WGA deal: Plenty to think about

By CYNTHIA LITTLETON

There's a lot to digest from all the info about the WGA deal that has been released in the past few days and discussed at Saturday's WGA West membership powwow at the Shrine Auditorium (pictured). A few things that stand out, or were pointed out to me by people much smarter than I am about this stuff:

No. 1 -- Surprising that more hasn't been made about the deal's provision on streaming of library product going back to 1977, which pays scribes 2% of distributor's gross from the FIRST year of the contract and with NO PROMOTIONAL WINDOW.

The deal defines library product as any program offered for streaming more than one year after the initial telecast of the program. (That's in line with the DGA's formula for network primetime shows that are offered for streaming for more than one year, and in line with the WGA's provision for the first two years of its contract.) That's probably going to be meaningful for some scribes in the near future as the majors push web initiatives like the NBC Universal-News Corp. joint vid venture Hulu.com, which is based on offering tons of segs, if not entire seasons, of library shows. Right now, ABC.com is offering the first three seasons of "Lost" for ad-supported web streaming, which means those scribes will be paid at the distributor's gross rate from the get-go once the contract is ratified.

A potential rub could come in the issue of how nets and studios determine the license fee that distribs will receive for older episodes that are licensed for web streaming. The issue gets even more complex when it involves different units of the same congloms, as so much of TV production and distribution does these days. Which brings us to the next standout issue in the WGA deal.

No. 2 -- What's all this business about an "imputed value" of $40,000 for an hourlong program and $20,000 for a half-hour program being established upfront for the switch to a distributor's gross formula for web streaming in the third year of the WGA pact. Isn't that like cooking the numbers, if both sides already know what the distrib's gross is going to be three years from now? Especially when it turns out that 2 percent of the "imputed value" works out to only a little more than the fixed residual fee from years one and two?

The answer is yes, and no, I'm told.

For one, laying down the "imputed value" foundation upfront was the only way the majors would agree to the third-year formula switch, so that they'd have some idea of the costs they'd be looking at in the '10-'11 year of the deal. The other big problem is that nobody's really too sure of what the market value is for the streaming rights to a single episode.

So far, the vast majority of the streaming deals have been between entities of the same conglom, though there have been some arm's length transactions such as deals between CBS and Warner Bros. and NBC and 20th Century Fox TV. But even in those cases, streaming rights have been built into the overall license fee that a net pays a studio for the right to telecast (the old-fashioned way) the program.

From the WGA's perspective, the key was to enshrine the notion of a distributor's gross-based residual payment in this contract go-round. During the next three years, the sides will have the time to watch the Internet biz develop and see what the market will really bear for streaming rights. That's why the financial and usage information disclosures that the majors agreed to for the DGA and now WGA have been so important, if not particularly sexy on the surface.

The guilds are supposed to now get unprecedented access to studio deal paperwork and financial records "without redaction" (or covering up the most significant parts) as both sides try to wrap their arms around the real proft-generating parameters of the new media biz. The deal point about ensuring that intra-company deals pass the fair-market-value sniff test, or "are subject to a test of resonableness when compared to transactions between unrelated parties," is also important here. But playing devil's advocate, all of this disclosure and scrutiny of dealmaking could set the stage for another big showdown (again) in 2011 when both sides have a lot more info.

No. 3 -- What happened to all the talk that the WGA was seeking a cut of advertising revenue that the congloms were realizing from embedded ads in programs offered for streaming? It was all a big misunderstanding, sez the WGA -- a perfect example of how the sides could not communicate with each other even on the most fundamental level of defining what it was they were arguing about. The WGA's move to hire lawyer Alan Wertheimer to help them sort out the distributor's gross definition and other issues spoke volumes to the studios about the WGA's willingness to admit some of its responsibility in all the misunderstandings and get down to the serious business of negotiation and compromise.

No. 4 -- Why is cable programming lumped into the "other programs" column and doesn't get the same 2 percent of distributor's gross formula? The deal calls for all programs other than network primetime to be paid under the 3 percent of applicable minimum for the first two years, rising to 3.5 percent of the applicable minimum in the third year. This I'm not entirely clear about but I'm told that because cable license fees are still so much lower than for broadcast, the WGA's thinking was that the 3.5 percent of the applicable minimum would yield more for scribes than the 2 percent of distributor's gross.

No. 5 -- Securing pension and health eligibility for writing done for new media was seen as a win by many WGA members. I'm told some of the company reps had told negotiating committee members that it would "never happen," though it is also included in DGA pact.

No. 6 -- Speaking of pension and health, there's a little-noticed line in the WGA's four-page summary that sez "A sideletter resolves a pending dispute about the Health Fund contribution rate." That translates to, the majors have dropped the federal arbitration claim that they filed in June, a month before the start of the contract negotiations, as a result of a dispute about how much the companies needed to pay into the WGA health fund during the last six months of the 2004-2007 contract. The AMPTP side raised hackles among WGA health plan trustees by including some language regarding liability in that arbitration filing that made it feel a like a lawsuit to the WGA side. (It's all very very wonky but detailed cogently, I hope, in this earlier column.)

So what have we learned from the whirlwind of activity during the past seven days?

Perhaps the most surprising and salient observation I've heard from either side came from the CEOs of one of the Big Seven members of the AMPTP. In this town, it's all about relationships and trust. It's a cliche, fer sure, but it's true. To wit:

"We'll never know" if the strike could have realistically been avoided, the honcho said. "I hope there are no lingering bad feelings. We want them to feel good about what they struck for and what they got.  And let's keep a conversation going (outside of contract negotiations). If there's an issue that comes up, we can correct it midstream. Not everything has to be done in a (formal) contract negotiations. Let's have a level of trust that exists between us so that we don't get back into one of these all-or-nothing situations."

Comments

[Stuart Creque]

"Let's have a level of trust that exists between us so that we don't get back into one of these all-or-nothing situations."

And the best way that the WGA and the other entertainment industry guilds and unions can foster that trust is to form a unified and powerful labor movement, so that they have the collective power to persuade management to keep its promises. If labor is too united to be double-crossed with impunity, management will find it a lot easier to stay honest, and thus trust can take root and grow.

[Luzid]

"Let's have a level of trust that exists between us so that we don't get back into one of these all-or-nothing situations."

Yeah, because the studios have shown they're soooo trustworthy, what with the decades of shady financing to rob writers of residuals, the horrific DVD/cable 'deals', and the retraction of a promised Most Favored Nations clause at the last minute of this negotiation.

[Luzid]

"Let's have a level of trust that exists between us so that we don't get back into one of these all-or-nothing situations."

Yeah, because the studios have shown they're soooo trustworthy, what with the decades of shady financing to rob writers of residuals, the horrific DVD/cable 'deals', and the retraction of a promised Most Favored Nations clause at the last minute of this negotiation.

[Marian Martell]

It seems disingenuous to say: "Let's have a level of trust that exists between us so that we don't get back into one of these all-or-nothing situations." When the AMPTP walked away from the table, twice, refusing to negotiate until after they had damaged the lives of tens of thousands of people (most of them not even members of the WGA). I am still mystified about why the studios and networks wanted to engage in these union busting techniques in the first place. And I'm continuing to write to my Congressional Representative about the anti-labor tactics and the history of secret accounting practices.

[Fi Core]

Think about thanking the dga for doing what ur leaders couldn't get ,think about all the showrunners working rite now even before a vote, think, about in 3 years so much reality that u will never be able 2 shut down this town,think about.............................walmart !!!!!!!!

[Action/Reaction]

Trust can't exist with a souless entity like the AMPTP. It is a conglomerate of companies with no real central authority. Trust might be established on a personal level with individual entities, say holding Iger, Chernin, et al to their word, but forget about universal trust. The AMPTP walked away from the table, but it was still a table the WGA set up. By trying to inflict pain and damage upon the entity, they responded by relieving pain. Expecting anything less, or complaining about their tactics, is naive but still could not have happened without the writers inititating it. And the writers will make some real gains, but they will also take some real hits as the studios continue to rework their business model to protect themselves from the pain inflicted this time, just as they did some 20 years ago. None of these battles is fought in a vacuum.

[Fi Core]

Also think about any job openings u might have. I need a new one soon! Where is a union when u need one!!!!!

[Fi Core]

get ready for more pink slips go american idol !!!!!!

[My last post here]

As the strike ends, I'm no longer surprised by someone like Fi Core's posts. Obviously, he or she knows nothing about the situation, despite having posted so fiercely (and ironically, with such awful writing skills). I'm now pretty sure s/he does this just to get a rise out of writers and has had some success. Good for you. Just so you know, the DGA got their deal done with much better terms for them because of the strike. Period. Never would've happened otherwise. Also, without the strike, the WGA becomes a dead union in a rather short amount of time. No new media, no contributions to pension and health, decline and end of union. So we had to strike simply to survive in a country where unions have been beaten down for 30 years. Is that simple enough to digest even for you, Mr. or Ms. Fi Core? That, and the fact that every writer on the line knew they'd never see the amount of money they were losing during the strike back in their pockets because of this deal. It was for the future, and future writers, like the generations before did for us. So the strike is done, but for the vote to officially end it, and this is my last post here. Goodbye, Fi Core. I'm going back to work and I don't have time to play with you anymore. I hope whatever has made you so bitter isn't so bad that you can't overcome it one day. Or if you simply were a paid corporate shill, then may I say, you were pretty terrible at making your case. The companies should get their money back.

[Paul]

Good luck, Fi-Core, as you wander off to heckle the next cause as a way of trying to fill your awful, empty day. Maybe you can hook up with one of the other countless online deadbeats who have stood on the sidelines of this dispute, adding pointless, ignorant, poorly spelt rants.