Global Boondoggle With No 'Back End'

At issue, really, is whether the unions will be able to catch up with an industry that has, in the past two decades, "radically restructured itself, vertically, horizontally and globally," as Paul Worthman of AFTRA puts it. What the writers and actors want is better compensation for their work when it appears--or reappears--in the booming cable, Internet, video, DVD and foreign markets. Too often, the artists are paid little or nothing in residuals for such reuse and resale of their work.

When a consumer plops down $25 for a new DVD, for example, the credited screenwriter receives only 4 cents. Much of the current residual formulas date back to the 1980s, when cable and video were infants, when DVDs and the Internet had not yet been born, and when foreign sales represented 30 percent of TV and movie revenues, instead of today's 65 percent. "Over the past decades, the companies asked artists to accept significantly reduced or bargain-basement residuals to help them build new foreign markets, in home video, DVD, off-network reruns on basic cable, reruns on foreign TV, made-for-basic-cable, made-for-pay-TV and the Fox Network," says WGA president John Wells. "Writers did so with the understanding that talent would eventually receive a fair share as those markets matured."

They have more than matured. The vertiginous concentration of ownership throughout the entertainment industry, the rivers of revenue produced by "synergistic" marketing, the profligacy inherent in plowing, say, $140 million into the new film Pearl Harbor, convince the creative unions that the time has come to present an overdue bill. "You get the feeling, this is our last chance before we completely miss the boat," says actor Matt Kimbrough, an activist member of SAG and AFTRA.

With a single conglomerate now able to produce a film in its studio, rerun it on its own TV network, exhibit it abroad through a subsidiary and then remarket it on video and DVD, for example, unionists speak of "transfer pricing" abuses. Companies within the same corporate family can move product back and forth at below fair-market value, thereby chipping away at residual earnings for actors and writers.

The economic stakes are enormous for both sides. And depending on whether you talk to the unions or the employers, over the next three years it will take somewhere between $750 million and $2.7 billion to satisfy the labor demands. "We are so far apart on the economics that there was no way to bridge the gap," said the industry's lead negotiator, Nick Counter, as the first round of talks collapsed. So far apart, in fact, that even after the WGA scaled back its demand to increase DVD residuals from 100 percent to 25 percent--or an extra penny per sale--the producers rebutted with an offer of a zero percent increase.

Belaboring the Hollywood Myth

Sitting across the table from labor is Counter, head of the Alliance of Motion Picture and Television Producers (AMPTP), consulting with a council of about twenty studio labor relations managers as well as a three-man team of economic advisers: Viacom boss Jonathan Dolgen, Disney president Robert Iger and Warner Brothers chief Barry Meyer.

Insiders say that Disney's Iger and Fox mogul Rupert Murdoch are taking the toughest line. And some think the studios are itching for a strike--an opportunity not only to roll back the unions but also to burn up deadwood deals with unproductive producers.

In turn, the unions face some steep challenges in the coming negotiations. To make their case for a fairer performers' share of revenues, they must marshal to their advantage the mountains of data provided by what is called "The Residuals Study." This report, an unprecedented opening of the employers' books, was won by SAG in the 1998 contract. The union considered it so crucial to identifying new sources of income for employers, and therefore potentially for its members, that it gave up higher wage demands in return. The employers dragged their feet for two years before turning over the data earlier this year.

"We also learned a lot from our six-month negotiation and strike in the commercials industry last year," says actor John Connolly. Connolly is a SAG member and first national vice president of AFTRA, as well as co-chair of the actors' negotiating committee in the upcoming talks. "Even though we won substantial gains, neither the mobilizations during negotiations nor the strike itself were well enough prepared, in tactics, infrastructure or leadership development."

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