The strike: Who will blink?

What would it take for a resolution?

What will it take to end the strike?

Writers and producers were making progress on key sticking points when negotiations ended abruptly Sunday evening.

Dozens of proposals remained on the table, but resolution of the big three issues — video streaming, WGA jurisdiction over made-for-Internet and download residuals — might have been enough for a deal to be made.

And a solution for each was close.

Many in town feel frustrated knowing that the WGA and the Alliance of Motion Picture & Television Producers could well have closed a deal had they gotten past the heated rhetoric of the past year.

Meanwhile, the writers may have stumbled into a scenario in which the Directors Guild could close a deal the WGA would have to passively accept.

Going into Sunday’s last-ditch negotiations, the WGA had three major concerns:

  • The AMPTP had originally insisted that streaming video is a promotional tool and not subject to residuals. But by the time talks collapsed, insiders say the producers had offered resids after a one- or two-month period. The residual rate had not been hammered out but would have likely been at 1.2% of any revenues to the companies.

  • Studios and nets indicated that they would give exclusive jurisdiction in made-for-the-Internet programs to the WGA on any derivative work, but not original work.

  • The AMPTP has insisted on linking the download residuals rate to the DVD rate, much to the WGA’s chagrin, and the issue wasn’t resolved. But on Sunday the WGA had taken its demand for doubling DVD residuals off the table and compromises had emerged on pension and health and other issues.

For the first and second items, there is reason for hope. Clearly, each side needs to yield on item three.

“I think that a deal could have been made in another 12 hours,” one source noted. Instead, the talks collapsed before either side could start hammering out a compromise on the issue of residuals for downloads — which was the key remaining issue.

The question of minimums — in which the WGA was asking for 3.5% yearly increases — probably would have been resolved with something on the order of 3%.

There’s still time for both sides to make accommodations. Many in town fear that if the issue is not resolved soon, this could turn out to be a very long and very damaging strike.

Pressure to get back to the table came Wednesday from dozens of WGA showrunners, who rallied at Disney and then came to a consensus about if and when they should start working as producers again. “We will gladly return to our (showrunner) jobs the day that the producers return to the negotiating table,” one insider said.

That means if the nets and studios start bargaining, the showrunners will help shoot the scripts that have already been written.

Ironically, deals are already in place for many of the points the WGA is seeking. Big-name screenwriters and showrunners have already used their leverage to get such concessions as new-media residuals.

For now, no new talks are scheduled, and the DGA’s expected to begin its negotiations within the next few weeks, which could mean the WGA would wind up having to accept the terms of that contract.

“There’s no way that the WGA would get a better deal than the DGA,” one insider opined. “There are two reasons — the DGA’s more united and more powerful than the WGA, and the companies would never allow the precedent of giving a better deal to a union that’s gone on strike.”

An area of concern: Assuming WGA-producer talks resume soon, would the terms hammered out on Sunday still be honored? WGA West president Patric Verrone insists that DVD was a one-day offer and is back on the table. And it’s possible that producers would similarly change their concessions.

Still, the move toward resolving the streaming issue represents a breakthrough from the pre-Oct. 31 negotiations that had been singularly unproductive.

And the question is money: How much would writers be gaining — and how much would producers be losing? So far, the money is comparatively small, but the studios and networks are making money.

Insiders estimate that each studio is making under $20 million a year from movie downloads. Each network is estimated to be making under $100 million from streaming and downloads. Jeff Zucker said NBC made $15 million in net revenue from iTunes sales in the 18 months that NBC U content was on Apple’s service.

WGA has pointed to a study by eMarketer that says overall online video ad revenue will be $775 million this year and $4.3 billion by 2011. Only a fraction of that is actually going to Hollywood, however.

Streaming video is essentially video delivered on demand via the Internet. Up to now, only TV shows have been streamed on network websites and partners, but the new NBC-News Corp. joint venture is experimenting with movies as well.

Though networks’ first digital distribution deals were for paid downloads, a la iTunes, streaming video has quickly become more popular and, execs say, potentially lucrative. All the major nets stream the shows they own, and others on which they can form a deal with the studio, on their own websites. In addition, as evidenced by Hulu, CBS’ Interactive Audience Network and ABC’s deal with AOL, they’re all moving aggressively to stream their shows on other websites as well.

Previously, the AMPTP has claimed it shouldn’t have to pay residuals on streaming videos because they’re promotional. Given that almost all TV shows streamed on the Net have video advertisements within them — albeit much fewer than on the air — as well as ads around them, the WGA had found that tough to swallow.

(Ben Fritz contributed to this report.)

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