WGA talks hold little optimism

Writers keep strike an option

Strike fever’s about to hit Hollywood hard.

With WGA negotiations set to resume Wednesday, the saber-rattling is growing louder and the public posturing more pointed. So there’s little optimism that the town’s scribes will reach a deal with studios and nets by the Oct. 31 expiration of the WGA contract.

Most expect that the guild won’t strike at that point but rather tell its members to keep working under terms of the expired deal in hopes of securing a better one once SAG negotiates next year prior to its June 30 expiration.

Still, the WGA’s not taking the strike option off the table. It’s converted the members’ lounge at its headquarters into a strike HQ, and WGA West prexy Patric Verrone admits the guild could schedule a strike authorization vote by early next month.

Belligerence between the two sides has grown since two acrimonious days of bargaining in July. The Alliance of Motion Picture & Television Producers proposal — a revolutionary revamp of residuals in which payments would be triggered only when producers recoup basic costs — is still reverberating two months later.

AMPTP prexy Nick Counter contends that fast-shifting showbiz economics have left the companies with no choice but to come in with their guns blazing. He cites soaring costs of film and TV, uncertainty over Internet revenues and flat DVD growth, rattling off MPAA stats showing an average deficit of $70 million per film.

“We are in a high state of deficit financing,” he added. “We’ve made the same argument in the last two rounds of negotiations, but the difference this time is that we’ve put forth a formula to deal with it. The idea evolved gradually, but we are now at a crisis stage.”

The guild’s flatly rejected the notion of changing the residuals structure and is promising that the idea will be turned down without further discussion if it’s broached at negotiations.

“It’s not a serious proposal,” Verrone said. “We have no interest in dignifying it as a means of paying residuals in new media or in the traditional markets.”

Verrone contends that the revamp would essentially mean talent would cease to see any residuals since the companies use accounting techniques that can keep movies and TV programs permanently in deficit.

“Hollywood accounting is a fantasy designed to pay talent as little as possible,” he added.

Counter bristles at such accusations. “Our accounting is transparent,” he insisted. “It’s a fallacious argument to say that the revenues aren’t transparent because of profit participations and audits. Because of shareholders and participants, the industry’s books have to be transparent.”

The WGA and AMPTP have already grappled over the issue of the health of the industry. John Bowman, head of the WGA negotiating committee, has accused the companies of duplicity — crying poverty at the bargaining table while bragging to Wall Street about the industry’s prospects for growth.

Counter’s also peeved by the fact that the WGA hasn’t provided any kind of detailed response to its proposal.

“The view of the companies is that the WGA has not responded to our proposal; they have not bargained in good faith,” Counter declared. “We’re entitled to a point-by-point response, and they have not given us the courtesy of that. And we are surprised and chagrined. This is the first time in my experience that the other side has been nonresponsive.”

Asked about Counter’s complaints, Verrone said they’re nonsense and the companies need to move on.

“If they want a detailed response to their proposal, the answer is no,” he added. “And if they ask again, the answer will still be no.”

Counter asserted that the companies have the right to seek a revamp in the residuals formula if they’re not recouping their costs. Such a right rests in three-decade-old contract language covering pay TV, under which producers reserve the right to redefine “supplemental” markets — such as homevideo — as “primary” markets; in the AMPTP’s view, that means the basic residuals formula can then be renegotiated so that residuals are not paid until costs have been recouped.

Verrone nevertheless remains upbeat, in part because he believes the town has come to the conclusion that the AMPTP is out of line in asking for something that the guild can’t give. And he calls the WGA’s proposal –seeking to spell out rates and residuals for new media and expand jurisdiction to reality TV and animation — fair and reasonable.

“I am optimistic that the companies will see the light of day and agree to a deal by Nov. 1,” he added.

Some observers don’t believe the AMPTP is completely serious about the proposal.

“I interpret the AMPTP position as a negotiating ploy more than anything else,” said Jonathan Handel, a partner at the Troy Gould law firm and a former WGA staff attorney. “The studios are aware that eliminating residuals is a nuclear option that would most surely trigger a strike.” 

Norman Samnick, an attorney with Bryan Cave who’s advised in past guild negotiations, believes there’s no chance that the WGA will make a deal by the deadline or go on strike. Instead, be believes the writers will wait for the DGA and SAG to make deals since both have more leverage in terms of a work stoppage.

He speculates that the DGA — which faces a June 30 contract expiration along with SAG — would be more likely than SAG to make a deal with the AMPTP later this year or in early 2008 given its history. That would follow what happened in 2004, when the DGA reached its current deal after the WGA contract expired.

“A WGA strike will not stop production,” Samnick noted. “The WGA will figure that SAG can do the heavy lifting for them. And I don’t think anyone’s sure what SAG will do.”

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