Hollywood readies for negotiations

WGA, studios prep for Monday talks

At a moment when all industry planning seems keyed to a possible strike, talks between Hollywood’s talent guilds and their employers are finally about start.

The Writers Guild of America, studios and networks will launch Monday morning what are widely expected to be bitter negotiations at the Encino headquarters of the Alliance of Motion Picture & Television Producers.

Pre-bargaining rhetoric has been particularly rancorous. Writers want a guaranteed cut of the revenues from new-media platforms and increased jurisdiction; companies are insisting they need to revamp the residuals system so that they can recoup before letting others share the wealth.

The two sides are at odds over the health of the business, with the WGA asserting that showbiz is in excellent shape via a bulletin mailed to its 12,000 members last week. But top execs warn of soaring costs, declining profits, audience fragmentation and a future resembling that of the battered music business.

The WGA’s also deemed the companies’ centerpiece demand — a contract extension, with a concurrent study to institute a recoupment-based residuals system — as a non-starter. The companies also want the Screen Actors Guild and the Directors Guild to agree to similar proposals; SAG’s already said it’s not interested.

When the WGA and company negotiators formally meet for the first time Monday, they’ll spend the first day presenting their complete proposals. Only the first week of negotiations have been scheduled.

At this point, the two sides appear so far apart that it would not be a surprise if there’s no deal when the WGA’s current three-year contract expires on Oct. 31.

The Writers Guild’s gone past the expiration in the last two negotiations — five months past in 2004, when it wasn’t able to budge the companies to sweeten DVD residuals and opted for the DGA to push that proposal. The DGA, however, reached a deal bumping up health-care contributions with no change in the homevid formula; the WGA and SAG accepted similar contracts soon thereafter.

The inability to improve the homevid formula during a time when DVD revenues were soaring was particularly irksome to the current WGA leaders — so much so that they ran on a platform in 2005 promising a more confrontational approach to negotiations and easily won. A few days later, they fired longtime topper John McLean and replaced him with organizing chief David Young.

The negotiations also represent a test for Young, whose background prior to joining the WGA in 2004 was in the garment and construction industries. His focus has been on building guild unity, staging public events to take on employers, organizing non-union work and bolstering WGA research — tactics that have alarmed the companies.

The harder line by WGA leaders has provoked worries that there will be a writers strike on Nov. 1, once the contract has expired. But it’s much more likely that the WGA will tell its members to keep on working under terms of the expired contract, just as it did three years ago.

The SAG and DGA contracts both expire on June 30 — a date that’s now cemented in the minds of feature producers and execs as they maneuver to get projects completed by then. If either guild strikes, the impact would be profound, with most production closing immediately.

If there’s no deal with the WGA, it’s more likely that the companies would prefer to make some kind of deal with the directors. The DGA has struck once, for a few hours; it prefers to start negotiations at least six months prior to expiration, contending that’s when companies will give the best deal in exchange for labor peace and security; and it prides itself on taking a realistic approach to negotiations.

SAG’s situation

SAG is much more of a wildcard.

Control of its board room shifted to the more assertive Membership First faction two years ago, but moderates could regain control in the upcoming elections in September.

In addition, SAG’s famously fractious board put aside their differences last fall and hired Doug Allen, a longtime No. 2 exec at the NFL Players Assn., as its top exec. Allen already has strongly endorsed the WGA’s brush-off of the companies’ proposal for an extension and study.

Allen also has demanded that AFTRA give up its 50-50 participation on the negotiating committee since its contracts contribute less than 10% of the earnings generated under the deal. AFTRA has resisted, and sorting out that dispute may mean SAG will need more time to get ready for bargaining.

The companies also will have to deal with AFTRA’s network code contract, which expires Jan. 31 and has already been extended by 2½ months. That pact covers all TV programming except network dramatic primetime.

For much of the town, memories of the last WGA strike in 1988 have receded — even though it lasted five months, delayed the start of the fall season and cost hundreds of millions of dollars. By comparison, SAG’s strike in 2000 remains a fresh memory, and there’s still bitter debate within the guild as to the effectiveness of the tactics and the impact of the strike.

It took a six-month work stoppage for the ad industry to drop its demand of elimination of residuals for TV commercials in favor of buyouts and for SAG to drop its demand for cable residuals. SAG gained Internet jurisdiction and a major hike in cable buyouts, while the ad industry gained practical experience in shooting non-union commercials.

Further complicating the picture is the fact that SAG and AFTRA agreed last year — before Allen came aboard — to a two-year extension of its commercials contract in order to conduct a study on new compensation models, given the expansion of new media in commercials. That deal’s similar to what the AMPTP is now proposing on the film-TV side.

The uneasiness over the labor situation dominated a Friday session at the TV Critics Assn. press tour as NBC Entertainment co-chairman Marc Graboff, Warner Bros. Television Group prexy Bruce Rosenblum and lead negotiator Nick Counter repeatedly expressed frustration over the current WGA agreement.

The trio stressed their view that key aspects of current guild compensation agreements are more than four decades old and no longer apply to TV’s fast-changing business models, given such trends as ad-skipping, audience fragmentation and using digital platforms.

“We need to know what the pie is before we can start divvying it up,” Graboff said, adding that it’s still uncertain how consumers want to find and watch TV programs.

Graboff also noted that the digital world’s so uncertain that most deals are only for a single year. He also declared that his network is ready for a strike but declined to offer specifics as to what programs will air as replacements once WGA-covered programming isn’t available.

“You’re not going to see a test pattern,” he added. “There will be a full schedule.”

Rosenblum asserted the industry needs up to three years to figure out how the new model will function financially in terms of what the consumer wants — and where the ad industry will want to spend money.

“It’s a brand-new business,” Rosenblum added. “In 24-36 months, we’ll have a much clearer picture.”

Rosenblum also contended that if the nets and producers can have flexibility in using digital platforms, the industry can reduce the 85%-90% failure rate of new shows. That would enable the industry to become more profitable, to the benefit of consumers and WGA members.

The execs also took several potshots at recent comments by John Bowman, chief of the WGA negotiating committee, including assertions that Hollywood accounting can’t be trusted. Counter insisted that the WGA has extensive access to company numbers via profit-participation agreements along with health and pension reports; Rosenblum stressed that the AMPTP’s seeking to revamp residuals so that the payments would be triggered once basic costs are recouped, adding that the proposal is not tied to a net profits formula.

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