will pass actors by and this generation and future generations of actors will never recover.

Thank you for your understanding and your solidarity.


Doug Allen
National Executive Director and Chief Negotiator

P.S. For anyone who thinks that is a hypothetical and distant future, this is what the business magazine Forbes said in a June 2008 article about YouTube:

“The vast majority of YouTube’s library is…babies laughing and dogs splashing in wading pools… Pricing for display advertising next to user-generated content has collapsed. Rates on sites such as Facebook, MySpace and YouTube have fallen 45% since February (’08), to 18 cents per thousand page views, according to digital analytics outfit PubMatic. Most of the momentum now, says Chris B. Allen, director of video innovation at media buyer Starcom is for ads within full episodes run on the TV network sites, such as NBC and Fox’s Hulu, ABC.com and CBS.com. It’s a format advertisers understand.”

Click here to download the full text of our white paper “It’s Not New Media – It’s NOW Media.” And to see an index of significant events and deals in entertainment media technology since January 2008, when the DGA-AMPTP deal tried to set “the template.” The index shows a sizable increase in technology investments, new deals, unique platforms and dramatic market forces at work.

Send your email questions or comments to us at contract2008@sag.org. (Your email browser must be open to access the email link.)

------------------

FOR IMMEDIATE RELEASE

July 17, 2008

Statement by the AMPTP

Today, SAG's chief negotiator said he could not accept AMPTP's offer because

the digital media "landscape has dramatically shifted in the six months since

the DGA" reached its deal. This statement is not just factually untrue; it

ignores the truly seismic shifts we have all seen over the last six months in

the rapidly deteriorating economy, the worsening credit crisis, and the

skyrocketing price of energy. Even in the midst of these severe economic

problems for our country and our industry, AMPTP has made SAG a good and fair

offer, with more than $250 million in increased compensation, groundbreaking

new media rights, and pension and health protections that most Americans would

envy.

By refusing to accept the AMPTP's offer, SAG's negotiators are ensuring that

SAG members will continue to work indefinitely under the old contract - a

contract negotiated by SAG that has allowed for non-union Internet production

since 2001. AMPTP has offered to extend SAG jurisdiction to original new media

production, including low-budget programs that employ a single "covered actor."

The AMPTP's final offer also guarantees residuals of 3.6% of distributor's

gross when original new media productions are reused on consumer pay platforms,

and terms to increase pay and residuals if the program is eventually exhibited

theatrically or on television. These terms are a major advancement for SAG

members compared to the existing contract terms.

In addition, the new media framework we have offered to SAG establishes

first-ever residuals for ad-supported streaming, made-for new media programs

and reuse of clips in new media. We have also offered to double the residual

rate for permanent downloads and give SAG exclusive jurisdiction over new media

programs derived from existing television series. Not a single one of these

rights exists under the contract that expired on June 30th - a contract that

SAG members now must work under because of the failure of SAG negotiators to

make a deal.

SAG - Looking Ahead

This short press release from the AMPTP (studio alliance) re today's SAG-AMPTP meeting says it all. Not particularly encouraging. And, below, my analysis.

STATEMENT BY THE AMPTP
A small group from AMPTP and SAG met today. Both parties agreed that the contents of the meeting should be kept private. No further meetings have been scheduled.

--------

With no announced progress today, and no new meetings scheduled, what happens next?

No strike: SAG probably can't get 75% yes vote to strike (the percentage required), and they're at least afraid they can't, so they won't even call a strike vote.

Likewise, I doubt in a few hour meeting they reached an agreement - I'd be very surprised if this was the case.

I think the Board won't do anything until after the 24th, to see if any credible opposition emerges for the Sept. elections. The 24th is the nominating deadline. Why would they wait? If the Board agrees to a deal now, it would be far short of what they've been demanding - and very similar to the AFTRA deal. That would leave the Membership First faction vulnerable to a charge by opposition that all the money spent opposing the AFTRA deal, and all the foregone or delayed production, was a waste of time, money, and job opportunities.

Conversely, if the Board continues to delay past the Sept. 19th deadline for ballots, they can make the case that the members shouldn't change leadership in the middle of a contract battle. After the election, we might see a deal - or, at least, that the Board sends the deal to members without a recommendation (more likely than the Board doing a deal, unless the studios give them some figleaf improvements, which seems unlikely in light of how contentious SAG has been). Or, we might see continued, longer-term delay.

If the Board has no credible opposition (which is what most people anticipate), then the same analysis applies as the previous paragraph - except that movement, if any, might occur before the September elections. That would be a plus.

Look to get a sense of the Hollywood membership's feelings, and the Membership First faction's positioning, at the Hollywood membership meeting this Saturday, July 19, 11:00-3:00. And look for possible Board action the following Saturday, the 26th. If they do decide to send the deal to the members at that time, look for the balloting deadline to be just before August 15.

That date's the deadline the studios set, after which the improvements in contract minimums in the deal on the table would no longer be retroactive, costing the actors about $10 million. I'm not sure if this time period (7/26 - 8/15) is quite long enough under the SAG rules for a vote (I just don't know), in which case the studios would probably extend the deadline by a few days to accommodate the rules and ensure that the members could obtain the sweeter deal if they voted yes.

Looking at the World Through SAG-Colored Glasses

Day by day, the Screen Actors Guild’s Hollywood leadership stumbles deeper into a morass, dragging behind it a bewildered and divided membership. Yesterday – Thursday – saw the spectacle of SAG insisting that it was still negotiating with the studios, while the latter just as steadfastly maintained that no such thing was happening.

Thus, when the parties’ meeting broke off in the early evening, the studio alliance (the AMPTP) castigated SAG for not accepting its final offer, which includes deal terms already embodied in four other union agreements this year (DGA, WGA, AFTRA daytime and AFTRA primetime). "We made it clear our final is our final and that we're not interested in further counterproposals," said the AMPTP’s spokesman to the Associated Press. For its part, SAG reportedly acceded to some portions of the studio proposal, but not others. That sounds like SAG’s negotiating with itself, not the studios.

Now, one can argue about the fairness of the proposed deal. Indeed, in my view, some of what SAG’s asking for is unreasonable, some of it’s reasonable but unrealistic, and some of it is indeed reasonable and might yet be achievable – if the Guild focuses its wish list.

Unfortunately, a realistic focus is exactly what’s lacking. Instead, for instance, the Guild is still asking for an increase in the DVD residual – which, though well-deserved, is completely unobtainable. The Guild is also still seeking to require union jurisdiction over low-budget made for Internet productions, even when none of the production’s actors are union members. In a world of user generated content and non-union competition, that’s just not realistic – and what SAG’s asking for would break the mold of the compromise accepted in the four other major union deals this year.

Breaking a mold and refusing to compromise can be a sign of strength, but only when backed by real power (and a rational assessment of one’s position). But power is another thing SAG doesn’t have. By pushing AFTRA towards the exit before belatedly realizing the disaster that would result from separate bargaining, and by then itself refusing to bargain early, SAG succeeded only in reducing its own leverage. Added to the strategic miscalculations are an inability to articulate a convincing case for continued delay, and a toxic combination (not of SAG’s making) of strike fatigue and economic recession.

In essence, SAG’s Hollywood leadership has backed itself into a corner, then painted itself into it for good measure. They’ve promised things to the membership – like an increase in DVD residuals and changes in the new media template – that they don’t have the leverage to deliver. Meanwhile, actors and the entire industry suffer from a work slowdown with little prospect of anything to show for it.

The ill-conceived anti-AFTRA adventure finally cut the legs out from under this enterprise, demonstrating that SAG members are highly unlikely to support a strike by the 75% affirmative vote that Guild rules require. At best, the outcome of such a vote is uncertain enough that SAG leadership is unlikely to seek a vote at all for fear of having it fail.

Hovering over all of this is the question of the upcoming (September) SAG elections. Are SAG negotiators simply stalling today so that they can later urge members not to oust board members during the middle of a labor conflict? It’s hard to know, but the absence of any apparent strategy other than continued delay makes the question compelling.

Continued delay and stalemate mean one thing: no contract at all. Under some scenarios, work will continue under the terms of the old deal, which isn’t as good as AFTRA’s. Under other scenarios, the studios might impose the terms of the new deal. Either way, without a signed union contract, there’s no SAG grievance and arbitration procedure, and there’s diminishing relevance for the Guild. Nor are there any surviving no-strike or no-lockout clauses, diminishing the desirability of SAG actors and SAG-covered work.

A no-contract situation could last for months, or even years. Indeed, SAG’s already the only above-the-line union that has no contract with the talent agents. SAG’s franchise agreement expired six years ago, while separate agreements between the agents and the DGA, WGA and AFTRA remain in place. Those agreements provide a measure of protection that SAG members no longer enjoy.

Meanwhile, the beneficiary of SAG’s miscalculations is AFTRA, which has now emerged from under the Guild’s shadow. The next few weeks will probably bring news of new television shows being signed to the AFTRA contract – as opposed to the SAG contract, which effectively no longer exists.

As if all this wasn’t enough, we also have the embarrassment of the day before yesterday, when the presidents of SAG (Alan Rosenberg) and AFTRA (Roberta Reardon) got nasty with each other on the public airwaves, lobbing a variety of charges understandable mostly to insiders. Of course, the LA audience probably is mostly insiders, as are you, most likely, if you’ve made it this far. If you didn't catch the show live on KCRW, click the link, and enjoy a lovely half-hour, then keep reading here.

Rather than dissect the show bit by bit, I'll just hit a few notes. As a general matter, it was astonishing how ill-prepared Rosenberg was. He seemed to have no message to deliver, and no particular point to being on the show. He was mostly reactive. I also was surprised when he suggested that SAG leadership had never said a negative word about AFTRA. Very peculiar.

More, I was stunned that Rosenberg tried to characterize qualified voting as a civil rights issue, suggesting in particular that Native American actors would be disenfranchised if voting on SAG contracts and strike authorizations is restricted to members who have worked as actors recently. While racial bias in casting seems indisputable, the fact is that most SAG members – of any race – work little or not at all in any given year as actors. The issue in qualified voting is whether those members, with so little at stake in the business, should have the right to vote on the momentous issues of contracts and strikes. Trying to claim this as a racial issue was disingenuous at best.

It also became clear – not that it wasn’t already – that the commercials contract is going to be a source of further dissension. Reardon said she favored joint negotiation of that contract (which expires in October, a few short months away), but she added that the two unions would need to be represented 50-50 on the negotiating committee. Rosenberg hesitated in response, awkwardly mumbling that he didn’t want to anger Reardon, before finally indicating that he opposed 50-50 representation, since more of the work is done under SAG jurisdiction.

Put it all together, and we may face the possibility of SAG negotiating the commercials contract – jointly or not – while it’s still without a signed film and TV contract. That would be odd. And by the time the commercials contract is signed (assuming that that contract doesn’t devolve into stalemate), Hollywood will have spent the better part of eighteen months struggling with labor unrest. That’s entertainment, apparently.

Qualified Voting Redux

Remember "qualified voting"? Also called "affected voting," it's the idea that only some union members should be eligible to vote on a contract (or strike authorization): namely, those who are actually affected by it – i.e., those who work under the contract. The countervailing argument is that unions are supposed to be united, and thus any member should be able to vote on any contract.

Several months ago, anti-strike forces in SAG pushed for qualified voting, putting forward a proposal that would have disqualified many SAG members from voting because they hadn’t worked even a day in the previous 12 months as a SAG actor. That would have reduced the likelihood of a strike, because actors who aren’t working have little to fear from a work stoppage (they’re already not working). SAG leadership killed the proposal, describing the proposal as anti-democratic.

Ironically, while spurning qualified voting for their own union, SAG’s leadership urges it on AFTRA, complaining that news anchors, weathermen, and assorted other non-actors get to vote on the AFTRA primetime deal now out for ratification. That complaint seems a bit hypocritical to me. What’s good for the SAG goose should be good for the AFTRA gander.

For what it’s worth, the Writers Guild uses a hybrid system: news writers didn’t get to vote on the WGA deal, but all other members, even those whose only credits or writing income was in the distant past, did. That included not only writers of features and scripted TV, but also writers of game shows and late-night variety shows, which are rather different businesses than traditional scripted work.

To put a cherry on it all, we turn to recent news from a third actors union (they all should merge one day), Actors’ Equity, which reached a deal with Broadway theater owners on its own contract earlier this week. In passing, Variety discusses the ratification procedure that will now follow: the contract will be sent to the members, “with voting eligibility reserved for members who have worked under the production contract since 2000.” Sounds a lot like the qualified voting that SAG rejected. Is Equity inequitable, or just sensible? I’m almost sorry I raised the question.

AMPTP-SAG: How Final is Final?

Over on Vallywood, the smart and analytical law professor Steve Diamond has a piece that explains the legal implications of an employer making a "final offer," as the studios did two days ago. It's worth reading, along with my piece that also takes a look at what happens next, but through a different lens.

SAG-AMPTP: No News is No News

SAG and the AMPTP (studio alliance) met for four hours today. According to the AMPTP, the meeting was at SAG's request, and the AMPTP answered questions on the proposal it put on the table two days ago. The AMPTP adds that SAG said that it (SAG) will contact the AMPTP on Monday. No further meetings between the two sides are scheduled.

The above is per the AMPTP's press release. SAG's slightly later release was less detailed, but noted that SAG will be studying the AMPTP proposal (which is reportedly 43 pages) over the next few days.

Hollywood Actors – What Now?

The Screen Actors Guild primetime and film contract talks collapsed Tuesday, and the next day, the American Federation of Television & Radio Artists began their own primetime TV talks with the studios, raising fears of a SAG strike and heightened inter-union strife between SAG and AFTRA.

The talks between SAG and the Alliance of Motion Picture and Television Producers (AMPTP) – the studios – were less nasty than the WGA talks, but no less contentious. SAG had several goals:

• Improvements in new media, above and beyond the DGA and WGA deals.
• Doubling the DVD residual – which would be a renegotiation of a 24-year old deal, albeit one quite unfavorable to talent. SAG later revised this to a proposal that DVD residuals be subject to pension, health and welfare contributions, which would amount to a 15% increase.
• Requiring the studios to obtain actors’ consent for reuse of movies and TV shows in new media, particularly in the form of clips. The studios don’t want existing consent requirements from traditional media to apply to new media. This has proved to be an area of great disagreement.
• Increased compensation for middle-class actors – i.e., actors who regularly work but are not stars. SAG’s backed off on some of these demands.
• Compensation for “forced endorsements” – i.e., product integration (product placement on steroids, so to speak), in which the actor is, for example, required to handle or extol the benefits of a product while in character, as part of a scene in a movie or TV show. It’s not clear whether SAG has compromised or even abandoned this demand.

Management has resisted these demands, and the talks, although extended twice, apparently resulted in little progress. In part this may be because SAG seriously underestimated its own vulnerability. For the last 27 years, SAG and AFTRA had jointly negotiated the primetime and film contract with the AMPTP, under an arrangement called Phase 1. However, of late, SAG’s Hollywood leadership became increasingly disenchanted by AFTRA’s 50% representation on the negotiating committee, in light of the fact that AFTRA represents no films and almost no primetime TV shows.

Nettled by the mismatch, SAG Hollywood tried through various proposals and procedures to reduce AFTRA’s influence. This angered not only AFTRA, but also SAG’s New York and regional branches, which, with AFTRA, tend to be more moderate than SAG Hollywood. The final straw for AFTRA was an alleged incident of inter-union poaching by SAG – a purported attempt to decertify AFTRA’s representation of a soap opera (an area of previously unquestioned AFTRA jurisdiction) and replace it with SAG.

Thus, AFTRA ended Phase 1 and elected to go it alone in negotiations. This undercut SAG’s leverage enormously, since AFTRA is expected to take a more moderate approach to the issues than SAG. Rather plaintively, SAG leadership has asked AFTRA to rejoin it at the bargaining table – most recently, in just the last several days, after talks collapsed. AFTRA’s rejected that out of hand, twice.

Now what? AFTRA and the AMPTP are talking, and will probably reach a deal in 2-3 weeks. That’s roughly how long it took AFTRA to reach agreement on its Network Code covering daytime programming. Indeed, the AMPTP has told SAG that it is willing to resume talks at the end of May – i.e., after an AFTRA deal is reached.

Now we face an odd spectacle: the actor’s union that represents no features and almost no primetime TV will set the template for the much larger union whose primary focus is exactly those areas. As a result, SAG will then find itself in an almost untenable position, and one that’s even worse than what the WGA faced even after the DGA did its deal. At least the WGA still had some leverage: namely, the threat to destroy the Oscars (as it had done to the Globes) and the prospect of joining SAG on strike after June 30. SAG, in contrast, finds itself the caboose: all of the other unions have done their deals, or will do so without rancor.

Thus, on new media, for instance, SAG will try to seek improvements over a deal that has, or will have, been agreed to by the DGA, WGA, AFTRA (in its daytime agreement), AFTRA again (in the primetime agreement), and, it appears, by the IA (the representatives of below-the-line workers … the IA has publicly expressed support for the DGA new media deal, but has not yet negotiated its own contract incorporating those terms). That’s an almost vertical fight.

On DVD residuals, same story. None of those other unions achieved an increase in DVD residuals – only the WGA even attempted the feat – and AFTRA’s not expected to do so in its primetime negotiations either. Although SAG has a good argument on the merits for some increase, as a practical matter, it’s a complete nonstarter.

The various other issues above are pretty much unique to actors, so there’s no weight of precedent established by the DGA, WGA or IA. But AFTRA’s setting that precedent right now in its talks, while SAG is sidelined. We can hope that AFTRA seeks and achieves a deal that SAG can, and does, accept without many changes, just as the DGA did with respect to the WGA. Unfortunately, AFTRA has little to gain by bargaining on SAG’s behalf, because they’re at war with SAG, whereas the DGA’s and WGA’s interests were somewhat aligned (since the WGA strike idled directors as well).

What will SAG do? If, or when, it returns to talks, its leverage will be even closer to zero. On the table will be a copy of the AFTRA agreement and a yellow sticky note that says “sign here.” Further talks will likely go nowhere unless SAG yields on most points.

If talks stall, as is likely, the assertive approach would be to take a strike authorization vote, in which the union leadership asks the members to allow the leadership to call a strike at any time after contract expiration, June 30. But there are risks to SAG Hollywood leadership in calling for a strike authorization vote. For instance, the other SAG leadership (New York and regional) will probably vote against such a call, signaling a divided union.

However, it’s likely that SAG Hollywood would succeed in passing a resolution calling for a strike vote, if it called for one, since SAG Hollywood is a majority of the SAG National Board. Then the action would shift to the membership. There, the minimum threshold for approval is 75%, and SAG Hollywood leadership may fall short, because the union is sharply divided regionally, and because it will be hard to convince members that a deal that’s good enough for the DGA, WGA, IA, and AFTRA is nonetheless so bad for SAG that it’s worth a strike – indeed, a second strike, coming just months after the WGA’s.

On the other hand, SAG might well achieve a 75% vote. An enormous percentage of SAG members don’t work even a day a year as actors – I spent more time in Tokyo last year and still scarcely had time for sushi – and so they are probably more likely to vote for a strike authorization than working actors. A strike wouldn’t affect non-working actors greatly, since they’re already not working, but working actors (and directors, writers, crew members, industry suppliers, and others in the LA economy) would suffer greatly.

Some interesting numbers from five years ago: in 2002, SAG members voted on whether to approve a new contract between SAG and talent agents. The contract was voted down, 55% to 45%. The Association of Talent Agents claims that 75%-80% of SAG members voting on the agreement made less than $2,000 the previous year. See http://www.agentassociation.com/frontdoor/news_detail.cfm?id=43 (4/26/02 entry). 55% is a majority – but it’s a lot less than 75%. That suggests that achieving 75% may be difficult, especially since a strike is a more serious matter than failure to reach an agreement with agents.

That agreement with agents was never ratified, by the way, and, to this day – six years later – SAG members are without the protection of an agreement between the union and the agents, although they (SAG members) do continue to be represented by agents, of course.

However, even if a strike authorization passed, a mere 75% is not enough in practical terms. Achieving a bare 75%-80% would underscore the divisions in SAG, and raise questions as to how much support there would be for a strike.

In any case, there are risks to an actual strike, as well. With SAG on the picket lines, AFTRA would be free to organize new TV shows without competition from SAG, and would likely do so aggressively. As a nuclear option, AFTRA might even seek to decertify SAG shows and replace SAG as representative, although this process apparently takes months or more. Another possibility, even more unlikely, is that AFTRA might start organizing feature films, at least those shot on DV (since tape is historically an area of AFTRA jurisdiction).

Also, a strike would put the 44,000 dual cardholders – actors who are members of both unions, and who comprise over one-half of AFTRA membership and almost one-third of SAG – in a very difficult position, working one day, then picketing the next, and perhaps urged by SAG Hollywood leadership not to work at all. AFTRA, and the other branches of SAG, would send the opposite message, presumably. There might be little solidarity, and some actors would probably go financial core, allowing them to cross picket lines (and while continuing to receive most benefits of union membership) or work non-union, all without fear of punishment from the union.

So, if renewed SAG-AMPTP talks prove unproductive, yet SAG Hollywood leadership has reasons to avoid a strike authorization vote, let alone an actual strike, what’s left? One possibility is that SAG will not take a strike authorization vote and will, instead, offer to continue to work without a contract, post-June 30. That might have support from much of SAG leadership: SAG New York and SAG regional because they’re opposed to a strike, and SAG Hollywood because they’re uncertain of achieving ratification of strike authorization vote.

This would be roughly analogous (factually, although not legally) to the situation between SAG and the talent agents noted above. However, there’s a key difference: under federal labor law, the terms of the existing SAG-AMPTP agreement would continue to apply, pretty much unchanged, even after it had expired. (That’s not the way contracts usually work in the non-labor world, of course.)

This development would leave a cloud of uncertainty hanging over the industry. Studio feature production, which halted several weeks ago, would not resume, because the threat of a strike at any time would make movies unbondable and unfinanceable. One ray of light: true independent features – those with no studio financing or distribution deals – would continue to be produced, under interim agreements called guaranteed completion contracts. SAG’s issued 95 of those already.

Television production would probably not resume either; even though the production cycle for any given episode of a show is short, the risk of a truncated season is too great. Thus, although SAG might offer to work, management would probably be unwilling to resume production.

That sounds like a de facto lockout. SAG might file an Unfair Labor Practices complaint with the National Labor relations Board, but management’s response would be that resuming production is not feasible without some guarantee against a walkout mid-show. In any case, ULP’s take months to resolve. Talks would probably continue fitfully, but progress would be slow. A de facto lockout might continue for months, until someone finally blinked. Just such a lockout occurred at an opera company in New York in 1983. It continued for 2-1/2 months.

I hope this isn’t where we’re heading. The industry can ill-afford a second full-blown, extended work stoppage this year, whether from a strike, a lockout, or some ill-defined hybrid. But that may be just what we’ll get – or continue to get, since a de facto lockout’s already started in features. Stay tuned.