Silly Lawsuit Against SAG Dismissed; and More

Remember the lawsuit that former SAG president Alan Rosenberg and three other Membership First members (1st VP Anne-Marie Johnson and board members Diane Ladd and Kent McCord) filed against their own union?

No? You may have blissfully forgotten this misbegotten legal action, filed a year and a half ago (!), but the courts haven’t. This is the lawsuit that attempted to reinstate former SAG National Executive Director Doug Allen and undo ratification of the SAG-AMPTP collective bargaining agreement. In a case of chasing a horse that’s left the barn, and despite two court decisions that the action was moot, the lawsuit drags on.

Or maybe not. This morning, yet another judge declared the lawsuit moot. That’s five judges total, since one of the previous decisions was by a three judge panel. In a statement, SAG’s Deputy National Executive Director and General Counsel, Duncan Crabtree-Ireland, said “Screen Actors Guild is gratified that this litigation has now concluded with a final reaffirmation of the Guild's position by the trial court.”

Let’s hope. Interestingly, in their opposition filing, the plaintiffs did not oppose dismissal of their complaint. But an observer pointed out that the plaintiffs have crafted their document, and their statements in the courtroom, so as to tee up a motion for attorneys fees. In other words, Rosenberg et al. will probably ask the court to order that SAG pay Rosenberg et al.'s attorneys fee for bringing a case that five judges declared moot and that at the end of the day Rosenberg's own attorneys were willing to dismiss!

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In other guild and union news of late:

· In a surprising move, SAG’s Unite for Strength faction reached across the aisle and chose Membership First hardline David Joliffe as the chair of the Negotiating Committee for the AMPTP talks that begin October 1, reports SAGWatch.

· Those talks involve both SAG and AFTRA, negotiating together once again after a bitter hiatus in the last negotiating cycle. In order to make the schedule for joint negotiations work, AFTRA leadership has agreed to a one-year extension to its so-called “front of book” – the portion of its agreement with the AMPTP that covers daytime serials (soap operas) and various other work whose jurisdiction is not shared with SAG.

The extension, which runs through Nov. 15, 2011, is noteworthy for two reasons. First, the compensation increase, effective Jan. 1, 2011, is 2.5% (2% increase in minimums and 0.5% increase in pension and health contributions), significantly less than the 3.5% that was agreed to in the last negotiating cycle, which began before the economy had spiraled into recession. That 2.5% may well set a precedent for the October 1 negotiations.

Second, the extension does not change the new media provisions in any way. This suggests that any changes will be handled in the October 1 negotiations. Those issues will probably be hard fought.

The extension goes out for a vote in a few weeks to membership meetings in the five major AFTRA Locals of Chicago, Los Angeles, New York, San Francisco and Washington/Baltimore.

· Speaking of front of book, a new version is now available from AFTRA, incorporating the changes agreed to in 2008. Yes, these books take a while to revise, and, alas, the AFTRA book still uses the same almost unreadable tiny typeface as previous editions. None of the other guild/union books do, and the WGA has even moved away from the small format books to a large size that’s more manageable.

A noteworthy change in the AFTRA book: Ex. A (the portion that is jointly negotiated with SAG) is no longer included. Word is that there will be a separate Ex. A book eventually, but no information on when. That book, if and when it appears, will presumably incorporate the results of the Oct. 1 negotiations.

· It turns out even unions sometimes have unions. SAG does – in particular, a few dozen of its employees are represented by Teamsters Local 986. The contract between SAG and 986 expired June 1, and negotiations are ongoing. In a statement, SAG declined to provide any details on progress: “Screen Actors Guild and Teamsters Local 986 continue to negotiate for a successor agreement. Having agreed to bargain across the table and not in the media, SAG will have no further comment at this time.”

· The Writers Guild voted a few days ago to revise its credit rules. Variety has details on this relatively technical change. And speaking of WGA credits, why not have end credits for “Additional writing by,” so that all participating writers get credit? Decades ago, the WGA agreement provided for a credit of this sort, but it was eliminated in order to create the often-fictional idea that only a small number of writers contribute to a script. The result: caterers get credit and many writers don’t.

· In other WGA news, the WGA West announced 18 candidates running for 8 open board seats: Robin Schiff, David Shore, David A. Goodman (inc.), Cheryl Heuton, Aaron Mendelsohn (inc.), Katherine Fugate (inc.), Timothy J. Lea, Mick Betancourt, Mark Gunn (inc.), Erich Hoeber, Erica Montolfo, Matt Pyken, Naomi Foner, Karen Harris (inc.), Kathy Kiernan (inc.), Christopher Keyser, Steve Skrovan, Matthew Weiner. (inc. means incumbent, and the order of the list was determined by lot). There will be a candidates night Sept. 7 in LA. Voting is by mail or at the WGA annual meeting Sept. 16, with ballots counted the next day.

· This summer is also SAG election season. The president is not up, but 1/3 of the board is. Candidates are usually announced in late July, with voting closing in late September. No details as yet.

· The WGA East (which has a snazzy new logo) announced 23 new digital media signatories to new contracts, bringing the total number of WGAE digital signatories to 43. Twenty eight writers have become new Guild members as a result of the new contracts.

· Finally, an item from a couple months back: AFTRA and the AFM, which represent recording artists and musicians respectively, sent a letter to the Teamsters supporting efforts by composers and lyricists to unionize. The Teamsters are assisting the efforts of the music scribes, who are among the few non-unionized workers in the business (with computer effects workers being another large group). No word on any progress though.

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Subscribe to my blog (jhandel.com) for more about entertainment law and digital media law. Check out my residuals chart there too. Go to the blog itself to subscribe via RSS or email. Or, follow me on Twitter, friend me on Facebook, or subscribe to my Forbes.com or Huffington Post articles. If you work in tech, check out my book How to Write LOIs and Term Sheets.

Fixing the Residuals System

The residuals system is broken. It’s expensive to administer and is an invitation to conflict as platforms such as new media evolve. Yet we need residuals, because talent survives on these payments between gigs. Can the system be fixed?

Yes, I believe so. For a proposal, see my piece in today’s Hollywood Reporter.

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Subscribe to my blog (jhandel.com) for more about entertainment law and digital media law. Go to the blog itself to subscribe via RSS or email. Or, follow me on Twitter, friend me on Facebook, or subscribe to my Huffington Post articles. If you work in tech, check out my new book How to Write LOIs and Term Sheets.

WGA Institutes Qualified Voting

The WGA membership has approved new rules limiting members’ eligibility to vote on strike authorization and ratification of the feature-primetime contract: members now have to have earnings of $30,000 under a WGA agreement during the six years preceding the vote or 15 or more qualified years as a pension plan participant, Variety reports.

The change passed by a margin of 96% to 4%, with turnout a low 15%. This level of support, and lack of angst as signaled by the low turnout, contrast with the reaction within SAG when a “qualified voting” or “affected voting” system having income requirements was proposed in that union. Of course, a higher percentage of SAG actors would have been disqualified since more than 2/3’s of SAG members earn little or money from the TV/theatrical contracts in any given year, even when residuals are included in the calculation.

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Subscribe to my blog (jhandel.com) for more about entertainment law and digital media law. Go to the blog itself to subscribe via RSS or email. Or, follow me on Twitter, friend me on Facebook, or subscribe to my Huffington Post articles. If you work in tech, check out my new book How to Write LOIs and Term Sheets.

JLH on UCLA Panel re Labor

Next Sat., June 13, I'll be on a labor panel at the UCLA Altered States Media Conference, sponsored by the UCLA Producers Program and the UCLA Festival for New Creative Works.

Here's the panel:

10:15 AM - 11:30: Studio and Labor Relations in 2015
Moderator: Arnold Peter (Partner, Raskin Peter LLP)

* Mike Farrell (Actor, M*A*S*H, Providence)
* Jonathan Handel (Attorney, TroyGould Attorneys)
* Patric Verrone (President, Writers Guild of America, West)
* Sallie Weaver (Founder, Entertainment Labor Consulting, Inc.)

Conference price ranges from $80 (guild members or out of school 5 years or less), $125 (general admissions), $175 (MCLE legal education credit), and $25 (student).

The conference description is below. For more info, click here.

The UCLA School of Theater, Film and Television, one of the premier film schools and research universities in the nation, will host the first-ever Altered States Media Conference. This one-day conference will bring together leading media creators, scholars, and industry practitioners to discuss the future and evolution of media arts, technology, scholarship, and commerce.

As digital technology becomes more pervasive, companies from all arenas of the entertainment industry are embracing a culture of convergence. Technology is connecting the disparate aspects of our lives and altering the way we communicate with each other. But are we laying a sufficient foundation for a sound, economically and artistically sustainable future? Or are we simply providing stop-gap solutions with a bigger battle looming on the horizon? Are we moving in the right direction?

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Subscribe to my blog (jhandel.com) for more about SAG, or digital media law generally. Go to the blog itself to subscribe via RSS or email. Or, follow me on Twitter, friend me on Facebook, or subscribe to my Huffington Post articles. If you work in tech, check out my new book How to Write LOIs and Term Sheets.

SAG & Studios Agree to Tentative Deal

The Screen Actors Guild and the AMPTP (alliance representing studios and producers) reached tentative agreement yesterday on a two-year TV/theatrical contract, potentially ending a ten-month stalemate that halted production of most studio movies and put thousands of people out of work.

The deal will probably be approved by the SAG board today or tomorrow and ratified by the membership by mid-May, but the hardline MembershipFirst faction has vowed to fight the deal, so ratification, although likely, is not assured. Assuming the deal is in fact ratified (which takes a 50% majority), the stalemate would be over by mid-May. Some production might resume before then, in anticipation of ratification, but this is unknown.

In separate news today, the SAG and AFTRA boards meeting jointly approved the commercials contract reached April 1 with the advertising industry. Ratification ballots will go out to the members of both unions next week, with a return date in mid-May. The deal has wide support among the leadership and is expected to pass easily.

Back to the tentative TV/theatrical deal: Critically, this deal would expire on June 30, 2011, effectively synchronizing it with the Writers Guild, Directors Guild and AFTRA (smaller actors union) deals. That means all four unions will be able to coordinate negotiations and strategy, even to the point of threatening a joint strike by two (WGA and SAG) or three (WGA, SAG and AFTRA) of the unions. (The DGA has essentially never gone on strike, and AFTRA seldom does.)

This synchronicity should give the unions significant leverage, which raises the question of why the studios agreed to it. Probably they needed to restart theatrical film production soon in order to have movies for 2010. That would seem to be the only pressure point SAG had, since the union was widely understood to be unable to strike (a strike authorization would have taken a 75% affirmative vote of those voting, and the union didn’t even seek such a vote for fear of failing).

The gain—synchronicity—came at a price to SAG, however. The new deal compromises the force majeure claims SAG has pending from the 2007-2008 WGA strike. These are claims by actors for lost wages due to the strike, and amount to tens of millions of dollars. It’s unknown as yet how much will be foregone. Also, since the claims were the subject of a pending arbitration process, it’s unknowable how much SAG would have gotten if it had continued to pursue the claims. Thus, it’s hard to calculate the dollar cost of the compromise. The new deal also modifies the force majeure language in the union contract, but the details are unknown.

The deal includes no changes in new media from the AMPTP’s February offer, according to sources. That offer, in turn, is essentially the same as the new media provisions that the DGA, WGA, and AFTRA (in two separate deals) agreed to. (IATSE’s new media provisions are similar in several respects as well.) No change was expected by anyone, yet, ironically, new media was the reason the hardliners stalemated for ten months in a futile attempt to improve on the template accepted in the other five union deals.

The deal will take effect upon ratification, and includes an immediate 3.0% increase in minimum pay rates plus a 0.5% increase in pension and health contributions. A year later, there will be an additional 3.5% increase in minimums, which will run through contract expiration.

In contrast, AFTRA members have been enjoying a 3.5% increase for the last ten months (when AFTRA did its deal), and will receive their 3.0% + 0.5% bump on June 30 of this year. That means that for virtually the entire contract period, AFTRA rates will be about 3.5% higher than SAG’s. In other words, the new deal does not give SAG a double increase in order to catch up with AFTRA.

If SAG wants to ever catch up, they’ll have to seek a double increase in 2011, but that will involve giving up some other issue that SAG would otherwise have negotiated for, and in any case a double increase in 2011 would not be retroactive to the 2009-2011 period. This is part of the damage that the hardliners inflicted on the union.

Speaking of retroactivity, that’s an element that, not surprisingly, this deal doesn’t include either. That means that SAG actors who worked in TV over the last ten months will not receive makeup payments to bring them up to higher minimum pay levels that they would have received if the deal had been done promptly. This also is a result of the delay that MembershipFirst caused by not making a deal almost a year ago. And, of course, the whole issue of expiration date was caused by the hardliners’ delaying tactics.

The deal next goes to the SAG national board tomorrow for approval and then to the members for ratification over a several week period. SAG hardliners will fight the deal—SAG president Alan Rosenberg, 1^st VP Anne-Marie Johnson, and former Hollywood board member David Jolliffe are among those who have already spoken in opposition—but I expect it to pass, although not with the over-90% margin the Writer Guild deal did a year ago. The deal will almost certainly go out to the members with a minority statement in opposition. Nonetheless, people are sick of not working and will probably agree that the deal was the best obtainable in a bad economy and with SAG weakened in large part by the hardliners themselves.

One thing that’s clear is that this is a time of enormous change for the Hollywood actors unions. Most immediately, actors have a lot to vote on over the next several months: the commercials contract, the TV/theatrical contract, the AFTRA Board elections, and then the SAG presidential and Board elections, the latter of which are expected to run from July through September.

In addition, several of the Hollywood unions’ pension and/or health plans have made cutbacks (AFTRA, AFM, and IATSE), due to the stock market collapse and to the continued increases in health care costs. Also, SAGWatch reports today that SAG itself is in difficult financial straits, due to MembershipFirst’s mismanagement: loss of union dues due to the production slowdown over the last 10 months, departure of television work to AFTRA due in large part to SAG’s internal strife, the expenses of futile battles with AFTRA and internally, and, most significantly, alleged bloated hiring practices that added 100 staff members to the union payroll. Layoffs are apparently expected, and the LA Times is reporting today that the union has a deficit exceeding $6 million.

SAG’s new leaders have difficult work to do on various other contracts that expired or were ignored on MembershipFirst’s watch, including the franchise agreement between SAG and the town’s talent agents, which expired seven years ago. Then there’s the perennial question of SAG-AFTRA merger, which will probably be a factor in the upcoming SAG elections, as will vituperative arguments about the new TV/theatrical deal and the responsibility for the large-scale decline in SAG’s power and prestige.

Change isn’t limited to the labor side. The AMPTP’s longtime head, Nick Counter, retired several weeks ago. Also, interestingly, the new TV/theatrical deal was negotiated primarily on an informal basis by key SAG leaders and studio heads, not by formal bargaining between the union and the AMPTP. Although AMPTP acting head Carol Lombardini played a part late in the discussions, this process raises questions as to the future role and effectiveness of that organization.

Hanging over all of this are the twin factors of the economy and new media. The troubled economy will continue to harm the entertainment industry for some time to come. New media will continue to evolve, and will probably roil the unions, and the industry as a whole, for a decade or more.

And, of course, with mid-2011 expiration dates set for the WGA, DGA, AFTRA (two deals) and new SAG deals, negotiations will start again in the towards the end of next year. No rest for the weary, or sleep for the sinful, it seems.

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Subscribe to my blog (jhandel.com) for more about SAG, or digital media law generally. Go to the blog itself to subscribe via RSS or email. Or, follow me on Twitter, friend me on Facebook, or subscribe to my Huffington Post articles. If you work in tech, check out my new book How to Write LOIs and Term Sheets.

Hollywood Labor Roundup

Keeping you up to date on miscellaneous goings-on in the world of Hollywood labor, here’s what’s happened in the last week or so:

• SAG Commercials Negotiations. These continue in NY under a press blackout. No news to report.
• SAG TV/Theatrical Contract. Rumors abound that a top CAA exec or a studio chief might get involved in trying to mediate between SAG and the AMPTP. Unclear if there’s any substance to the reports.
• Counter Leaving. The AMPTP confirmed what had been an open secret: after 27 years (and after negotiating a staggering 311 union contracts), the studio alliance’s president, Nick Counter, is retiring. That will be effective March 31, 2009. His deputy, Carol Lombardini, executive VP, will serve as acting president, and Counter will continue on as a consultant, including on the SAG negotiations, whenever there are any again.
• Chernin Leaving. After 20 years at Fox, thirteen of them as News Corp.’s president and COO, Rupert Murdoch’s deputy, Peter Chernin, is retiring. That’s of interest to union watchers because Chernin and Disney’s Bob Iger played a role in brokering a deal to end the writers strike last year. Now it seems less likely that Chernin could play such a role in the SAG stalemate, assuming anybody could.
• DGA Hires New Media Consultant. Already planning for thee 2011 labor negotiating cycle, the forward-looking Directors Guild has hired new media consultancy Wolzien LLC to study the issues. Wolzien, whose principal (and apparently sole employee) is Tom Wolzien, was one of two consultancies that performed a similar function for the DGA leading up to the 2007-2008 negotiations. (The other firm has never been publicly identified.)
• WGA Executive Director David Young Defends Writers Strike. Well, what did you expect? Young lays out his case in a statement on the WGA website, which includes a handy chart and a bullet point list (see below).
• Leno Haled Into WGA Court. Jay Leno is facing the music for writing his own material during the WGA strike, which the WGA contends was a violation of strike rules. No word on a verdict yet.

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WGA Chart of Improvements over Studios’ Last, Best and Final Offer

Top of Form

	November 4 AMPTP offer	February 9 final deal
Internet ad-supported streaming – in the first year of the life of a television program	Free for 6 weeks; 1.2% of producer's gross thereafter (equal to 0.24% of distributor's gross)	Free for 17 or 24 days; 3% of applicable minimum; switches for network prime time in the third year of the contract to 2% of distributor's gross
Internet ad-supported streaming – after the first year of the life of a program	1.2% of producer's gross	2.0% of distributor's gross
Internet ad-supported streaming feature films	No residual offered = zero	1.2% of distributor's gross
Electronic Sell-Through (Download to Own)	DVD rates (0.3% and 0.36% of distributor's gross)	0.65% and 0.7% of distributor's gross (though the companies are now reneging on covering library product with these negotiated rates)
Internet Download Rentals	1.2% of distributor's gross	1.2% of distributor's gross
Fair Market Value test	Same as 2001 contract	Enhanced test for related-party transactions
Inspection of New Media Deals and Activity reports	None	Rights for quarterly inspections of unredacted company records
Promotional use in new media	Free, however they define it, including ad-supported streaming of complete programs	Clips only are free and only with clearly promotional purpose
Made-for-New-Media	Jurisdiction over dramatic forms only if derived from MBA-covered scripted programs; excludes original, comedy-variety, serials, etc.	Jurisdiction over all New Media programs; terms and conditions applied to all but the lowest-budgeted productions, only when done by non-professional writers
Creator's rights ("Separated" Rights)	None	TV Separated Rights adapted to New Media

WGA List of Improvements Over the DGA Deal

• The DGA won EST [i.e., Electronic Sell-Through] at 0.65% and 0.7% only for movies and TV first released in 2008. The WGA won EST at 0.65% and 0.7% for our entire library of product – although the companies are trying to renege on this, forcing us to seek arbitration.
• The DGA won only a small raise in the third year of streaming. The WGA, for the first time ever, won a formula by which the writer will be paid 2% of Distributors Gross in the third year of streaming.
• The DGA sunsetted all New Media provisions in their contract. WGA accepted no such sunset clause – we don’t want to start from zero in these hard fought areas when we go back to the bargaining table in 2011.

Leno’s All Charged Up

The wheels of Writers Guild justice grind slowly, it seems. Flashback to January 2007—almost 14 months ago—when Hollywood was in the middle of a long writers strike, rather than an even longer screen actors stalemate. Comedian Jay Leno, after having been off the air for weeks, came back on, this time minus his writers.

That reappearance gave the WGA strike a highly visible supporter, as Jay’s first returning monologue was a recital in favor of the strike. But it also created a problem, because Leno, himself a WGA member, was penning his own material. The WGA said at the time that that was a violation of guild strike rules. Leno and his network, NBC, denied that the strike rules applied to performers writing their own material. The legal analysis is a bit complicated, but I concluded at the time that Jay was probably in violation.

Eventually the strike ended, and we all moved on to other things, such as SAG strife and bank failures. La affaire Leno disappeared into the maw of the WGA. Meanwhile, ironically, Jay made Hollywood labor news again in December, when it was announced that his show was moving to primetime, displacing five hours of scripted primetime programming per week and causing a commensurate loss of acting jobs that upset SAG.

The Writers Guild, in turns out, hadn’t forgotten Jay, or forgiven him either. Why it took 14 months is unclear, but yesterday, reports the LA Times, Leno was called in front of a WGA trial committee to assess whether he had broken the strike rules. The case is a political hot potato, because it pits the power of a Hollywood guild against the even greater power of one of its prominent members. If found guilty, penalties could include a reprimand, a fine or even expulsion from the union (this last seems unlikely). No word, however, on how long that determination might take, or on what appeal procedures might be available.

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Hollywood Labor’s Long-Term Future: More Unrest

After a year and a half of Hollywood labor turmoil, we’re finally nearing a SAG deal and the end of this negotiating cycle. Will this be the beginning of a new era of labor peace in the industry?

Unfortunately not. Silicon Valley is not going to suddenly take an Ambien and stop innovating. That means that a scant two years from now, when negotiations for 2011 renewals of the guild and union contracts begin, negotiators will be challenged with even newer forms of “new media,” new business models, and new economic realities.

Thus, the cycle of anxiety, distrust and failed bargaining may begin again. And so on when those renewals expire three years later, and again three years after that, and so forth. Hollywood is now yoked to the computer, Internet and consumer electronics industries, all of which evolve at breakneck speed, dragging slower-moving Hollywood along like a clumsy partner in a three-legged race. That has toxic consequences for the entertainment industry’s labor relations, including, notably, an increased risk of strikes, stalemates and slowdowns.

What to do? I suggest that Hollywood guilds, unions and management form a joint New Media Working Group. This body should have members from management and from the Writers Guild (WGA), Directors Guild (DGA), Screen Actors Guild (SAG), AFTRA, IATSE, and management. Perhaps the AFM (musicians union) should be included as well; I don’t know enough about that union to venture an opinion.

The function of the Working Group would be to analyze and report on developments in new media and the possible resulting effect on existing labor agreements and relationships. The goal would be to track those changes on an ongoing basis and generate various options for addressing them in the collective bargaining agreements.

By doing this work on an ongoing basis, it might be possible to reduce the paroxysms of last-minute activity that characterize the negotiating process today. And, by conducting this work jointly, it might be possible to bring the various unions, and management, onto the same page in their subsequent negotiations: that is, to ensure that everyone has a common knowledge base from which to work.

To do its work, the committee should meet quarterly or even monthly. It will need research support (sharing of data) from all parties, and a budget for purchase of research reports and other such expenses, consultants as necessary, and perhaps a staff person who would travel regularly to Silicon Valley. The committee would build relationships with major players and information sources—agencies, attorneys, other guilds, academics, research firms, tech companies, and the like.

Silicon Valley will continue to innovate, and new media will continue to evolve. Yet, when it comes to guild agreements, the entertainment industry seems content to snooze between contract renewals. Isn’t it time to try a different approach?

Portions of this article previously appeared December 14, 2007, as Memo to DGA - Please Propose a Tri-Guild New Media Adjustment Committee.

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AMPTP, IA to Talk Monday

Negotiations between SAG and the AMPTP (studios) are stalled, and the mediation process seems glacial, so the AMPTP is taking advantage of its free time to negotiate with IATSE, it seems. The two parties are sitting down for talks tomorrow (Monday) and have scheduled three days' worth of sessions, reports Variety.

The IA and AMPTP last met about seven months ago, also for three days. Seemingly, there's no rush -- the IA deal doesn't expire until next August. But on the other hand, the AMPTP would love to be able to announce yet another deal incorporating the new media template that SAG objects to. That template -- a set of provisions regarding minimums, residuals, jurisdiction and other matters -- has been part of four other deals this year (DGA, WGA, and two AFTRA deals).

SAG Apparently Seeking Strike Authorization

Lewis Carroll was a master of bizarre fantasy, willful illogic, and headstrong characters. Not surprisingly, that often makes his shape-shifting prose relevant to present-day concerns. Consider Alice’s fall down the rabbit hole:

The rabbit-hole … dipped suddenly down, so suddenly that Alice had not a moment to think about stopping herself before she found herself falling down what seemed to be a very deep well.

Either the well was very deep, or she fell very slowly, for she had plenty of time as she went down to look about her, and to wonder what was going to happen next. …

Down, down, down. Would the fall never come to an end?

– Lewis Carroll, Alice’s Adventures in Wonderland

If we were focused on the broader world, we’d note how woefully applicable this passage is to the current economic crisis — will the fall never come to an end?

Or we might look at the sorry state of politics, and ruminate on how we’ve fallen from a potato(e)-head VP (Dan Quayle) to a frat-boy boob of a president, and now to a VP candidate who was mayor of almost nothing just two years ago. Again — will the fall never come to an end?

Our focus is SAG, however, but the question is still relevant. The Hollywood Reporter is reporting that SAG’s negotiating committee will probably approve a measure today asking the guild membership for a strike authorization. Variety is less sure, referring to “speculation” along these lines. But if the Reporter is accurate, we’re off on a journey deeper into Wonderland.

Now, whether an authorization will pass is unknown: 87% of members responding to a guild survey said the guild should keep negotiating for a “better” and “fair” contract, but that’s not the same as saying they’re willing to strike over it — and, critically, only 10% of the guild’s paid-up members even bothered to return the survey.

The other 90% didn’t care enough to return the survey, and many of them are probably sick of guild politics and may not want a strike. Whether they’ll bother to vote is another question, and thus we face the possibility of the 120,000 member guild striking based on the vote of just a few thousand members. That has a rather Carrollian illogic to it.

Then there’s the matter of the subject of the strike: SAG wants to fill some gaps in the new media template agreed to by the Directors Guild, Writers Guild, and AFTRA (twice). Fair enough, except that there’s little money in new media today, and there’s unlikely to be much for the next few years. Thus, those gaps have little immediate impact — and may never, depending on how new media business models evolve. Why not wait, and strike (or threaten to do so) in three years, when there may be more money at stake? Why now?

That, in turn, brings us to the subject of “now,” and back to the economy. Banks are busy failing, housing prices are deflating, and gas prices, though off a bit, are still quite high. Congress seems more capable of running from the problem than solving it, and economists are debating whether this is the worst crisis in 20 years, or in 75.

Into this nerve-wracking landscape strides SAG, apparently willing to trigger a second Hollywood strike in less than a year — i.e., to risk losing real money, and, no doubt, some people’s homes, for the sake of precedent that could be argued over in three or more years, when it really matters. It’s true that precedent, once installed in Hollywood union agreements, is hard to dislodge, but it still seems illogical — in a sort of Carrollian “verdict first, trial afterward” fashion — to strike over issues as incremental and, to date, speculative, as these.

SAG’s appears to be playing a dangerous game: Seek an authorization and fail to obtain it, and the guild’s leverage collapses. That’s a real risk, because an authorization requires 75% yes vote of those voting. With failure comes the possibility that the studios would withdraw the offer on the table, and substitute an inferior one. That’s glory for you, as Humpty Dumpty once remarked.

Seek an authorization and obtain it, and the next step is a vote of the guild’s national Board — controlled now by the newly-elected moderates (Unite for Strength) and their allies in New York and the regional branches. But they’ve only got a razor thin margin, susceptible to disruption by the hardline Membership First faction. What’s more, it’s unclear if UFS would take a stand and oppose a strike. Their leader, Ned Vaughn, was vague when I asked him about negotiating strategy in August (and he hadn’t returned my call seeking comment by the time I wrote this article). Membership First, in contrast, is quite decisive, and its certitude might carry the day: The Board might indeed call a strike if the members grant it the authority to do so.

But if a strike does happen, then what? The studios are unlikely to back down on the new media template they’ve set. The result is likely to be a long, bitter strike, with the possibility that SAG will end up with a worse deal than it’s being offered now. Of course, SAG might prevail. That’s what the hardliners are betting, in any case.

You may be wondering why UFS would even permit the Negotiating Committee to seek a strike authorization in the first place. Answer — they may not have a choice: Membership First still controls many aspects of the guild, including the Negotiating Committee. Moreover, the first national Board meeting isn’t until the 18^th. That’s probably the first time the moderates could take a decisive stand, if they’re inclined to do so. (There’s a Hollywood Division board meeting next Monday, the 6^th, but Membership First still controls that board.)

In other words, today’s vote (if it takes place as the Hollywood Reporter predicts), is a preemptive strike by Membership First against the new, moderate majority — yet another symptom of the guild’s bitter divisions. Now we’ve left Alice behind, and entered the world of the Italian Renaissance — in particular, the world of cutthroat political strategist Niccolò Machiavelli — and that of the ancient Greeks, who coined the word “hubris,” a word that surely applies to an attempt to thwart the will of SAG voters. Sometimes a rabbit hole leads to Wonderland, but other times to a place far more dangerous. Will the fall never come to an end?

New Media Jurisdiction: Letter from the DGA

The DGA has just released a letter from DGA President Michael Apted entitled "Giving New Media Room to Grow." Dated today (August 20, 2008), the letter appears in the September 2008 issue of DGA Monthly.

The letter addresses the question of the jurisdictional carveout for certain media production. I agree with most of it, and present it here. See below for my additional thoughts.

Dear Members,

As we move into the third month of our new contract, I wanted to take this opportunity to address the issue of union jurisdiction over new media production – the question of whether all the writers, actors, and directors who work on studio-produced programming for the Internet must be covered by union contracts. This issue – new media jurisdiction – was central to all the guild negotiations this year because however entertainment evolves over the next few decades, it is clear that a significant part is going to be online.

In our contract negotiations earlier this year, we made the decision to allow an exception to our general policy of insisting on jurisdiction over every show made by the studios and production companies that are signatories to the DGA contract. The exception, which the Writers Guild and AFTRA also chose to include in their new contracts, allows producers to make low-budget “experimental” programs for the Internet that hire people who would not be covered by our contract. However, we built into our agreement a very important protection – if a signatory company on a new media production employs a professional as director or in any other DGA category, regardless of the budget level – that production is covered by the Guild agreement.

Critics of this approach argue that union jurisdiction must be absolute. If some productions are allowed to be non-union, they claim, producers will take advantage of the loopholes and eventually all productions will be non-union. But before there can be a union job, there has to be a job. And despite all the grandiose talk about the coming bonanza, new media hasn’t yet started raining money. The truth is that for new media production to realize its undeniably vast potential – and create all those jobs we want our members to have – it must be given the room to evolve and grow. The current landscape of new media is overwhelmingly populated by user-generated content and all kinds of concepts created by thousands upon thousands of eager novices with digital cameras and new, out-of-the-box ideas. Occasionally, one of these efforts might catch the attention of the studios, and the new media jurisdictional carve-out will allow producers of extremely low-budget productions to take a chance with young, untried writers, directors, and actors who are not members of any union. If their efforts yield fruit and their shows succeed, their budgets will quickly reach professional levels and they will come under union jurisdiction. If they don’t succeed– well, at least they got their shot. That’s the nature of experimentation. We must be flexible to allow that experimentation to flourish.

What would happen if the unions were to demand and be given jurisdiction over all new media production without exception? The most likely scenario is that it would become structurally and economically unfeasible for AMPTP members to make low-budget experimental shows for the Internet. Then two things could happen. First, rather than grow within the studios and companies that are guild signatories, new media production would gravitate toward the Googles and Microsofts of the world, which are not. Second, to stay competitive in the game, the studios are likely to create non-union subsidiaries where they could produce Internet programs without bothering to become signatories at all. At this point, the talent guilds would be in danger of being pushed out of new media. Were an experimental show to succeed, it wouldn’t come under union jurisdiction, nor would the writers, actors, and directors who created it.

Even if the studios were persuaded to make low-budget new media production under union jurisdiction, this could result in another problem. Many of those untested novices would be required to pay DGA initiation fees and dues, potentially forcing the DGA to accept a large number of new members who have been hired to do one experimental project and might never direct again. Frankly, it would not be fair to charge them initiation fees and dues (which they probably couldn’t afford in any case).

So we have a choice. We can insist on having jurisdiction on paper over everything, and thereby run the risk that the area develops in a largely non-union context. Or we can carve out an exception that will allow experimentation, innovation and growth at the lowest budget levels, while simultaneously securing jurisdiction over all professional-level productions. That approach ensures that if and when the producers become successful, the jobs they’ve created will go union. This approach has been successful before. With very low-budget feature films, we designed an innovative, flexible jurisdictional carve-out that allowed the new medium to develop in a way that ensured that once it was ready for professionals, those professionals would be our members.

I believe we’ve made the right decision.

Sincerely,

Michael Apted
DGA President

The new media jurisdictional carve-out would apply only to a production that falls under the following circumstances:

* $15,000 or less per minute; or
* $300,000 or less per episode; or
* $500,000 or less per series of programs produced for a single order;

and does not utilize an employee in any DGA-covered category who has previously been employed under a DGA collective bargaining agreement.

Two points worth adding. First, the dollar thresholds are high -- much higher than almost all new media production today ($2,000 - $5,000 per minute is typical, with occasional productions at $10,000 per minute). I'd prefer to see them lower, and this is (in my view) an unfortunate compromise that the DGA made. But it's the template, and we're stuck with it, as a practical matter.

However, bear in mind that the union-member provision ("and does not utilize an employee in any DGA-covered category ...") means that even if the production is below the overly-generous thresholds, it's still covered if it uses a DGA member.

Second, the WGA, AFTRA, and proposed SAG deals have the same jurisdictional dollar thresholds, and also have similar provisions regarding use of union members. For instance, in the WGA deal, if the show is written by a "professional writer" -- a defined term that includes WGA members, published novelists, and professionally-produced playwrights -- then the show is covered, regardless of budget.

Likewise, the AFTRA deal has a similar provision regarding "covered performers." This term is defined as follows:

A “covered performer” is an individual who has worked under a collective bargaining
agreement and has met any of the following criteria:
.. has at least two television (including free, basic, pay or direct-to-video) or
movie credits;
.. has had 13 weeks’ employment as a performer in radio (including satellite
radio) in a major market;
.. has had at least two credits in a professional stage play (e.g., Broadway,
Off-Broadway, LORT, COST, or CORST contract, or as part of an Equity
National tour);
.. has been employed as a performer on an audio book or as a royalty artist on
a sound recording which has been commercially released by a major or
bona fide independent label;
.. has been employed as a principal performer, announcer, singer, or dancer in
a national television or radio commercial, interactive game, or nonbroadcast/
industrial production.
The Producer shall be entitled to rely on the representation of the performer as to
whether he or she meets the definition of a “covered performer.”

The proposed SAG deal is reportedly similar to the AFTRA deal, and thus presumably includes this language. Thus, if a show uses a SAG, AFTRA or Equity member with two TV or movie credits or any of the other listed credits, then it's covered, even if the budget is below the thresholds.

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.

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 Makes Final Offer to SAG

The AMPTP just made a final offer to SAG. I'm advised by a AMPTP spokesman that this offer tracks the AFTRA and DGA/WGA deals in terms of minimums, new media, and other provisions. On force majeure (an actors-only issue), the AMPTP offer holds to the AMPTP's previous position that the existing contract language should be revised.

The AMPTP spokesman confirms that this is a "last, best, and final offer" in legal terms. Such an offer would allow the AMPTP to impose the offer's terms once the SAG agreement expires tonight. However, as the AMPTP press release says, "As SAG's leadership considers our final offer, we will continue for now to work under the terms of the old contract as current productions wind down."

The AMPTP has offered to meet with SAG on Wednesday afternoon to explain the offer, but states that it will not entertain counter-offers.

Curtain Call

“We are not done yet!” shouted Screen Actors Guild leader Doug Allen three times at the guild’s anti-AFTRA rally last week. Evidently not, but Hollywood is beyond well-done and beginning to burn. It’s time for SAG to put its full efforts into crafting the best deal it can get, rather than try to derail the AFTRA primetime deal.

Why? Several reasons. For one thing, attempting to defeat the AFTRA deal is a futile exercise. The members of AFTRA – the American Federation of Television and Radio Artists, SAG’s smaller rival – approved a similar daytime deal by an affirmative vote of 93% of those voting. It’s almost impossible to believe that SAG can cut that percentage to 49% – i.e., virtually in half – which is what would be necessary to nullify the deal.

For another thing, even if the incredible were to happen, SAG’s stated goal of persuading AFTRA to then return to the bargaining table jointly with SAG is Pollyannaish. There’s little but bad blood between the unions at this point. Indeed, given that SAG and AFTRA are both headquartered in the same office building, it’s hard to imagine what shared elevator rides must be like. Do people retreat to opposite corners like cold-war prizefighters, or do they simply turn their backs on each other?

The other reason that SAG’s mission in quixotic at best is that some (though not all) of the positions it’s taking are just non-starters. For instance, on clip consent – the issue of whether actors should have the right to veto studios’ online use of excerpts from movie and TV shows – SAG is taking positions at odds with the AFTRA deal and even with what SAG itself apparently originally proposed. That’s a quick road to nowhere.

Another example: SAG is seeking revisions in the new media template already enshrined in the Directors Guild, WGA, AFTRA daytime, and AFTRA primetime deals. That’s largely an uphill battle. SAG’s also not going to get any improvement in the DVD residual, no matter how fair such an increase may be (and I do think an increase would be fair). That’s another pointless venture: None of those four earlier deals contains a DVD increase, and it’s a fair bet that IATSE (representing technical and craft workers) won’t be looking for one either when it recommences its negotiations.

That makes five other contracts that don’t or won’t have an increase. With SAG in last position among the above the line unions (i.e., all but IATSE), it has virtually no leverage to revise the 24 year-old deal that established what the WGA called “the hated DVD formula.” Ironically, SAG put itself in this position. It could have negotiated jointly with AFTRA were it not for a series of decisions that angered the smaller union and gave it an excuse to sever a 1981 joint bargaining agreement. And even after that arrangement collapsed, SAG could have had an extended period of negotiations prior to AFTRA entering the field, had the guild not refused for weeks to set a date to start negotiations. AFTRA’s, and management’s, reactions should have been easy to predict. SAG overplayed a weak hand, allowing management to play one union off against the other, and now the guild finds itself buried under a landslide of precedent.

That’s unfortunate, because the probable result is that SAG will still be sidelined in negotiations – or maybe on the picket lines – while AFTRA begins signing up new TV shows starting sometime after July 7, the date that ratification ballots are due back from the membership. No doubt the smaller union will be vigorous in seeking new signatories and enlarging its reach. After all, AFTRA didn’t negotiate its deal simply to put it up on a shelf and admire it. A weakened SAG will be the consequence. Already, SAG’s own leadership is bitterly divided on tactics and on the inter-union rivalry.

More regrettable is what SAG’s maneuvers are doing to the industry. Feature production is already down significantly, and that trend will only get worse once the SAG deal expires. Whether or not SAG strikes, the town will enter a near-complete work stoppage come June 30. That’s a blow the battered industry and depressed local economy can ill-afford. Let’s be done with labor negotiations, at least until the guild’s commercials contract comes up for renewal this fall, when new media will once again be likely to present difficult challenges and frustrate all concerned. It’s time for SAG to finish its scene, take a graceful bow, and depart the stage.

Acting Up

CANNES, France – Do loose clips sink ships? Apparently the actors think so. Their ongoing union negotiations with the studios are hung up over clip consent – the issue of whether studios can use short excerpts from movies and TV shows without an actor’s permission. In particular, the question is whether actors should have a veto right when the studios make clips available online or via cell phones.

The issue is arcane, like so much that’s recently bedeviled Hollywood labor. Studios say that seeking consent from every actor in every clip is uneconomical, which would mean no clip revenue for either side (although significant digital revenue is years away in any case). It’s a compelling argument.

Actors respond that they want to control their own images and avoid being overexposed, let alone mashed-up and morphed. That also sounds sensible – until you consider the tens of thousands of clips already available online illegally. Neither the actors nor the studios can control those clips, or pretty much anything else on the Internet. That horse left the barn several years ago, yet management and labor are still arguing over whether to ride English or Western.

There are other major issues in the negotiations as well: Should actors get a bigger piece of DVD revenue? Yes, but they probably won’t, because the writers and directors already passed on the issue, leaving the actors with little leverage. What about union jurisdiction over low-budget new media production? The parties should adopt the nuanced deal agreed to by the directors and writers. Product integration? Force majeure? The former is a type of product placement on steroids, and the latter’s scarcely worth explaining, although it’s not without economic impact; the actors should yield on the first, the studios on the second.

On and on it goes, with mind-numbing complexity. Further confusing matters is a tussle between the two major actors unions, the Screen Actors Guild and the smaller American Federation of Television & Radio Artists. SAG and AFTRA used to negotiate jointly with the studios, but a bitter split led to negotiations this year in alternating bouts: a few weeks of discussions between the studios and SAG, then a few weeks between the studios and AFTRA, then back to SAG again. It’s like a French farce, with doors slamming as parties enter and exit the negotiating room.

Granted, these are complicated talks. Digital media is clouded with uncertainty, subsidiary issues abound, and the contract being amended runs to hundreds of pages. Yet, a sense of perspective seems nowhere in evidence. As the June 30 contract expiration approaches, we slide closer to a second possible work stoppage in the entertainment industry within a year. That could take the form of a lockout – a studio refusal to continue or restart production during labor uncertainty – rather than a strike, which would require a 75 percent affirmative vote, for SAG at least. Even now, feature film production has all but ceased in anticipation of the contract expiration.

If this seems dysfunctional, it is. Hollywood labor is a machine with an enormous number of moving parts, none of them well-oiled. In addition to conflict between SAG and AFTRA, there is disagreement within SAG as well, on geographic lines. Several of the unions are riven by internal strife on class lines also, and most of the unions are at odds with each other, notwithstanding some overlapping membership. Meanwhile, the studio alliance whose only responsibility is to make labor deals was unable to do so this year with either the writers or directors. Instead, several studio chiefs had to be called in to do the job, which will probably be the case with the actors as well.

While the industry endures dissension, strikes and lockouts, Silicon Valley entrepreneurs, none of them unionized, enjoy snacking on Hollywood’s bacon. They’re growing – and gloating – while Hollywood’s slowing. That’s not good news for Los Angeles. In addition, Hollywood is hurt by depression in the global film business, evident in diminished activity here in Cannes at the film market that accompanies the film festival. On the heels of the recent Writers Guild strike, the Los Angeles economy can ill-afford another multi-billion dollar hit.

What to do? It’s time to close the deal, first with SAG, whose productions are more affected than AFTRA’s. Let’s get the studio chiefs back in the room, then hope for rational, mutual self-interest from both sides. The SAG deal would lead to a quick conclusion with AFTRA as well, and the whole industry could get back to the hard work of making light entertainment – and of sustaining the local economy.

First published in the Los Angeles Business Journal.

Spinning the Web - Seminar at the WGA

Interested in writing original scripted content -- web series -- for the Internet? If so, come to Spinning the Web, a seminar on June 21 at the WGA, sponsored by the Writers Guild Foundation. It's an all-day affair with a host of speakers (including me). There is a registration fee.

WGA Deal: Details

Want to know the gory details of the tentative writers deal (now being voted on by the Writers Guild members)? If so, read on.

The Writers Guild has released a deal summary at http://www.wga.org/contract_07/wga_tent_summary.pdf, and actual contract language (not posted, but I can email it to you). Below is my analysis of the contract language, generally in the same order as in the deal summary.

Note that this is just a summary; for definitive answers, refer to the actual contract language (which is over 50 pages in length, in three separate documents). Also, more information, and updates, are available on my blog, at http://www.jhandel.com.

Made-For New Media Provisions

Made-For New Media Jurisdiction

If a professional writer writes original programming for new media (such as Internet and cell phones), the work will be covered by the Guild agreement, even if the budget levels for the programming are low. This has a rough equivalent in the DGA deal.

Derivative works for new media – i.e., spinoffs of existing TV shows – are covered regardless of budget level; and original programming for new media is covered above certain budget levels (must be over $15,000 per minute and $300,000 per single production and $500,000 per series). These provisions are the same as the DGA deal. (It’s unclear how, or if, derivative works based on theatrical or direct-to-video, product are covered.)

Some writers have criticized the budget levels for original programming as high, but bear in mind that the studios have to compete at lower budget levels with content generated by non-union Silicon Valley startups and with user-generated content (UGC), the latter of which is often produced at little cost and not for profit. Union jurisdiction would arguably hamstring the companies. Also, as the Internet grows as a venue for original programming, budget levels will likely increase, just as they have for video games.

Made-For New Media Compensation

For derivative works, relatively low compensation minimums apply, on a per-minute basis, with a floor of two minutes’ compensation. Not great for writers, but better for them than the current practice of often pressuring show staff writers to do this work for free.

For original works, compensation is negotiable. That’s not so good for the writers – given the relatively high budget thresholds for jurisdiction, they would have hoped for some minimums.

Pension and health provisions apply to new media.

Made-For New Media Credits

The Guild determines credits on new media programs within the above jurisdiction, and credits must appear on-screen or via a link if anyone else receives such credit. This provision is consistent with one of the WGA’s core functions – recall that the Guild was founded 70-plus years ago with credit as a key motivator (to counter abuses in credit granting that were then common).

Made-For New Media Residuals – Derivative Works

Initial compensation covers 13 consecutive weeks of ad-supported exhibition and 26 consecutive weeks of consumer-paid exhibition.

Thereafter, (a) reuse on ad-supported platforms within one year of expiration of the 13 week period requires payment of small fixed residuals; after the one-year period, the rate is 2% of distributor’s gross. And, (b) reuse on consumer-paid platforms after the 26 week period, the rate is 1.2% of distributor’s gross

When derivative new media programs are reused on television, residuals for television programs apply, with some modifications. No residuals are specified if such content is released on home video (quite conceivable) or even (albeit unlikely) theatrically.

Made-For New Media Residuals – Original Works

Initial compensation covers 26 consecutive weeks of consumer-paid exhibition, and all uses on ad-supported platforms.

Thus, no residuals are payable for ad-supported uses. Also, no residuals are payable for uses on consumer pay platforms if the program is budgeted below $25,000 per minute.

Above that budget threshold and after the 26 week period, the residual is 1.2% of distributor’s gross.

When original new media programs are reused on television, residuals for television programs apply, with some modifications. No residuals are specified if such content is released on home video (quite conceivable) or even (albeit unlikely) theatrically.

Note – reuse on television is exemplified by Quarterlife (a backdoor series), and could also represent the situation where the Internet is used to create a backdoor pilot. This is important coverage, because such backdoor series and pilots may become increasingly common – for instance, as an alternative to traditional, expensive pilots.

Made-For New Media Separated Rights

For derivative works, if the writer introduces a new character that is used as the basis for a new TV series, then separated rights apply. For original works, certain separated rights apply if separation of rights would have applied had the work been written for free television.

Also, if a writer writes for new media, then later writes a television program or theatrical motion picture based on the new media content he or she write, the fact that there was such source material will not preclude separated rights.

Note: separated rights are complex, even prior to the introduction of this concept into new media. The WGA’s own booklet explaining separated rights is 40 pages. I can email you a copy of the booklet if you wish.

Made-For New Media – Other Provisions

Writers of covered new media programs must join the WGA. Also, disputes are subject to arbitration (as with disputes in existing version of the Guild agreement).

New Media Residuals

This applies to reuse of TV programs and theatrical movies in new media (it’s unclear how made-for-DVD movies are treated). Pretty much the same as the DGA deal, with a couple notable exceptions, discussed below. Details are as follows:

Definition of New Media

Internet, mobile (such as cell phones or PDAs), and “any other new media platform known as of February 13, 2008.” Thus, we can expect further discussion (or discord) as additional new media platforms are developed over the next several years and beyond.

Distributor’s Gross

Note below that many of the formulas are based on distributor’s gross, not producer’s gross. This is excellent for the writers, because distributor’s gross is higher, and is more transparent.

Paid Rentals

Residuals for paid rentals – i.e., downloads or streaming where the user pays on a subscription or per-picture basis, and the payment covers viewings for a limited time period or a limited number of viewings – are paid at 1.2% of distributor’s gross.

Electronic Sell Through (EST) (paid downloads, such as iTunes)

0.36% of distributor’s gross below certain thresholds for number of units sold. Not a great rate for talent, and same as existing DVD formula (more particularly, there are two existing DVD rates, and this is the higher of the two). The thresholds are high, but probably become more likely to be met as this medium eventually replaces DVD/Blu-ray.

Note – “same as existing DVD formula” actually probably means less than the existing DVD residual payment (four cents on average DVD) per unit, because EST prices will probably be lower than DVD average selling price, at least eventually. (The four cent DVD residual is actually a percentage, not a fixed amount.) But, the total residual payment may be the same or higher, because unit sales would increase at lower per-unit prices.

Above the threshold number of units sold, the rates are higher: 0.65% (theatrical) or 0.7% (TV) of distributor’s gross. Not huge numbers, but an improvement for talent over DVD.

Theatrical Ad-Supported Streaming

1.2% of distributor’s gross. Note – only applies to post-July 1, 1971 films (measure from start of principal photography). For older films, apparently no residuals.

Television Ad-Supported Streaming for Library Content

TV library content is payable at 2% of distributor’s gross. Library content means programs that (a) are post-1977 (and, apparently, some prior programs, but it’s hard to determine which) but (b) as to which the literary material was written prior to February 13, 2008.

Television Ad-Supported Streaming for New Programs

This area is complex, and was the subject of enormous conflict. That’s probably because, when such content is rerun on TV, a high fixed residual is payable. As reuse migrates to ad-supported new media, but still exists on TV, then studios will have to pay both the high fixed TV residual and the new media residual, so they feel burdened by high costs, in a business that already is under a lot of financial pressure.

Here’s the deal:

There’s an initial “streaming window” of 17 to 24 days where no residual is payable. This isn’t great for the writers, because much viewing will occur during this time, since viewers will probably not wait weeks before they catch up with TV programs they missed on TV (or that they prefer to watch on a PC in the first instance, which is the case with many young people).

After the streaming window, there’s a residual payable. For network prime time shows, it works like this: in the first year or second year of the WGA contract (WGA contracts are three years), the residual is a percentage of the applicable TV residual base. That translates into a fixed residual of roughly $1400 per year for one-hour programs and roughly $700-$800 for half-hours.

In the third year of the new deal (literary material written on or after May 2, 2010), the residual is seemingly 2% of distributor’s gross, which would be an improvement for the writers as compared to the DGA deal. But what one hand gives, the other hand takes away: distributor’s gross is deemed to be fixed at $40,000 for one-hours and $20,000 for half-hours, resulting in a fixed residual of $800 or $400, respectively. So, the residual doesn’t actually scale as distributor’s gross increases.

By setting out a distributor’s gross framework, this provision arguably makes it (somewhat) easier for the WGA negotiators in three years to argue for true scaling (or, at least, an increase in the deemed level for distributor’s gross).

For other than network prime time shows, there’s a fixed residual. It’s unclear whether this is lower than the residual for network prime time – I believe so, but the contract language is quite ambiguous.

Paid Streaming (Non Time-Limited) or Ad-Supported Downloads

Unclear how (or if) residuals for these uses are paid, because the deal seems to assume that all streaming is ad-supported or for a limited time (in the latter case, it would be paid under the rental formula) and all downloads are user paid. I previously blogged that these assumptions were problematic, because this leaves a gap in the contract for paid streaming or ad-supported downloads. That could engender disputes, if the deal summary is accurate.

Transparency

New media residuals based on transactions between divisions of the same company have to be based on a fair market value, and the issue would presumably be arbitrable. Also, the studios and networks have to provide the WGA with new media contracts and distribution statements, without redactions (deletions), and usage data. These provisions, I believe, were not even attained by the Guild previously in traditional media (nor in the new deal).

Clips

Clip residuals are low for ad-supported streaming, which will hurt late-night writers when, for instance, a Leno monologue is made available online for free preceded by an ad. Where the user pays, the residual is 1.2% of distributor’s gross, but this is an unlikely scenario on the Internet. Such a business model might be more common cell phones – i.e., the user could pay $5 extra per month on your cell bill and get unlimited comedy clips.

There are provisions for residual-free clip usage when used to promote programming.

Other Issues

Contract Expiration

May 1, 2011 – synchronizes with likely SAG (and announced DGA) expiration of June 30, 2011. This arguably increases the WGA’s negotiating leverage, because it allows for the threat of concurrent WGA and SAG strikes; but, on the other hand, it eliminates the WGA’s opportunity to easily interrupt the fall TV season mid-stream or implode the awards shows.

Minimums

Various minimum compensation levels will increase by 3.5% or 3% per year under the proposed deal. Appears to be generally the same as DGA increases.

Cable Minimums

Basic cable minimums were not increased to the same degree as achieved by the DGA. Specifically, under the DGA deal, directors of high-budget basic-cable programs got a 12% pay increase. However, under the proposed WGA deal, writers of such programs do not receive an equivalent bump.

Given the increasing amount of scripted content on cable (basic cable, such as FX, USA and AMC, as well as pay TV such as HBO and Showtime) – and the decreasing amount on network TV, at least for the time being (since strike-replacement reality programming is occupying time slots formerly held by scripted programming) – it seems shortsighted and unfortunate for cable TV to suffer second-class citizenship.

Favored Nations

If the Screen Actors Guild gets better deal terms in its upcoming negotiations than the writers, will the writers retroactively get the benefit of those improved terms? This is called “favored nations.” (See http://digitalmedialaw.blogspot.com/2008/02/favored-nations.html for discussion.)

The WGA says they achieved a limited form of favored nations – it applies only to the new media provisions of the proposed agreement. So, if SAG attains better terms in another area, such as DVD residuals (which SAG has highlighted as an issue it will focus on), the writers would not get the benefit of SAG’s efforts. The WGA deal on favored nations is apparently a handshake deal.

However, the issue may be academic – AFTRA has announced that it will negotiate separately with the studios, undercutting SAG’s leverage and perhaps reducing the likelihood of any gains. Still, this story is very much in flux, and it’s too early to know whether SAG might nonetheless achieve further benefit.

Other Technology-Related Issues

The parties established a committee to address the reuse of movies and TV shows on alternative digital broadcast channels, which are new channels such as LA ch. 4.1, 4.2, etc. (controlled by ch. 4) which are broadcast digitally in spectrum space used for digital transmission.

The parties also agreed to meet on a company-by-company basis to discuss electronic data transfer of residuals information. The companies first expressed the intent to move to such transfer (as a replacement for the paper transfer of information that then has to be rekeyed by the Guild) more than ten years ago, so it might not be realistic to expect a change in procedure anytime soon.

Foreign Remakes of TV Series

The parties added a new sideletter setting out residuals for foreign remakes of U.S. TV series.

Other

There are many other, more minor, changes; see p. 4 of the deal summary for information.

Reality and Animation Jurisdiction

The WGA abandoned these demands, as I predicted back in October, and recommended. Thus, reality and animation jurisdiction are not part of the new deal.

DVD Residuals

The WGA several months ago abandoned its demand to double the home video residual rate, so it remains the same as always: 0.3% of the studio’s gross below a certain threshold, rising to 0.36%. No change from the previous version of the contract, and no difference from the DGA. Note that SAG considers this issue still on the table for its contract negotiations, as of their last published statement on the topic, a couple weeks ago. I have argued that this decision by the WGA was a mistake for writers; see Slipped Disc: Why DVD Residuals Still Matter – and Always Will (http://digitalmedialaw.blogspot.com/2007/11/slipped-disc-why-dvd-residuals-still.html).

Bargaining History

Ambiguities in the Guild agreement (MBA) are usually resolved, or at least addressed, with reference to bargaining history, composed of notes taken or exchanged during formal negotiations. However, since much of the 2008 deal was worked out in informal sessions, it’s unclear how much bargaining history will be available as disputes arise.

Administration and Enforcement

As the complexity of the new media provisions suggests, this deal is going to be very complicated to administer and enforce, notwithstanding the transparency provisions. Expect errors in new media, especially early on, while studios implement and debug new computer software to pay these residuals and compensation minimums.

And, because of the low dollar amounts in new media over the next few years, individual audits will generally not be cost effective. Hopefully the Guild will develop sufficient in-house capability to conduct audits, perhaps as part of the Tri-Guild (WGA, DGA and SAG) audit process.

Format of Contract Language

Interestingly, the new media provisions of the MBA continue to be contained in two Sideletters buried at the end of the contract. This will seem increasingly peculiar as the Internet grows in importance.

Strike Termination Agreement

There is a separate Strike Termination Agreement that deals with return to work and extension of personal services agreements, among other issues.