It may not be a perfect storm yet, but ominous clouds are gathering.

As the winter holidays approach, there’s growing agita across the industry about the potential for substantial labor strife next year. The WGA, DGA and SAG-AFTRA are gearing up for master film and TV contract negotiations with the major studios at a time of sweeping change across the entertainment business.

The creative community is concerned about the impact of the latest wave of media mergers and acquisitions, and about how paychecks will be affected by the shift to direct-to-consumer content platforms. There is growing interest over what role Netflix will play in the next round of negotiations.

With so much of the industry’s focus on embracing the streaming revolution, it’s likely that the guilds will push for improvements in compensation and residual formulas for content that runs in the digital realm. In that scenario, there’s no doubt the largest conglomerates will point to the billions of dollars being invested in content to fuel the launches of Disney Plus, Apple TV Plus, HBO Max and NBCUniversal’s Peacock. A potential work stoppage hitting in late spring or early summer could be detrimental to the supply of marquee programs for these ambitious new business ventures. Already, major networks and studios are said to be starting to stockpile scripts and accelerate production schedules to fill the larder as much as possible.

With the stakes so high, the potential is huge for the guilds and studios to be at loggerheads over how to address these seismic industry shifts, veterans say.
The WGA has already moved into activist mode with its campaign to reform the rules governing talent agents who represent guild members. That effort has created a standoff that’s now in its seventh month, with no end in sight, as litigation between the guild and CAA, WME and UTA wends through federal court. The jolt of the break last April between agencies and more than 7,000 writer clients has led to a feeling that the new normal for the business is entirely unpredictable.

“People are not sure how things are going to shake out with the [studios] and with the agencies, and that makes you nervous,” says a veteran producer. The source is one of many in the business who are warily eyeing the 2020 calendar in hopes that contract issues don’t derail projects scheduled to shoot on tight schedules next year. The WGA’s master film and TV contract expires in May. SAG-AFTRA and DGA deals are up June 30.

If precedent holds, the DGA will be the first to sit down with AMPTP negotiators. The WGA typically initiates talks closer to the contract expiration date, to use the ticking clock as leverage. The WGA declined to comment for this story beyond a statement noting that it is in the process of setting its priorities for the Minimum Basic Agreement talks.

“In addition to staff conducting industry research and drafting potential negotiating proposals, the West Board and East Council will soon appoint the 2020 MBA negotiating committee,” states the guild. That happened Nov. 8, when the WGA appointed more than two dozen members to serve on its negotiating committee for upcoming talks on its master contract.

“Members will receive a survey to identify the MBA issues they consider most important, and meetings will be held in early 2020 so that members can provide further input prior to a vote on the pattern of demands ahead of spring negotiations,” the WGA West notes.

A representative for the AMPTP declined to comment on the upcoming negotiations.

Another big question mark that has industry insiders guessing is the void among industry CEOs with labor relations experience. When the WGA contract talks hit a wall last time around in 2017, then-CBS chief Leslie Moonves and then-Warner Bros. CEO Kevin Tsujihara took on a diplomatic mission to bridge the gap. Both executives have since been forced out of their jobs amid the #MeToo reckoning. Of the current crop of media CEOs, Disney’s Bob Iger has the strongest industry standing and relationships, but he’s also heading into his final 24 months at the helm of Disney and may not be inclined to engage.

Meanwhile, there are questions swirling around Netflix, which has already separated itself from the AMPTP by cutting a separate three-year film and TV contract with SAG-AFTRA in July. In October, the streaming behemoth announced its intent to negotiate its own contract with IATSE. It’s not hard to see Netflix turning to the WGA with a proactive contract offer that would eliminate the threat of a programming slowdown for the voracious platform. The fact that Netflix doesn’t face the same pressure as traditional media giants to deliver quarterly profits could make the company amenable to sweetening compensation rates and agreeing to other WGA demands. That in turn could give the WGA a big club to wield in its AMPTP talks. And it would cleave the creative community into haves and have-nots if a work stoppage hit other AMPTP companies.

Residuals for TV series reruns and movies carried on streaming platforms (or “new media reuse,” in the argot of the WGA’s master contract) are now the WGA West’s single-largest category of residuals. For 2018, new media reuse residuals for TV writers hit $76.5 million, up 263% from 2013 levels, according to the WGA West’s 2019 annual report. For film writers, residuals in the category reached $47.2 million, up 356% since 2013. In 2018, new media reuse residuals accounted for nearly one-quarter of the total residual haul of $462.4 million from all worldwide sources of exploitation.

Despite the triple-digit gains, writers feeling the squeeze of the industry’s changing pay structures are quick to share stories of receiving meager residual checks for shows that are now available 24/7 on an on-demand basis. New media reuse fees have not made up for the sharp drop in residuals for cable and broadcast TV and home videos during the past five years. That sentiment could give writers at all income levels the incentive to support a hardline push by the guild for higher rates.

The standoff between the Writers Guild of America and the largest talent agencies has only added to the sense of unease about the coming guild negotiations. The estrangement between writers and agents means that some of the industry’s most experienced dealmakers will stay on the sidelines. The frustration level is rising as sources at each of the big five agencies — WME, CAA, UTA, ICM Partners and Paradigm — say they are quietly back to having regular communication with some former clients. But any business-related actions taken by agents still have to be masked as flowing through lawyers and managers lest WGA members face sanctions from the union for working with agents who haven’t agreed to abide by the WGA’s new agency code of conduct.

“It’s a ridiculous situation,” laments one top agent.

The agent says that in recent weeks he has returned to advising more than a dozen clients who formally severed ties with the agency after the WGA imposed its new rules. Other agency sources concur, saying that the incoming calls have increased in recent weeks as scribes who were booked solid back in April are now looking ahead to 2020 and seeing holes on their work calendars. A number of showrunners and producers are said to be trying to pull together comprehensive series packages to take to market with some fanfare — the kind of things that agents were typically active in helping to assemble.

With so much uncertainty rippling through the industry, there’s a lot of worry in writers’ rooms and executive suites that the unpredictable business climate will lead to fierce gale-force winds early in the new year.

“Batten down the hatches,” says a seasoned network executive-turned-producer. “I’ve never seen it as weird as this.”