WGA's hard line sets up showdown

This article was updated at 7:48 p.m.

Storm clouds are gathering on Hollywood’s labor front.

Worries have been building that showbiz scribes are heading down a rocky road as they prep for contract negotiations with studios and nets, with a May 2 contract expiration looming.

Those concerns were underlined Wednesday as writers strongly backed their leaders’ aggressive bargaining demands — highlighted by the need for a far bigger slice of the sizzling DVD market — with nearly 97% support among the 2,410 members who voted.

Though the WGA’s contract proposal hasn’t been hammered out, a spokeswoman for the Alliance of Motion Picture & Television Producers responded cautiously to the vote results.

“We’re looking for the best and, of course, preparing for the worst,” she said. “Out of respect for the WGA and the collective bargaining process, we prefer to negotiate at the bargaining table and not in the press.”

The near-unanimous endorsement, with only 89 scribes voting “no,” is a signal that rank-and-file writers have responded to the Guild’s assertion that writers have been largely excluded from the DVD bonanza. The WGA recently pointed out that DVD residuals on 2002 revenues of $11 billion amounted to only $18 million.

Though the WGA has not disclosed how much more of the DVD pie they will seek, studio execs have already signaled they are highly unlikely to alter the 20-year-old formula. Other key WGA demands: boosting health-care contributions, expanded jurisdiction over reality TV and animation, and hikes in minimum rates.

The level of backing by members on the WGA’s 25-point “pattern of demands” was significantly higher than in a similar vote in late 2000, when 89% of the 2,597 ballots supported a 42-issue list. WGA West prexy Charles Holland — elevated to the post last week following the surprise resignation of Victoria Riskin — called the vote “resounding.”

“The Pattern of Demands is comprehensive, presenting issues that are not new but are fundamental to artists who provide content to the studios and networks,” Holland said. “The DVD/videocassette formula has not been changed in decades though DVD profit margins have dramatically increased in the past two years.”

Holland also noted that benefit cuts and heightened eligibility hit the WGA-industry health plan in 2003. “It is now time for companies to contribute their fair share,” he added.

Holland, who has been part of the more moderate political wing of the WGA, was a co-chair of the negotiating team in 2001 and has refrained from saber-rattling during preparations for the upcoming talks. But Hollywood execs have clearly become unnerved by the WGA’s persistent push on the DVD issue.

The WGA’s announcement last month of its “pattern of demands” prompted a tit-for-tat exchange with AMPTP prexy Nick Counter, chief negotiator for the companies, who labelled the list “excessive” and “a disaster waiting to happen.” Riskin subsequently noted that the Guild had not yet issued specific dollar demands asserted that Counter’s comments were counterproductive.

The WGA has also been stressing the economic well-being of showbiz for the past year, a theme reiterated Wednesday by Holland.

“This is a time of great opportunity. The business is healthy with rising revenues in TV and exploding revenues in motion pictures,” he said. “The negotiating committee formed by the Board and Council of WGA West and WGA East is comprised of knowledgeable, professional writers. The studios and networks have seasoned professionals. Together, we can put the industry right and create lasting labor peace. The Writers Guild is ready.”

In Gotham, 430 voters endorsed the demands list while 10 were against. “The overwhelming passage of the Pattern of Demands by 98% by our members sends a clear message,” said WGA East prexy Herb Sargent. “In this next contract, they want real improvement, especially in the areas of DVD residuals, new technologies, and healthcare.”

The “pattern of demands” vote, which culminated with membership meetings this week in Los Angeles and Gotham, fulfills the union’s constitutional requirements to begin negotiations over the contract to replace the current three-year pact. Those talks are likely to start in early February after the WGA’s negotiating committee formulates the contract proposal.

Studios will undoubtedly contend that moviemaking costs have continued to escalate sharply; that DVDs aren’t ancillary income but essential to keeping studios afloat; and that the future profitability of DVDs could vanish, given the already massive pirating of discs.

The writers are stuck with uncommonly small residuals amid the current DVD bonanza. The payout is based on a formula unchanged since it was set in 1985, when the WGA agreed to excluding 80% of revenues from residual calculations so that the then-fledgling technology could gain a foothold.

Under the WGA’s contract, about a nickel per DVD sold goes to the credited writers. The rate is 0.3% of wholesale revenues on the first $5 million, then 0.36% after that; the standard WGA residual rate is four times higher, or 1.2% of revenues. And unlike its other residual agreements, video/DVD revenues are based on producers’ gross receipts rather than distributors’ gross, which allows studios to subtract distributor costs.

The guild pushed hard on the video/DVD issue in the 2001 negotiations, asserting the 1985 costs of videocassette manufacturing were $14 per unit, but had dropped to $3 per unit with DVD manufacturing costs at $2 per unit. It asked first for a 100% hike in residuals, scaled that back to 25% after the first month of talks and then settled for no hike with a one-time $5,000 fee for the right to include the movie script on the DVD.

The WGA’s major gains in 2001 came from increasing residuals for foreign TV, the Fox net and pay TV. The potential strike threat was taken seriously enough that studios spent several months speeding up production to create a stockpile; negotiations went three days after expiration of the previous contractbefore the new deal was hammered out.

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