iPod lightning rod

Guilds girding for fight over vid residuals

The saber-rattling over Apple’s new video iPod has started.

WGA West president Patric Verrone has sent a letter to the 8,000 WGAW members asserting that residuals from the ABC and Disney programming distributed via new technology should be calculated, at the very least, using the 1.2% formula employed for pay TV.

Verrone said explicitly that the formula used for DVD residuals — set at 0.3% of wholesale revenues on the first $5 million, 0.36% after that — is not applicable.

The companies did not specify in their Oct. 12 announcement how talent will be compensated. That development prompted this joint response the same day from AFTRA, SAG, DGA, WGA West and WGA East: “We have not yet heard from the responsible employers of our members, but we look forward to a dialogue that ensures that our members are properly compensated for this exploitation of their work.”

Verrone said his missive, issued Friday, came in response to dozens of phone calls and emails from curious and concerned members and in the wake of one report that an ABC executive had said residuals would be “close to the DVD model.”

“Make no mistake, that formula (which significantly discounts the revenue streams upon which the residual is based) is clearly not applicable in this case,” he said. “I congratulate Apple and Disney for this new means by which our work can be distributed to the masses, and I look forward to working with our members and the members of all of the creative unions in making sure that we are all paid appropriately.”

All the guilds operate under a DVD residuals formula that has been in place for two decades. The rate — which allows studios to exclude 80% of gross revenues prior to calculating residuals — was tilted toward studios to help the fledgling videocassette technology at the time.

As a result, the credited writers of a moderately successful film selling 1 million DVDs and generating $15 million in wholesale revenues would split a payout of around $50,000, compared with an estimated $10 million profit for the studios.

At negotiations last year, all the guilds failed to budge studios from their resistance to changing the formula. The studios contended that DVDs were not ancillary income; they essentially kept studios afloat with only one in 10 features recouping costs from domestic box office and only four in 10 recouping after all revenues come in via foreign box office, TV and DVD.

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