HOLLYWOOD — The clock starts ticking today for writers.
With only four weeks before the May 2 expiration of the current three-year contract, the Writers Guild of America and the Alliance of Motion Picture & Television Producers will launch negotiations at 10 a.m. at the AMPTP headquarters in Encino, Calif.
Both sides will bring in at least 30 participants and talks are expected to take place every day.
The WGA’s key demands — supported by a 97% endorsement from members in voting several months ago — include DVD/video residuals, pension and health insurance contributions and jurisdiction over reality TV and animation. The Writers have had extremely limited success with their efforts to get any reality shows to work under a union contract, even though hundreds of WGA members work on the unscripted shows.
Though nerves haven’t been stretched to the breaking point, as they were in 2001 when studios scrambled to stockpile, the writer business has become more unsettled than usual by the uncertainty over the outcome. Scribes, execs and agents report notable upticks in recent dealmaking, driven by worries that the talks won’t lead to a deal and that the WGA will strike for the first time since 1988.
The unease stems partly from the WGA’s efforts to prep its 12,000 members for the negotiations, laying out its demands in a far more public manner than SAG or the DGA. For example, the WGA West’s most recent negotiations update to members noted that the guild has amassed an $8.5 million strike fund.
Preparing for worst
“While there is no expectation of a strike at this time, the board of directors does want to be prepared in the event contract talks break down,” the guild said. “Although it is called a strike fund, it serves another purpose: the deterrence of a strike by communicating to management both the guild’s preparedness and resolve. It is our hope that the current negotiations will conclude in a positive manner and that the existence of these funds helps to further that goal.”
The strike fund has been mandated by the WGA West’s constitution since the 1980s; funds are earmarked for members who face a “financial hardship” due to a work stoppage.
After presentation of initial proposals today, both sides will impose a news blackout on the substance of the negotiations. “We don’t believe in negotiating in the press,” AMPTP president Nick Counter said.
The first week of talks will take place at the AMPTP, then shift to the WGA West headquarters in Hollywood, the site of all nine weeks of negotiations in 2001.
Strategies are expected to focus on offering starkly contrasting views of the health of the entertainment business.
Cost of films up
Studios are likely to point to the recent Motion Picture Assn. figures showing the average costs of 2003 films jumped 9% to $64 million last year while P&A costs soared 28% to $39 million. They will assert that margins on filmmaking are under 5% because six of 10 films never recoup; on the TV side, they will point to the shaky economics of syndication and the declines in revenues from foreign sales.
The WGA will cite data from Wall Street analysts who cite growth from DVD and video-on-demand as drivers for current and future profitability. Merrill Lynch’s Jessica Reif Cohen wrote last year that studios were operating on a 65% profit margin on DVD and added, “We believe perception of low returns on feature film production is no longer valid.”
Homevideo revenues topped $22 billion last year with DVD amounting to $16 billion and VHS taking in about $6 billion. But the WGA is stuck with a two-decade-old formula that excludes 80% of revenues from residuals calculations in most cases; studios insist they need those DVD dollars to remain financially viable.
Residuals fight looms
The soaring DVD market — which amounted to $11 billion in 2002 — led to a 50% rise in writer homevideo residuals from $34.4 million to an estimated $51.5 million last year. The WGA has asserted that its members are taking in about a nickel on every DVD sold.
WGA leaders have stressed that members view health-care costs as a crucial point, and that will likely be among the first discussed. Trustees of the industry-guild health plan boosted eligibility and cut benefits last year in response to soaring costs. SAG and AFTRA were able to gain a 0.5% hike in producer contributions in their one-year extension but the WGA will face a much tougher task in obtaining hikes over a three-year period.
Talks are also likely to be rancorous on the issue of the WGA assuming jurisdiction over reality TV, with the guild arguing that such shows are based on writing concepts and plot outlines. The AMPTP will insist it’s not obligated to bargain on the issue, but the WGA has managed in the past to expand its coverage, such as obtaining jurisdiction in 2001 over made-for-Internet programs.