WGA plays it tough

Guild growls as contract expiration looms

With the contract clock ticking toward a Sunday expiration, the Writers Guild of America has bared its teeth at the studios.

The WGA has opted for a decidedly feisty stance on its key issues of DVD residuals, health care costs and jurisdiction over reality TV in a Negotiations Update newsletter sent to members on Monday.

The missive also hammered studios over video-on-demand, late payments to writers, one-step writing deals and mega-congloms’ failure to disclose possible “self-dealing” transactions.

And though the WGA did not mention specific discussions at the bargaining table, it took studios to task for insisting DVD residuals can’t be improved because profits are shrinking amid soaring filmmaking costs.

Tough stats

Studio execs have pointed to recent Motion Picture Assn. stats for 2003 showing a 9% hike in average production costs to $64 million and a 28% jump in marketing costs to $39 million; industry sources estimate that average per-film foreign marketing costs have hit $40 million. Even with DVD revenues, four out of 10 films never re-coup costs, per the MPAA.

“Your representatives will take into consideration any realistic business concerns,” the guild said. The WGA “won’t accept that a fair improvement in the video/DVD formula will bankrupt the industry. That simply isn’t true and never has been.”

The newsletter, issued after a three-week news blackout during negotiations with the Alliance of Motion Picture & Television Producers, appears designed to remind the 12,000 WGA members of the need to present a unified front. Today’s face-to-face negotiations are expected to move toward concluding a deal over the next week.

Some execs have groused at the slow progress and the WGA’s assertiveness on the DVD issue, which is expected to be particularly contentious.

The WGA is likely to cite Merrill Lynch analyst Jessica Reif Cohen, who wrote last year that studios were operating on a 65% profit margin on DVD.

Costs out of control

The AMPTP is likely to rebut that by quoting analysts such as Hal Vogel, author of “Entertainment Industry Economics,” who noted recently that production costs were out of control and that companies like MGM could not recoup expenses, even with DVD.

The companies are also likely to claim that the cost of increasing the WGA’s DVD residuals would multiply by 10 since the other Hollywood unions would demand a similar hike.

WGA West assistant exec director Charles Slocum took specific aim in the newsletter at the economic impact of relaxing media ownership rules, such as a TV series or film produced by one of the mega-congloms and rerun on a cable network owned by the same conglom.

“What if the concentration is so great that the operation of the free market is distorted?” he asked. “The residuals (and profit participation) for talent in that series or film are based on revenues paid by the cable network to the television or film distribution division. If the same owner controls both, there is no arms-length transaction to ensure that the price is fair.”

Slocum said the WGA wanted to improve its ability to assess such transactions. “If the companies are going to engage in ‘Hollywood accounting,’ ” he said, “at least they should open their books and let us have a good read!”

The newsletter accused the AMPTP companies of deceit in avoiding WGA jurisdiction in reality shows and warned that it may use a variety of tactics — including recognition strikes — to gain a foothold in the sector.

No need to bargain

The AMPTP has insisted that, since the producers of reality shows aren’t signatories to the WGA contract, it’s not required to bargain on the issue.

But, the guild said, “Most of these shows are either directly produced or independently controlled by companies who are our signatories, hiding behind legal and corporate structures that are simply a dodge.”

Execs also insist the WGA has no jurisdiction because reality shows are unscripted. That’s a contention the guild disputes, arguing the shows operate from scripted outlines, often supplied by WGA writers.

The WGA newsletter also asserted that members’ eligibility and benefits for the guild-industry health plan were tightened last year but producer contributions were not increased. It noted that average employers pay 10% to 15% of payroll toward health care, while AMPTP companies pay 5% of total compensation.

“The companies must do what every employer across the country is doing — increase the amount they pay in to assure the soundness of the health fund,” the guild added.

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