SAG-AFTRA Ad Deal Done

Score one for labor. SAG and AFTRA jointly reached a deal late last night with the advertising industry, retaining the current lucrative compensation structure for broadcast network commercials, and largely resisting the industry’s attempt to reduce pension and health contributions. Solidarity, it seems, makes a difference. In the words of a labor-side source close to the talks, “the unions effectively won.”

The industry’s chief negotiator, Doug Wood, had a different perspective: “neither side won or lost,” he said in an interview; rather, the deal was “fair on both sides.” He described the process as one of “give and take,” and contrasted it with TV and theatrical labor negotiations, which he called “crazy.” (SAG will presumably wade back into that thicket now that the ad deal’s done, and attempt to revive the stalled talks with the studios.)

The three-year deal was reached just hours after the last contract expired. If ratified as expected by the union boards and membership (a process that’s likely to take 4-6 weeks), it will run through March 31, 2012. The deal is worth more than $2.8 billion over three years, said a union source. Wood approximated the deal at $1 billion per year, and said the total increases amounted to $30 million per year, or 3%.

Under the new agreement, actors will continue to be paid under the so-called “Class A” structure for their work on broadcast network commercials, though the unions agreed to an industry proposal for a two-year pilot study of an alternative approach, called the Gross Rating Points (GRP) model.

The current system, based on the number of times a commercial is run, has become a sore spot for the industry: network advertisers balk at making high payments to actors even as broadcast network audiences have declined. Nonetheless, it looks like they’ll continue to make those payments for several more years at least. Wood counseled patience: “If I had my druthers, I’d get [a switch to the GRP model] done sooner rather than later,” he remarked, but he expressed conviction that if the pilot study goes well, the unions will essentially be forced to change to the new approach by 2012. At that point, the GRP model will be a “fait accompli,” said Wood, and software and systems will be in place for an quick changeover at that time.

The GRP model, according to the industry, would maintain the same aggregate compensation to actors as a whole, but shift the allocation in favor of actors in cable ads. The issue has been bubbling since at least 2006, when the contract was extended for two years to allow a study of alternative approaches. The GRP model emerged from that study.

Union concerns with the GRP proposal include an interesting gender issue, according to a labor-side source. Women, it turns out, appear disproportionately often in daytime commercials for household products and the like. Those commercials have lower viewership than primetime commercials do, and the unions want to ensure that a ratings-based formula would not adversely affect female actors’ earnings.

The new deal also includes a 5.5% overall increase in wages and other compensation over the life of the contract. It also, for the first time, sets rates for commercials made for the Internet, though those minimums don’t kick in until the third year of the contract, Wood noted (he nonetheless called the minimums a “big victory” for the unions). Interestingly, new media did not prove to be the flashpoint in these negotiations that it has in the deals between Hollywood studios and actors, writers, directors and crew.

In addition, the advertisers’ contribution rate for pension and health plans was increased by 0.5%. Under the new deal, the contributions will be subject to an annual cap, as the industry sought, but the cap is much higher ($1,000,000 per performer, per contract, per year) than the advertisers had proposed ($250,000).

The joint SAG-AFTRA press release is below. UPDATE: Also below is a blog post from industry chief negotiator Doug Wood.

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Here’s the SAG-AFTRA joint press release:

AFTRA AND SAG REACH TENTATIVE AGREEMENT WITH ADVERTISING INDUSTRY ON NEW COMMERCIALS CONTRACTS

NEW YORK (APRIL 1, 2009)—Screen Actors Guild and the American Federation of Television and Radio Artists announced today that the AFTRA/SAG Joint Negotiating Committee has reached a unanimous tentative agreement with the Joint Policy Committee (JPC) of the American Association of Advertising Agencies (AAAA) and the Association of National Advertisers (ANA) on terms for successor agreements to the AFTRA Television and Radio Commercials Contracts and the SAG Television Commercials Contract, subject to approval by the SAG/AFTRA Joint National Board.

The new three-year agreement contains a more than $36 million increase in wage rates and other payments for all categories of performers in the first year of the contracts, approximately $21 million in increased contributions to the SAG Pension and Health Plan and the AFTRA Health and Retirement Fund, establishment of a payment structure for work made for the Internet and other New Media platforms, important new monitoring provisions, and improvements for choreographers, extras, and Spanish language performers.

The new contracts also contain an agreement in principle outlining terms for a pilot study for the purpose of testing the Gross Rating Points (GRP) model of restructuring compensation to performers as proposed by Booz & Co. The two-year study is scheduled to commence on April 15 and will be conducted by a jointly retained consultant engaged by the Unions and the Industry. The results and possible adoption of the study’s findings will be subject to negotiation by the parties not later than January 3, 2012.

The unions successfully protected the critical “Class A” payment structure and continued unchanged the editing provisions in the existing contract.

Highlights of the new agreement include:

• Three-year agreement, term effective April 1, 2009 to March 31, 2012

• 5.5% overall increase in wages and other compensation over the life of the contracts, including a 4.43% increase, effective April 1, 2009, in Class A, Wild Spot, and basic cable session fees

• For product made for the Internet or in New Media, 1.3 times the minimum session fee for 8 week’s use and 3.5 times the minimum session fee for one year’s use

• 0.5% increase in the employer contribution rate to the AFTRA H&R and SAG P&H plans bringing the total contribution rate to 15.3%. The agreement provides for a cap on P&H and H&W contributions, but the committee successfully negotiated the industry from their initial demand of $250,000 to $1,000,000 per performer, per contract, per year.

• Secured five, new covered jobs for commercial extras, up from 40 to 45

• Established new exclusivity provisions for made-for cable only commercials

• Instituted, for the first time, a contract provision to pay extras a round-trip mileage fee of $8

• Increased foreign use payments under the Spanish Language section of the contract

• The across the board increase under the AFTRA Radio Commercials Contract is 5.3%, including contributions to AFTRA H&R and the AICF

• All of the unions’ proposals regarding diversity issues were addressed in the negotiations

“The AFTRA and SAG commercials contracts provide our members with the solid foundation they need to sustain their careers and families,” observed AFTRA National President Roberta Reardon and AFTRA Chair of the Joint Negotiating Committee. “In this round of negotiations, during the worst economic crisis since the Great Depression, we successfully improved wages and expanded benefits to keep our members working now and in the future. This is a major victory for our unions—and a victory for organized labor as a whole—and I applaud the Joint Negotiating Committee for their vision, hard work, and solidarity.”

“I am so proud of the work of our Joint Negotiating Committee. It was a hard-fought negotiation and our greatest victory was in protecting Class A residuals payments. By securing a joint study to research and develop a workable compensation model, our negotiating committee protected every member who works under these contracts across the country,” said Sue-Anne Morrow, Screen Actors Guild Chair of the Joint Negotiating Committee.

“Our Joint Negotiating Committee held together in the face of some very tough issues and they stood firm for our core principles. We have achieved a deal that brings significant improvements to these contracts. Our gains include establishing the first-ever payment structure for made-for-the Internet and new media commercials and significant increases in wages during a very troubled global economy. I am proud to take this tentative deal to our Joint National Board,” said John T. McGuire, Screen Actors Guild Chief Negotiator.

“The Joint Negotiating Committee provided us with clear objectives borne out of the nationwide Wages and Working conditions meetings leading up to the negotiations,” said Mathis L. Dunn, Jr., Chief Negotiator for AFTRA and Assistant National Executive Director for Commercials, Non-Broadcast, and Interactive Media.“ Among the priorities, our members asked us to increase minimum compensation and preserve Class A. We achieved those objectives and more, including agreement on a test study that will allow for a meaningful exploration of how best to adapt our contracts to meet the changing needs of all performers working in the shifting landscape of new technology.”

Formal negotiations between the 26-member AFTRA/SAG Joint Negotiating Committee and the Industry began on February 23 and concluded on the morning of April 1 in New York City.

Details of the new agreement will be submitted to the SAG/AFTRA Joint National Board for approval at a date to be determined, and if approved, will be jointly mailed to the membership of both unions for ratification thereafter.

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Here’s the post from Doug Wood:

New Collective Bargaining Agreement with SAG and AFTRA

I am pleased to announce that the JPC and SAG and AFTRA have tentatively agreed on terms for a new collective bargaining agreement commencing April 1, 2009 and ending March 31, 2012.

Formal negotiations began on February 23 and concluded in the early morning of April 1. Since the opening of negotiations, the two sides met for a total of 25 days.

In many ways, these negotiations set a new stage in the relationship between the advertising industry and the unions. Rather than approaching the bargaining table as adversaries, the two sides sought to find solutions to one another’s key issues. While many of these issues were difficult to resolve, the conviction by all parties to find reasons to agree rather than disagree resulted in a fair and balanced agreement.

Full details of the agreement will be released shortly.

I would like to thank the members of the JPC who worked many hours in developing the industry proposals and particularly Danielle Korn and Leslie Meeds who fully participated in the negotiations and were at the bargaining table every day, including days that went well into the night. A special thanks goes to Kathleen Quinn of the AAAA. Kathleen is the glue that keeps the JPC working. Her tireless efforts at the negotiations and years of knowledge working with the unions proved to be invaluable. I’d also like to thank the ANA, particularly Bob Liodice, Christine Manna, Dan Jaffe and Keith Scarborough for their support and assistance.

Most importantly, I’d like to thank the union negotiators – John McGuire, Mathis Dunn, and Ray Rodriguez -- for their tireless efforts throughout the negotiations.

Lastly, I’d like to thank my colleagues, Elky Stone and Greg Hessinger. Their assistance, knowledge, and wisdom throughout the negotiations helped us all focus on the key issues and accomplish the tasks at hand.

In the end, our success was a team effort that I extend my thanks to everyone involved.

SAG-AFTRA Commercials Update

Small moves by each side, but movement nonetheless, characterizes the ongoing commercials contract negotiations being held in New York between SAG and AFTRA jointly and the advertising industry, according to a source close to the talks.

The unions retain the option of seeking a strike authorization, the source added, but are not planning to do so as yet, given the incremental progress being made. No doubt the uncertainty of obtaining authorization in this financial and industry climate is also a factor.

A welcome bit of news: the source said that SAG and AFTRA are working well together, with no evidence of factionalism. Most SAG-AFTRA decisions are being made by consensus, with little need to vote, and with disagreements being debated forcefully but respectfully.

Talks are believed to be ongoing. The contract expires March 31, one week from today, although negotiations could always continue past expiration if necessary, if both parties agree.

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Hollywood Crew Deal Ratified

As expected, the membership of IATSE, the union representing Hollywood crew members, ratified that organization’s proposed contract with the studios yesterday, although not without significant opposition. The new contract takes effect August 1 and runs for three years, as is usual with Hollywood labor agreements. It includes 3% annual wage increases.

The deal had been opposed by some members, who cited rollbacks in the healthcare plan, as well as concerns regarding new media. However, IA President Matthew D. Loeb remarked, “We feel we have given our members the best protection we can at a time when the bottom is falling out of a lot of traditional business models.”

Unofficial partial ballot totals posted on the No campaign’s web site showed a wide difference of opinion from local to local, with opposition ranging from 20% to 45% among the 7 locals for which data was available. Turnout was unclear from the figures. The 15 Hollywood-based IATSE locals covered by the contract encompass over 35,000 members.

Meanwhile, the Screen Actors Guild is still in stalemate with the studios, with no evident movement. In NY, negotiations between SAG and AFTRA jointly with the advertising industry continue this weekend. SAGWatch quotes a source reporting “some progress,” which contrasts with indications earlier in the week. That contract expires in ten days.

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Actors Commercials Negotiations Deteriorate

Though it gets less play than the stalled SAG TV/theatrical talks, SAG and AFTRA have been jointly negotiating for several weeks with the advertising industry over the commercials contract. That contract is SAG’s second most important, economically, and represents hundreds of millions of dollars per year to SAG alone (I don’t have the AFTRA figures). Now, after industry statements that the negotiations had been going reasonably well, the talks seem to have hit a snag, and the unions may seek a strike authorization vote from their members, reports The Wrap.

The report goes on to say that the unions have already written—and someone has leaked—a draft letter to be sent to the membership of both unions seeking a strike authorization. A separate report in Blog Stage adds that the letter would also include a separate set of pro-authorization talking points, also leaked. That report cautions that the leaks may be just a negotiating ploy. A statement from SAG and AFTRA described the leak as an “unauthorized distribution of . . . one of many contingency documents that we prepare in the course of any negotiations.”

Nonetheless, I’m guessing the leaks are a trial balloon intended to pressure the Joint Policy Committee, or JPC, representing the advertisers and ad agencies. If the JPC doesn’t move on the issues and if the union membership doesn’t rebel at the idea of an authorization, then we may indeed see an authorization put to a vote of the members. (It’s important to remember that an authorization does not automatically mean a strike, especially since the more strike-averse AFTRA is part of the mix, unlike with the SAG TV/theatrical negotiations, where the more strike-happy hardliners were unconstrained last year.)

So, will the JPC move on the issues in the absence of a strike authorization? Apparently, they often play hardball until a strike authorization vote is held, note the Hollywood Reporter. That seems especially likely today, since the JPC recognizes that SAG is now a fatigued and overextended union, thanks largely to the hardliners’ stalling tactics last year and into January.

Those tactics have left SAG actors with virtually no studio theatrical work since June 30 of last year, no increase in minimum compensation levels for TV work (and the theatrical work that does exist), a dramatically diminished share of pilots, and a panoply of expired contracts in other areas. All of this, combined with the state of the economy, leaves SAG members more vulnerable and less likely to support a strike. (AFTRA actors are likewise vulnerable, if for no other reason than the fact that most of them are SAG members as well.) The result is less leverage at the bargaining table for the unions, and more for the JPC.

Speaking of issues, let’s look at the major ones. The fundamental roadblocks are (1) new media and (2) the economy. New media, of course, had been the major stumbling block in the negotiations between SAG and the studios before being at least partially eclipsed by the issue of contract expiration date. Among other things, the current commercials contract apparently has no minimums in new media. The unions want to change that.

As for the economy, it’s reared its ugly hydra-head in several ways. For one thing, the JPC has apparently yet to make an offer regarding wage increases. When they do, don’t count on it to make the unions happy.

On another economic front, the recession has decreased the value of pension plan and individual retirement assets everywhere. In addition, economists worry now about deflation of prices generally, but one area that still features high prices is health care. In this environment of benefits-related anxiety, the JPC is apparently seeking rollbacks and caps on the companies’ contributions to the unions’ pension and health funds. The unions, not surprisingly, want an increase in those contributions.

(Side note: P&H rollbacks also feature in the campaign by some members of IATSE, the union that represents most crew members, to derail that union’s proposed contract with the studios. Ballots are due back tomorrow, March 18—or perhaps have to be postmarked by then, I’m unclear—but either way, we’ll soon know the fate of that agreement. It’s expected to pass.)

Yet another significant issue is a proposal by the JPC to dramatically alter the way residuals are paid for national commercials—so-called Class A residuals. This comes in response to declining viewership of national ads due both to commercial-skipping by DVR users and to audience fragmentation, i.e., viewer migration away from network TV and towards cable TV, video games and the Internet.

The JPC says that its proposal is revenue neutral but simply changes allocations—in other words, that some union members would gain (those doing cable and Internet commercials), others would lose (those doing national broadcast network commercials), but as a whole they would receive the same amount of residuals in aggregate. (The same amount as what? As today? As under the union proposal? I don’t have the details, because there’s a news blackout.) The unions appear skeptical.

There’s a multi-way struggle here, by the way, because actors (and other production expenses) are only one aspect of the advertising cost structure. The other, of course, is the cost to air the ads—i.e., the prices that the networks and other outlets charge. That means that the more the networks push to maintain ad prices in the face of declining viewership and a softening ad market (which results from the slackening demand for consumer products), the less money the advertisers can afford to spend on production. Thus, they put the squeeze on actors. In a struggle between networks and actors for piece of the advertisers’ purse, guess who’s likely to win.

So, theatrical production is stalled and likely to stay depressed even after (if?) the stalemate ends, scripted television is eroding, advertising is soft, and the Internet pays everyone (producers and talent alike) mere pennies on the dollar. What’s a thesp to do? “Keep your day job” is too flip a response, but it sure isn’t an easy time to be an actor.

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In other Hollywood labor news, Variety reports that SAG interim National Executive Director David White sent SAG members a message today stating that, although no new formal talks with the studios are set, union negotiators are working behind the scenes to achieve a deal. No word on what exactly that means,

Meanwhile, SAG president Alan Rosenberg’s lawsuit against his own union slowly winds its way through the legal system. Rosenberg’s lawyers filed some documents last week. I doubt they’re significant, but don’t know, because I haven’t seen them. The lawsuit seems, at least for now, to be a mere sideshow, but even defeats at both the lower court and appellate level haven’t deterred Rosenberg and his fellow plaintiffs (1st VP Anne-Marie Johnson and board members Diane Ladd and Kent McCord) from pursuing their now-moot claims.

In another development, the WGA is cutting 10% of its staff, Variety reports. The causes: (1) a recession-caused decline in value of the WGA’s investment portfolio; (2) a reduction in dues-generating work for WGA members, due to last year’s writers strike and no doubt exacerbated by the slow decline in scripted television; and (3) expenses incurred in the so-far unsuccessful attempts to organize reality TV and animation. The WGA had no comment, says Variety.

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