The significant progress made in the DGA's tentative contract agreement with the majors stands as a hopeful sign that labor peace may soon be at hand. And it's also provides perfect examples of what's gone wrong to date in the fitful negotiations between the Alliance of Motion Picture and Television Producers and the WGA. The lack of communication between the studios and the scribes has been devastating to the creative community, below-the-liners included, and a failure of leadership on both sides of the picket lines.
The DGA rightfully touted on Thursday its victory in achieving big gains in residuals for electronic sell-through (aka paid downloads) based on a percentage of distributor's gross, not the despised producer's gross homevideo formula that took 80% of the distributor's revenue off the table, leaving 20% for the scribes and helmers to take a slim percentage of (1.5% or 1.8%, for sales after $1 million) as a residual. It's understood that the AMPTP wanted to base the deal on some definition "producer's gross" in the deal but the DGA held firm, on the rationale that it's too easy for the majors to move money around to make the producer's gross a lot punier than the distributor's haul.
The WGA pushed hard in its approach to the studios for a distributor's gross formula, but it was a non-starter, the AMPTP reps repeatedly told the WGA. How come? Because, according to execs from the AMPTP member congloms, they quite weren't sure what the WGA meant by the D- and G-words. AMPTP reps raised the specter of the WGA demanding a cut of advertising revenue from new media exhibition platforms (ABC.com, NBC.com, etc.) if they were owned by the same company that distribbed the program to the Internet (as is more often than not the case in post fin-syn Hollywood).
So why didn't the companies just ask for clarity? Why didn't they demand a simple, declarative sentence, a la the DGA's snappy "Distributor's gross is the amount received by the entity responsible for distributing the film or television program on the Internet." AMPTP says they did; WGA says it was the majors who refused to define their understanding of distributor's versus producer's gross. I can't imagine a first grade teacher accepting such a "did too/did not" explanation for why the entire class flunked the math test.
Equally important, from the DGA's perspective, is the breakthrough the pact gives the guild in getting access to the studios' books for auditing and review purposes. Although the details haven't been released yet, the DGA pact apparently calls for the guild to have unprecedented access to studio's Byzantine accounting records. A top exec from the AMPTP camp even acknowledged to me on Thursday that the agreement will bring a whole lot more "transparency" to the process.
I've never bought into the conspiracy theory that the studios were playing hard-hard-hardball with the writers because the end game was to break up the union. As much as the guilds can be a thorn in the side of the congloms, consider the alternative for the employers. Virtually every significant talent deal would be a free-for-all negotiation of compensation, rights, residuals, perks, working conditions, etc. Each network and studio would need three times the number of biz affairs execs just to keep it all straight.
But it does seem evident that somewhere along the way the majors decided that they simply could not deal with the WGA. In the view of AMPTP conglom execs, the new regime led by WGA West prexy Patric Verrone and exec director David Young began banging the hammer and sickle too early and too often -- it put the companies on the defensive right away. And they didn't believe that the WGA was willing to get off the soap box and engage in the give-and-take that defines successful contract negotiations.
When the references to income inequality and the greater middle-class struggle in the nation at large (however true it may be), the CEOs shut down, for the most part. The more alarmed they've become, the more their fear and loathing of Verrone and Young has increased. They became convinced that the WGA was just aching to go on strike all along. And there was a sense, even among WGA supporters, that some WGA leaders were thriving a little too much on the attention they were suddenly getting from crowds on picket lines and at rallies.
For sure, the studios played their own brand of hardball, most recently with the dozens of force majeure terminations sent to writers and producers en masse. Think that wasn't timed to precede the DGA announcement, and stir writers into viewing the DGA terms as a way out of their misery? But maybe the most irrational, and frankly irresponsible, move on the majors' part came early on in July when they handed the WGA a proposal to dramatically revamp (some say "eliminate") the concept of film and TV residuals. Putting this proposal on the table at a time when both sides knew they were in for tense negotiations on massively complicated issues seems akin to throwing gasoline on a fire.
History, and the fine print of the eventual WGA contract, will judge whether the clenched-fist approach by the WGA was a sound one. The initial reaction to the DGA's deal among many (but not all) industryites is that it's a pretty good deal, and they wouldn't have gotten there without the WGA taking the first bullets, and making the sacrifice of striking.
When the majors issued their now-infamous Dec. 7 ultimatum that the WGA had to drop six of its proposals as a condition of continued bargaining, the focus was on the guild's bid for blanket jurisdiction on reality and animation production. It didn't help that the guild had sponsored a reality-centric rally in Burbank that day, at which Verrone assured the crowd that reality jurisdiction "will be in our next contract." That didn't sound like the "everything's negotiable" message that the WGA negotiating committee was sending inside the bargaining room -- where reality and animation were only briefly discussed. Yet Verrone's statement gave the AMPTP more ammo to walk away -- and freeze writers out well into the new year.
When the DGA made its move earlier this month, it had the leverage of knowing that the studios wanted to finally hammer out the biggest of the compensation issues (at least for the next three years) and show show they could make a deal with at least one of the Big Three creative guilds. But the DGA also had the extra burden of having to craft a deal that would be palatable to moderates within WGA and SAG, for that matter.
Under the circumstances, reasonable observers agree that the DGA chief Jay Roth and DGA negotiations chair Gil Cates expertly navigated the waters and moved the studios as far as they would go on the money issues. They more than likely wouldn't have been able to do it without the pressure created by the writers strike, but at the same time it's clear that the WGA leadership, through their own words and deeds as much as through AMPTP intransigence, could not even break the negotiations stalemate on their own.
Perhaps the key lesson to be taken from the quagmire of the past three months is the incalculable value of trust and communication in these kinds of negotiations. Before the conversation turns to percentages and profit formulas, it out to be rooted in a deep understanding of each side's needs, and a spirit of compromise. By all accounts, the DGA gets an A-plus for its pre-production effort leading into its six days of formal bargaining.
The WGA has so far done a great job of rallying its members for a long and bitter fight, and not such a good job of establishing relations with the key players that were crucial to making the good deal the guild has so fervently pursed. The studios reached for the club, rather than a carrot, pretty quickly, and then made little effort to find that path to compromise when confronted with personalities and tactics that they didn't like.
As that first-grade teacher would tell her math-challenged students: Now it's time to think about what happened, study hard, and try even harder the next time.
A number of WGA insiders say the tenor of the guild talks was set back in the summer when the AMPTP and WGA trustees of the WGA health plan had a dispute about funding of the guild's medical plan.
This gets deep into the arcana of trust fund law, but in a nutshell, the charter of the Writers Guild-Industry Health Fund allows that if both sides agree that the fund is flush enough with money to meet all of its obligations to health plan members, the AMPTP companies can reduce the total amount of their contribution to the fund by a half-percent in the last six months of the guild's master contract. (The last WGA contract in 2004 called for AMPTP companies to contribute 8.5% of the amount that they collectively paid scribes during the contract.) This year, as the six-month window approached, the 17 AMPTP trustees on the board that oversees the health plan raised the issue of the half-percent reduction, but the 17 WGA trustees weren't so sure the plan was fully funded to warrant the reduction.
In the event of such a dispute, the health plan agreement calls for the sides to try to find an "impartial umpire" to make the call, and if they can't agree on the impartial ump, then they go to federal court to ask a judge to find them a referee. The studios filed for that arbitration in early July. What made the situation more unpleasant, in the view of WGA reps, is that the AMPTP's complaint included a provision requesting repayment of attorneys fees and other legalese that made a relatively pro forma filing much more like a lawsuit against the WGA trustees. A small matter, in the scheme of things, but the WGA side saw the maneuver as an ominous sign of the hardball to come in the Minimum Basic Agreement negotiations.