This is the second piece in an ongoing Variety Intelligence Platform series on the 2020 contract negotiations between the Writers Guild of America and the Alliance of Motion Picture and Television Producers. Part 1 concentrated upon what was at stake in the negotiations. This piece takes a detailed look at streaming media residuals, one of the key points in the talks.
This may sound familiar. A new innovation in viewing leads to changes in entertainment consumption. The Writers Guild of America uses the renegotiation of their agreement with the studios (the AMPTP) to redress the balance, with the studios reaping the benefits of the new revenues until the contract renewal. The WGA ends up getting short shrift, and resentment builds.
This could aptly describe how many of the WGA’s members feel about the rise of streaming media, but could equally apply to past entertainment revolutions spurred by VHS cassettes and DVDs. The long history of getting a bad deal means the current set of negotiations the Guild is having with the AMPTP will see the WGA dig its heels in to win concessions in order to right decades of wrongs.
If that language seems strong, consider that the AMPTP didn’t adjust the home video residuals that were set in 1985. With the dual issues of inflation and the fact that the residual was set when a VHS cassette retailed for $79.99 and not adjusted when the price kept getting lower, this meant that despite total sales booming as a result of many more titles available, writers were typically taking less home with each year.
With that history behind them, the WGA, along with the other major guilds, has dug in to make sure that the same didn’t occur with paid streaming. Curiously, the AMPTP left subscription streaming out of the 2007 agreement for new media, with the result being that with each round of negotiations for a new master agreement, the collective guilds have managed to better the residual rate.
Very few TV shows are now a hit in rerun syndication. For every “Big Bang Theory”, “Family Guy” or “Modern Family”, there are dozens and dozens of shows that don’t even get close to the 100 episode syndication threshold, as networks cancel shows after a season or two in the search for the next hit. This removes a valuable source of “long-tail” income for writers, which would help to keep them afloat while looking for the next gig.
It should be noted however that, based on the most recent WGA West annual report released in 2019, the residual decline for syndication hasn’t occurred yet. This is due in part to mega-shows such as “Friends”, “The Office” and “Seinfeld” still having lucrative syndication deals. The WGA is looking to the future in this case, for the increasing number of writers who are unlikely to ever have a show in reruns 20 years after initial airing.
The decline of the home video market is also removing a source of income for writers. Instead of purchasing a Blu-Ray of the latest releases, many simply opt to watch them via a streaming service. In truth, the home video residual rate has not accounted for a great share of total residuals, for reasons outlined above, but the reduction in this rate again removes more long-tail income for writers.
The shift in viewing from TV to streaming has seen subscription services like Netflix pioneer new talent agreements, front loading deals with little money to be made in the future. The change is due to the removal of syndication options, as once a show is commissioned by a streaming service, it typically stays exclusive to that service. This removes the chance of future pay days, with streaming residuals based on a scale which declines in value over time and based on a complicated combination of:
- The number of subscribers a service has;
- Whether the content is available domestically, worldwide or in select markets;
- The length of the episode;
- The show budget;
- The number of years since the season was released.
With traditional media companies who commission scripted content now all with subscription services save for FOX, they are offering similar deals to talent for shows on their SVOD platforms. The worry from the WGA is that long-term, these SVODs will become the primary offering from Disney, NBCUniversal, ViacomCBS and WarnerMedia, and will remove not only the potential for a long-term paydays that syndication would create, but replace most other forms of residuals at some point.
For these reasons, the 2020 negotiations represent a last stand for the Guild. When the negotiations occurred last time in 2017, streaming was a force, but it was represented primarily by Netflix and Amazon. 2020 sees Disney+ already a major force, and Peacock, a revitalized CBS All Access, and HBO Max all looking to have similar consumer impacts. The need to strike a good deal prior to the industry shifting to streaming is imperative, as the next wave of negotiations will be several years in the future.
The Director’s Guild of America, in their negotiations earlier in the year, achieved an increase in subscription streaming residuals of an estimated 95.44%, based on figures supplied. It’s expected that the AMPTP will offer these terms to the WGA, and the table above outlines what residual rates based on these will look.
The question will be if these are enough for the Guild. Knowing that the AMPTP’s members are already hurting for new content thanks to the COVID-19 production shutdown, there is a once in a lifetime opportunity to apply pressure and extract concessions to counter being on the cusp of traditional media’s shift to streaming, and the continued decline of reruns as a source of income. With a more militant stance apparent in WGA leadership, an attempt to force out additional concessions in the streaming residual rate should be anticipated.