Independent New Media Productions

There are casting notices out there for SAG new media productions under the “SAG New Media Contract.” A few notes may help clarify what these are, and help performers enforce a few of their rights.

First, this is not the new media sideletter recently negotiated with the AMPTP (major studios) as part of the theatrical contract. Rather, it’s a new media contract (the SAG New Media Agreement) that’s been available to independent producers for a number of years—that is, producers who are not signatories to the theatrical and/or TV agreements. So, disagreements that a performer may have with this agreement simply don’t relate to the compromises in the new TV/theatrical deal.

Second, under sec. 3 of the SAG New Media Agreement, wages are freely bargained by the employer and the performer.

Third, performers should recognize that independent producers are unlikely to make much, if any, money on these productions. Even the studios are shutting down their new media production entities (Stage 9, 60 Frames). And CPMs (advertising rates) for new media are at about $10 rather than $40-$50 (TV) or more, and with viewership on new media much less as well. These two factors, as well as the difficulty of finding any new media distribution at all, mean that independent producers will generally receive very little income from their new media efforts.

Fourth, it’s reasonable for performers to negotiate for back end (a piece of the producer’s gross or net revenues), so that if the producer does make money, so will the performer.

Fifth, when the producer offers to compensate you only in the form of “credit and meals,” or “credit, meals and tape,” that’s illegal. They have to pay you the greater of California minimum wage (if the production is in California) and federal minimum wage. California’s is higher—$8/hr.

Overtime requirements are more complicated. See complex discussion of exemptions and exceptions (also here) regarding overtime for actors. Also, for workers with less than 160 hours of “employment in occupations in which they have no previous similar or related experience,” the producer can pay 85% of minimum wage. (I don’t know if acting classes count toward the 160 hours, since they’re not employment.)

In any case, if the producer doesn’t pay you the required minimum, you can file a wage claim with the state. You can also call SAG. Although they don’t enforce the minimum wage laws, they may call the producer and suggest that he follow the law.

Sixth, SAG does enforce terms of an agreement between the performer and the producer. So, rather than relying simply on the minimum wage law, it would be a good idea for the performer to include an explicit wage in the SAG new media deal memo with the producer (or a rider), even if the wage is just $8 per hour. SAG would then enforce the agreed wages, meaning that the performer wouldn’t have to rely on the vagaries of the state.

Original made for new media productions are still experimental, and the difficult reality for performers and other talent and workers, above and below the line, as well as their representatives, is that compensation is dramatically lower than in TV and theatrical, just as the revenue for producers is. However, that doesn’t mean that performers shouldn’t insist on some minimums, and hopefully the above suggestions are helpful.

Note: This blog post is intended as general information, not specific legal advice. Check with a lawyer about your particular situation if you want definitive advice.

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SAG: No Good Reason to Strike

There’s turmoil planned for the upcoming Jan. 12-13 SAG National Board meeting, reports the LA Times. SAG’s National Executive Director Doug Allen and the current negotiating committee may find themselves bounced out unceremoniously by the moderates—or they may not. The strike authorization vote, postponed from its original Jan. 2 mailing date, may get canceled altogether—or it might not.

In light of this uncertainty, it’s still critical to ask whether a strike authorization and possible strike make sense. SAG’s hardline leaders and their supporters have made a lot of statements in support of both an authorization and a strike itself. Do their statements stand up to scrutiny? I say no, but you be the judge. Here are SAG’s most oft-repeated arguments, and my analysis.

You may also want to refer to my articles SAG & The Studios: What Are They Fighting Over? and Studios Release Final Offer to SAG.

BTW, there are three UPDATES below—a new "SAG Statement" item 3 items down, some further discussion about the cbs.com item 11 items down, and some corrections and further analysis in the Asner item about 15 items down.

SAG Statement: A strike authorization is not a strike.

Analysis: True, but disingenuous. The SAG leadership, which could have had a deal nine months ago, has instead stumbled from one ill-considered strategy to another, most of which involved attacking AFTRA in some way or another. Throughout the turmoil, one constant has remained: the leadership is wedded to demands that the studios won’t agree to, and seems at least as concerned about internal politics as about actually making a deal. Granting SAG leaders a strike authorization means they’ll almost certainly use it, unless the moderates on the National Board indeed try to stop them and in fact succeed in doing so.

SAG Statement: “Will a SAG TV/Theatrical strike ‘shut down the Industry?’ NO WAY!” (Doug Allen email)

Analysis: Also disingenuous. This statement attempts to imply that a strike would not cause pain to the industry—yet, a strike is useless unless it causes pain. The statement is just spin intended to minimize the significance of voting yes on a strike authorization. The writers strike cost the industry $25 million per day, and there’s no reason to believe a SAG strike would be any less devastating. There’s also good reason to believe a SAG strike, if one happens, would be long and bitter, as I’ve previously discussed.

The email goes on to say that “jobs in commercials, basic cable, video games and industrials would continue during a TV/Theatrical strike.” This is true, but other than commercials, these contracts are small potatoes, as SAG’s own figures demonstrate. And even though commercials are significant, how many actors can earn a living just from commercial work—especially in an economy in which television ad spending is declining?

The email then says that “jobs would continue on more than 800 independent movie projects by producers not associated with AMPTP companies.” This is deceptive. SAG issued several hundred “guaranteed completion contracts” (strike-proof contracts) to non-studio producers (I have no way of knowing if 800 is an accurate number, but let’s assume it is). However, not every one of these turned into a production. Many indie projects fail to materialize, usually for lack of financing (especially in an environment of financial crisis). Also, some of the projects that did come together are presumably already completed (or principal photography is), since these contracts started being issued in March or so. Also, of course, indie projects usually involve fewer actors and lower pay than studio projects. Bottom line: these independent movie projects would only amount to a small fraction of the normal film and SAG television work.

Next, the email says that “jobs would continue … on more than 800 independent new media projects under SAG’s new media agreement.” This is also deceptive, because (based on SAG statements to the press several months ago) this number appears to represent the number of Internet letters of adherence that SAG has issued since the inception of these letters in 2001, not the number of Internet agreements currently active and outstanding. In addition, Internet projects involve far fewer actors and far lower pay than film or TV projects.

Finally, the email contains a rather intriguing statement:

Also, actors on any shows signed to AFTRA before the effective date of such a strike would be required by their personal contract and AFTRA’s CBA [collective bargaining agreement] to report to work on any AFTRA-covered projects in its jurisdiction (primarily dramatic network primetime and pay TV shows, and movies made for television or DVD.)

This is true, but what’s odd is the limitation to “shows signed to AFTRA before the effective date of such a strike.” It’s unclear why this would not also apply to shows signed to AFTRA after a strike. SAG seems to be suggesting the possibility that dual cardholders need not, or must not, report for work on shows that signed to AFTRA after a strike. The reasoning behind this apparent implication is unclear.

UPDATE—SAG Statement: The arguments over jurisdiction, residuals, and other issues are not about rich, millionaire actors; they're about middle-class actors.

Analysis: Absolutely true. Powerful actors have the leverage to have their agents and lawyers negotiate their deals, which are significantly better than the terms of the Guild's collective bargaining agreement. Some people, especially some members of the public, believe the debate is about greedy actors, especially millionaires, trying to grab more than what they deserve. That's not true, or fair.

SAG Statement: The terrible economy is no reason not to (potentially) strike. After all, SAG itself was founded during the Depression.

Analysis: The terrible economy significantly increases the number of actors and other workers who would, as a result of a strike, lose their healthcare, their homes, their livelihoods, and their ability to remain in the entertainment business at all. Does SAG have enough of a reason to cause such harm in the middle of the worst economy in many decades? Read the rest of this blog article and decide for yourself.

SAG Statement: The effect on non-actors is no reason not to (potentially) strike. After all, SAG represents actors, not below the line workers, writers, directors, or other people who work in, or supply goods and services to, the entertainment business.

Analysis: A discussion of whether this point of view is or is not selfish will generate a lot of anger but not change anyone’s mind. The more useful analysis is the same as the preceding “SAG Statement” item regarding the economy.

SAG Statement: What SAG wants is not better than what the other unions got, just different.

Analysis: That’s just silly. SAG is seeking more inclusive new media jurisdiction than AFTRA and the other unions (DGA, WGA, and IATSE) got; broader new media residuals coverage; increased DVD residuals; and consent and compensation for product integration. Those things are all better than what AFTRA and the other three got, not just different.

SAG Statement: All SAG wants is what the other unions got: a chance to negotiate.

Analysis: SAG and the studios held 46 negotiating sessions, but SAG didn’t like its options. The real problem is that SAG deleveraged itself—i.e., weakened its negotiating position—by refusing to negotiate early, and then by attacking AFTRA to the point that AFTRA ended the Phase 1 joint bargaining relationship the two unions had had for 27 years. As a result, AFTRA and IATSE did their deals first, leaving SAG as the caboose in a train led by the DGA, WGA, AFTRA and IATSE. Even now, however, it’s likely that there will be some room to negotiate on traditional media issues if SAG drops its demands in new media and DVD.

SAG Statement: SAG can’t wait three years to negotiate new media.

Analysis: Yes, it can, and it will be better positioned if it does. In three years:

• SAG will have financial data on the performance of new media shows and copies of contracts, because the deal on the table requires studios to share this info.
• There will be no strike fatigue as there is now from the WGA strike.
• The WGA deal will expire at virtually the same time as SAG’s (2 months before SAG’s), allowing the threat of a dual strike. Such a threat might even succeed in increasing the DVD residual as well, which is long overdue. On the other hand, if SAG doesn’t accept the deal on the table, the studios are likely to revise the expiration date, since they do three year deals. Indeed, although the WGA contract expired at the end of October 2007, the new contract commenced in February and expires at the end of May 2011. In other words, expiration dates do get adjusted as more time passes without a deal. Adjustment would desynchronize the SAG and WGA expirations and dramatically reduce both unions’ leverage.
• The AFTRA deal will expire at the same time, which will allow joint negotiation if SAG can repair its rift with AFTRA, as it now seems to be doing with the commercials process.
• The economy will (hopefully) be better. If it isn’t, then many people and companies will be out of business and a SAG improvement on new media will be the least of anyone’s worries.

In contrast, by refusing to accept the deal on the table now, none of the above applies, and instead:

• SAG members have lost and continue to lose losing millions in film and TV increases—increases which AFTRA members are enjoying now. The increases are 3.5% annually, in an economy where most workers are enduring wage freezes, wage rollbacks, layoffs, and increased workloads for those who remain and must handle work formerly performed by their now laid off colleagues.
• SAG risks losing the increases even on a going forward basis, since the studios at some point may take them off the table or reduce them, in light of the weakened economy.
• SAG will have (and currently has) zero support from the industry, zero support from the public, and only partial support from its own members. This is a formula for SAG leadership’s own actions breaking the union, not a formula for a better deal.

In my view, a strike would end badly for SAG:

• There would be a deal no better and possibly worse than what SAG could have had 9 months ago.
• A large number of pilots will be AFTRA. This is already happening.
• There will be more primetime reality and game shows, and less scripted programming, reducing job opportunities for actors. And, incidentally, this migration (which, of course, is already happening) helps AFTRA, since these shows are often under its jurisdiction (for the hosts and judges).
• A significant number of SAG members will go fi-core, and the divisions within the ranks will harden and intensify.
• If a strike goes on long enough, as it might, the studios may pressure AFTRA to seek jurisdiction over digitally-shot theatrical films, despite AFTRA’s statement now that it doesn’t seek such jurisdiction.

Also, I think the studios are unlikely to punish the unions (DGA, AFTRA and IATSE) that were easier to deal with and made compromises, by rewarding SAG for being tough to deal with. Imagine the firestorm they’d be buying themselves by doing this. Also, as a somewhat lesser factor, it is understood that Nick Counter wants to retire, and he’s probably unwilling to have his last big deal be caving to SAG (and hurting the DGA, AFTRA and IATSE).

SAG Statement: There’s a ton of original content being made on the Internet.

Analysis: Not using professional actors there isn’t. If you’re an actor, ask yourself: When’s the last time you auditioned for an original show made for the Internet? (“Original” means not based on an existing TV show.) Maybe never. And the stuff that’s up there is not making much money. SAG cites Hulu as making $12m in profit, but that ignores the fact that this is a small amount of money, and that Hulu is mostly move over content, whose residual formula SAG does not appear to be challenging (it’s not in SAG’s list of outstanding issues). (“Move over” content means existing TV shows that are then replayed on (i.e., moved over to) the Internet.)

SAG Statement: You can already buy a set top box or new TV with an Internet connection and therefore new media is here now (Justine Bateman video on SAG website).

Analysis: Misleading, because few people buy these things. They’re too hard to use and too expensive. And many websites, including broadcast network websites (and YouTube, which would be the big draw), are not available on some or all of these boxes. Until these devices become user-friendly, inexpensive, and capable of accessing a wide range of Internet content, they’ll remain novelties.

Even Apple, which has had so much success with the iPod and iPhone, can’t get people to buy the Apple TV box—which most people haven’t heard of even though it’s been out for about 2 yrs. Indeed, Steve Jobs describes that box as a “hobby” for Apple rather than a true business.

Plus, in this down economy, who’s going to spend precious cash on new set top boxes and TVs? As one independent industry analyst said, “Consumers are reluctant to pay for another service and find a home for another box in their living rooms to duplicate much of the content they already get from cable.” Not surprisingly, electronics and appliances sales were down 27% this holiday season as compared to last.

With these realities in mind, electronics companies are going to be cautious about rolling out new and better products. And, these realities, combined with the credit crunch, mean that entrepreneurs will be hard-pressed to find capital for startups that might develop such products. All of this will retard development, let alone consumer adoption, of the devices that SAG points to.

SAG Statement: Why wouldn’t CBS do all of its pilots next year on cbs.com instead of on their network (in light of the lower labor costs if SAG accepts the proposed deal)? (Justine Bateman video on SAG website)

Analysis: Because the overwhelming majority of viewers watch TV on TV, not on the Internet. Why would CBS abandon most of its viewers, and millions of dollars of ad revenue? It won’t. Most people watch far more programming on television than on the Internet.

UPDATE: There is, however, the risk that a network would do pilots under the guise of being for new media, but actually intending the pilot to be for a broadcast show. That’s a matter to be rectified by negotiating the contract language and/or, secondarily, by arbitration.

SAG Statement: “It’s not new media, it’s ‘NOW’ media ” (Doug Allen video on SAG website).

Analysis: Actually, it’s closer to “no media,” if you’re looking for slogans. See the preceding two “SAG Statement” articles for an analysis. Allen’s email claims that the Internet will be “the platform of choice for television programming not in decades but in months, or years.” Months? That’s ridiculous. Does Allen really think that television will disappear in a few months? Or even in a few years?

SAG Statement: The new media deal will be “the end of residuals as we know it.”

Analysis: This statement pretends that the rather distant future is today. It’s a form of fear-mongering that telescopes reality, and is built on two assumptions: (1) The assumption that broadcast networks will completely stop rerunning programs on their networks, and rerun programs only as move over content on their websites. (2) The assumption that broadcast networks and cable channels will completely stop creating scripted programs for their networks and channels, and create programs only as original made for new media content.

These are two big and speculative assumptions. Studios and networks would do these things only if the audience has virtually all disappeared from existing networks and cable channels, and all migrated to the Internet. That’s not going to happen any time soon, for reasons discussed in the preceding four “SAG Statement” items. Indeed, it may never happen at all; the future is a slippery thing.

So far, the Internet is a supplemental market, not a replacement market. That’s because the large audiences and large ad dollars are still in television, not the Internet. As long as this remains true—as long as the networks use their traditional networks and the Internet—then the Internet compensation/residuals will be additive to the compensation and residuals provided by traditional media.

Also, if this does happen—if the audience does move entirely to the Internet—the producers and networks are likely to make a lot less money than they have to date, as I discuss in Hollywood Under Siege. The business is changing, and becoming tougher for everyone. If there’s less money for producers, the reality is that there will be less money for talent as well.

SAG Statement: The proposed deal would strip SAG of jurisdiction in original made for new media productions—unless the budget for the production is over $15,000/min., which virtually none are today.

Analysis: This is misleading. The portion of this statement after the dash is true, but what SAG often omits (for example, in this Doug Allen video on the SAG website) is that, under the proposed deal, SAG would also have jurisdiction if there’s a “covered performer” in the cast (a SAG, AFTRA or Equity member with 2 TV or film credits, or 2 Broadway, off Broadway, or national touring credits, or with certain other credits). In that case, the production is covered (all of the actors on it, not just the “covered performer”). What this means is that productions would be non-covered only if they are truly experimental—i.e., the cast is composed only of actors who are non-union, or who have only a single TV or theatrical credit.

Also unstated by SAG is the fact that the studios can set up non-union sister companies anyway (this is called “double-breasting”)—as Disney already has, with a company called Stage 9. So then they can go non-union anyways, and SAG actors can’t even compete for those jobs (because of Rule 1). Is it better to let non-union actors—and AFTRA members—get experience in new media, while SAG members get frozen out? When I ask SAG leaders why they’re fighting over jurisdiction, in light of the fact that double-breasting makes the issue almost irrelevant, they say it’s the principle. That is, they’d rather fight for an empty principle, and lose millions in increases, cause people to lose jobs and their houses, and endanger the union as well as the industry. Where’s the logic in that?

SAG Statement: “The offer in new media … includes zero minimum compensation, zero overtime, zero residuals structure, zero forced call consideration” (Ed Asner LA Times op-ed).

Analysis: Not entirely true. Specifically:

• Not true for move-over new media, which is most new studio/network media online today.
• UPDATE: Only partially true for derivative new media content (new media programs based on an existing TV show or movie). See detail below.
• UPDATE: Only partially true for original made-for new media content with at least one covered performer. See detail below.
• UPDATE: Only partially true for original made-for new media content above $15,000/min. budget (but there are very few such productions, because this is a high budget level). See detail below.

UPDATE: Here’s the detail:

• Derivative and Original—zero minimum compensation: Asner is correct. However, state and federal law set a minimum wage. In California, this is $8/hr. For a 12-hour day, this works out to about $100/day. This is low, but note that the SAG Ultra-Low Budget Agreement (summary here), which covers theatrical projects up to a $200,000 budget, also allows low day rates ($100/day for an 8-hr day, $175/day for 12-hr. day), so there is some precedent for very low day rates.
• Derivative and Original—zero overtime: Asner is correct. However, state law provides for overtime.
• Derivative—zero residuals structure: Not true. There are residuals for reuse of derivative content (a) in new media and (b) in traditional media. See offer pp. 9-12. Asner is wrong on this point.
• Original—zero residuals structure: Not true. There is a residual structure. It's true, and not good, that for reruns of new media on new media, the residuals are mostly zero (see AMPTP offer pp. 17-18), as I've previously blogged (see item 2 here). Also, for reruns of new media on traditional media there are in fact residuals (see AMPTP offer pp. 18-19). So it's not accurate to say that there is “zero residuals structure.”
• Derivative and Original—zero forced call consideration: Asner is correct.

I regret the errors in the original post.

SAG Statement: It’s critical to lock in a favorable deal now, because it will be impossible to change it later, as the 24-year old home video formula and the cable TV minimums and formulas demonstrate.

Analysis: It may not be easy to change the deal later, but it will be even harder to change the proposed deal now. See the analysis above under “SAG Statement: SAG can’t wait three years to negotiate new media.” In part, this is because SAG leadership mishandled the current negotiations, spending its energy (and members’ dues money) fighting AFTRA, rather than trying to present a unified front against the studios. In part, as well, it’s because the Writers Guild elected not to wait before striking, rather than wait eight months and threaten a joint strike with SAG. A unified strategy will be an option in three years, as discussed above, but only if SAG takes the deal while it’s still on the table in its current form.

SAG Statement: “Pattern bargaining” is not obligatory—that is, SAG is not legally required to accept the new media template accepted by the other unions.

Analysis: True, but a bit of a red herring, since the AMPTP has not made this argument, so far as I’m aware.

SAG Statement: The new media template accepted by the other unions doesn’t work for actors.

Analysis: AFTRA is a union of actors, as well as broadcasters and others, and AFTRA accepted the new media template on behalf of its 50,000-plus actor members—44,000 of whom are also members of SAG.

SAG Statement: The “pattern”—the new media template—is not even a pattern, because it differs from union to union (Frances Fisher video on SAG website).

Analysis: True in part. SAG cites three examples, and I have a fourth:

(1) The WGA deal sets minimums for writing for derivative new media productions, whereas the SAG deal on the table doesn’t. I agree with SAG—this seems unfair. However, note that it is not in SAG’s list of outstanding issues, which suggests that SAG has abandoned the issue.

(2) When a television episode is streamed on the Internet (i.e., move over new media) for 26 weeks, the writer or director receives a residual of “over $600” (for a half-hour show), but an actor who works as a day player receives a residual of only $22.77. This is (almost) true, but nonetheless misleading. That’s because the formula in both cases is identical: 3% of applicable minimum compensation. (The formula changes over time, and the WGA formula ultimately differs slightly from the formula in the DGA, AFTRA, and proposed SAG deals. The latter three stay synchronized.)

In other words, there is indeed a pattern that is maintained. However, the dollar figures are different because the applicable minimums (to which the percentage is applied) are different. In other words, writers and directors get paid more than day players. That’s no surprise: a writer or director works far longer than a single day. Also, (for purposes of the formula as Fisher describes it) there is only one writer or director on a show, whereas there are many actors on a show. Thus, the total residuals payable to a show’s actors is more than $22.77.

(I say “(almost) true” and “(for purposes of the formula as Fisher describes it)” because Fisher is not quite correct when she says that a director or writer receives a residual of over $600. Rather, all of the writers on the show (i.e., episode) split the WGA residual. For instance, if there are two writers, each would get a little over $300. Likewise, the director doesn’t receive the entire $600-plus DGA residual. Rather, he or she splits it with other DGA crew members (1^st AD, 2^nd AD and UPM) and with the DGA pension and health fund.)

(3) Actors have consent right over the use of clips on the Internet, whereas writers and directors don’t. This, of course, benefits actors (as Fisher notes).

(4) Under the SAG offer, derivative new media includes new media productions based on theatrical films (as well as television programs), whereas this is not the case in the DGA and WGA deals (nor in the AFTRA deals, of course, since AFTRA has no theatrical jurisdiction). This benefits actors, since the provisions regarding derivative new media content are better for talent than those regarding original new media content.

SAG Statement: Quality of life is lower in new media.

Analysis: Probably true, to some extent—just like at startup companies themselves. If you don’t want to take risks and experiment, stay in traditional media, just as, if you’re a risk-averse computer programmer or exec, you should work for a traditional company, not a startup. For that matter, the quality of life in a low-budget independent movie is probably lower than in a studio movie as well.

SAG Statement: The studio offer effectively eliminates the SAG contract’s force majeure provision, which has been in place for decades.

Analysis: True (see “Force Majeure” in this article). This is clearly something that the union should resist—and would be better able to do so if it dropped its economically meaningless and/or fruitless demands in new media and DVD. (For an explanation of force majeure, see item 4 in this article.)

SAG Statement: The studio offer fails to give actors consent rights and compensation for product integration.

Analysis: True (see “Product Integration” in this article). The union should fight some aspects of this. Again, it would be better able to do so if it dropped its demands in new media and DVD. (For an explanation of product integration, see item 3 in this article.)

SAG Statement: The proposed deal fails to increase DVD residuals, and an increase is long overdue.

Analysis: True, but SAG National Executive Director Doug Allen stated to me that this is his fifth priority at most (he put it after new media jurisdiction, new media residuals, force majeure, and product integration). That presumably reflects a recognition by SAG leadership that the issue is a non-starter. For further discussion, see item 5 in this article.

SAG Statement: The AMPTP is not even honoring the new media deal signed with the Writers Guild less than a year ago.

Analysis: Not persuasive. SAG cites two issues:

(1) The WGA says that the studios have failed to make proper payments on streaming, and that the studios blame technology problems. This is true in some cases (the studios admit it), but somewhat understandable. The new media deals are about 30 pages each of dense legalese, with dozens of details. You can’t reprogram computers for this stuff rapidly. And the studios have stated that they’ll pay interest on the late payments.

(2) The WGA complains that the studios have claimed that the new rates for downloading doesn't apply to any material produced before the WGA strike. True, the studios are making this claim, but the trouble for the WGA is that the studios may be right. The contract language in this area contains an explicit start date of February 13, 2008 for payment (the date the strike ended). Thus, the issue is at best ambiguous. The WGA cites 1971 and 1977 dates that don’t even appear in the applicable section. It’s just not true to imply that AMPTP has no justification for its position. (The WGA may also, but the AMPTP may have the better of the argument.)

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Exclusive: SAG-AFTRA New Media Battle?

When (if?) SAG eventually does a deal with the studios, will SAG and its smaller rival, AFTRA, peacefully share jurisdiction in new media? Answer: probably not. Although no one else has publicly raised this issue to my knowledge, buried in the SAG deal on the table are the seeds of a scathing fight for control of the future of new media.

The issue is which union has jurisdiction over original programming made for new media. The AFTRA deal, which was ratified four months ago, has a provision that says “[i]t is understood and agreed that AFTRA shares jurisdiction” over such programs. That provision would seem to give producers a choice of unions when making such shows.

However, when reviewing the AMPTP offer to SAG, I noticed that the comparable language—“[i]t is understood and agreed that SAG shares jurisdiction”—is struck out. Instead, there are a footnote and another paragraph which state that the studios and SAG disagree on whether jurisdiction would be shared. The language then states that each party reserves its legal positions on the issue. In other words, SAG refuses to agree to shared jurisdiction, and the AMPTP is not pressing the point.

That language means that even if and when a deal is eventually done—which is at least two months off, and probably more—we’ll may find the two unions battling over whether they share jurisdiction in original made for new media production. The studios might well get dragged into the fight too. As such productions grow in importance, the battle is likely to become more pitched, and could rival or exceed the animosity between the two unions on the subject of basic cable jurisdiction and terms. One thing’s sure: there’s are no dull moments in Hollywood labor, only dull contracts.

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).

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.

Guild Agreement New Media Thresholds

This is a rather technical post:

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

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

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

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

The better way to summarize this is:

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

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

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

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

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

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

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

Letter from SAG

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

July 17, 2008

It’s Not New Media – It’s NOW Media

Dear Screen Actors Guild Member,

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

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

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

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

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

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

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

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

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

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

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

Thank you for your understanding and your solidarity.


Doug Allen
National Executive Director and Chief Negotiator

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

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

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

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

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

FOR IMMEDIATE RELEASE

July 17, 2008

Statement by the AMPTP

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

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

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

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

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

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

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

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

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

envy.

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

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

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

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

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

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

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

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

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

members compared to the existing contract terms.

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

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

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

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

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

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

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

make a deal.

Further Thoughts on AFTRA and SAG

Expanding on my previous post, I do want to acknowledge the obvious: this vote was a strong victory for AFTRA, especially in light of SAG's aggressive campaign against the vote. It was almost 2 to 1. AFTRA members are making a statement that they want to work, not strike. That's something the industry should be encouraged by.

Unfortunately, I also think that SAG leadership will view this vote, in their own minds, as a moral victory. That's because the margin was significantly lower than what the unopposed daytime deal achieved (93%), and SAG's viewpoint is going to prolong the process of achieving a deal. SAG's omnibus approach also risks making it more difficult for the Guild to achieve improvements in more focused areas in which improvement might be achievable.

One key such area is minimums for clip usage. Reportedly, neither the deal on the table from the AMPTP nor the AFTRA deal have such minimums. In my opinion, they should: setting minimums is a core function of any Hollywood union. Another area is product integration, where it does seem that some of what SAG is seeking is reasonable, and a compromise should be achievable. Finally, SAG should focus on holding the line on industry-proposed changes to the way force majeure is handled in the existing SAG agreement.

SAG has also listed various other issues, but the major ones seem unachievable: significant change in the new media template now adopted in four separate deals (DGA, WGA, AFTRA daytime, and now AFTRA primetime); an increase in DVD residuals (not achieved in any of those four deals, nor, apparently, even sought in several cases); and increases greater than 3.5% in certain minimums (2.5%, 3.0% or 3.5% is the norm, seldom deviated from). SAG's focus on these issues is, as I said, distracting and dilutes its more realistic points.

What remains to be seen is how this all will play out. One thing seems clear: a SAG deal won't be quick or easy.

SAG Thinks, Blinks

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

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

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

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

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

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

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

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

AFTRA reaches tentative agreement on Network TV Code

Here's a press release from AFTRA:

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

American Federation of Television and Radio Artists

NEWS RELEASE

For Immediate Release: MARCH 9, 2008

AFTRA REACHES TENTATIVE AGREEMENT WITH

MAJOR NETWORKS AND PRODUCERS ON NETWORK TV CODE

LOS ANGELES -- The American Federation of Television and Radio Artists--the

national labor union of 70,000 actors, singers and recording artists, dancers,

announcers, and other broadcast talent--has reached a tentative agreement

with the four major television networks and producers on the Network

Television Code, which is subject to AFTRA National Board approval and

ratification from members.

"This agreement is a major milestone for AFTRA as substantial gains in wages

and working conditions for performers were successfully achieved," said

Roberta Reardon, AFTRA President and Chair of the Negotiating

Committee. "This contract is extraordinary for performers and made significant

progress on many fronts, including importantly new media jurisdiction and

compensation."

The new agreement contains solid increases in wage rates for all categories,

increased contributions for the AFTRA Health and Retirement plan, and

addresses discrete issues affecting every category of performer. In addition,

the agreement preserves significant principles which are a hallmark of AFTRA

contracts--such as universal coverage of background performers and

contract security for daytime serial contract players.

Highlights of the new agreement include:

-- Increases program fees each year of contract.

-- Increases "extra rehearsal" and overtime rates by 25%.

-- Beginning November 2008, establishes 1-day, 3-day and weekly rates (as

provided in AFTRA's primetime contract) for principal performers in non-prime

time and syndicated dramatic programs (other than serials).

-- Retains universal coverage for background actors in all formats, including

dramatic programs and daytime serials.

-- Raises minimum call provisions for Singers and Stand-Ins.

-- Establishes new residuals structures for paid Internet downloads

(electronic sell-through) that increases the rate currently paid by employers,

and establishes residual rates for ad-supported streaming and use of clips on

the Internet.

-- Establishes union coverage and terms for entertainment programming and

promotional announcements made directly for new media.

-- Reduces the "reconciliation period" from 26 weeks to 2 weeks for

freelance daytime performers in recurring roles.

-- Raises exclusivity thresholds for performers under contract.

-- Establishes a day rate for Dancers on Awards programs.

-- Guarantees Health and Retirement coverage for Stunt Coordinators on

serial dramas.

-- Establishes new limitations on crediting overscale against overtime.

-- Increases employer contribution rates to the AFTRA Health and

Retirement plans.

Terms for original dramatic programs made directly for new media will be

negotiated during AFTRA's "Exhibit A" negotiations for primetime dramatic

programming.

"Our fundamental goal in these negotiations was to protect performers'

interests and improve their wages and working conditions in the face of

challenging times," said AFTRA Network Code Negotiating Committee Co-Chair

and Los Angeles Local President Ron Morgan. "Our priorities were to modernize

certain aspects of our contract and establish a framework for union members

to participate in new media as these businesses evolve."

The AFTRA Network TV Code covers actors and all on-camera and off-camera

talent on all forms of television programming: syndicated dramas, daytime

serials, game shows, talk shows, variety and musical programs, news, sports,

reality shows, and promotional announcements. Programs covered by the

Code include diverse programs such as "Good Morning

America," "20/20," "American Idol," "The View," "The Tonight Show," "Late

Show with David Letterman," "Oprah," "The Price is Right," "Deal or No

Deal," "Days of Our Lives," "The Bold and the Beautiful," All My

Children, "Cake," "Saturday Night Live," "Entertainment Tonight,"

and "Survivor."

Formal negotiations between members of AFTRA's 35-person Negotiating

Committee and the networks and producers began February 19 in Los

Angeles, and were concluded on the evening of Saturday, March 8, in New

York.

Representatives of the following organizations attended one or more of the

sessions: American Federation of Musicians, Actors' Equity Association,

Writers Guild of America, East, Directors Guild of America, Screen Actors

Guild, and AFTRA's strategic partner, the International Alliance of Theatrical

Stage Employees.

Members of other important sectors of the industry--promo announcers,

daytime drama contract players, stunt performers and coordinators, and

rehearsal actors--also attended negotiation sessions. These negotiations

were preceded by months of informal discussions, preparation, and research

by union staff and consultants.

Terms for AFTRA primetime network TV dramas and situation comedies--such

as "Rules of Engagement," "Curb Your Enthusiasm," and "Til Death"--are

covered by Exhibit A of the Network Code and are negotiated separately. The

current Exhibit A terms will be up for renegotiation in June 2008.

Details of the new agreement will be submitted to the AFTRA National Board

for approval at the end of the month, and if approved, to membership

ratification thereafter.

###

ABOUT AFTRA

The American Federation of Television and Radio Artists, AFL-CIO, is a

national labor union of over 70,000 actors, singers and recording artists,

dancers, announcers, and other broadcast talent performers, journalists and

other artists working in the entertainment and news media. With over 30

Locals across the country, AFTRA promotes the success and welfare of

members in a variety of ways, including contract negotiation and

enforcement, advocating on legislative and public policy issues, supporting

equal employment opportunities, and sponsoring or supporting health and

retirement benefits and programs. For more information, visit

http://www.aftra.com.

Wedge Issue in the Hollywood Strike: New Media Residuals

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

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

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

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

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

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

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

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

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

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

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

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

WGA Strike: How to Restart the Talks, And Why

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

Background

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

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

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

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

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

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

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

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

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

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

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

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

How to Restart Talks

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

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

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

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

What’s the Deal They Should Make?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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