The Strike Is a Lawyers' Game: How to Play to Win

This piece is by WGA strike captain Alfredo Barrios, a former corporate attorney turned writer. It offers insight into what the AMPTP methods and rationale for undermining the writers' resolve. Thanks to Ashley Gable for submitting this to us. -JA

We’re two months into the strike, and I’ve noticed a certain confusion and fear emanating from certain quarters about how things have been “handled” by our “leadership.” Some ask: are we being too militant with our demands and “rhetoric” and all this picketing and chanting? Isn’t that what’s keeping the studios from “coming back to the table?” Shouldn’t we be nicer guys and gals? If we were, surely they’d come back, right? I mean, we have to show we’re “reasonable.”

From other quarters, people pose the question: why are the studios acting so insanely? Our demands are reasonable. Don’t they understand that they have a lot to lose? Surely, it’s the hardliners who are holding things up, right?

Regardless of what camp you fall in, everyone is grasping for an explanation of why the studios are acting the way they are. That’s because with the exception of a few carefully prepared press releases, a trade ad or two, and some supposed “leaked” stories, we haven’t heard directly from any of the CEOs about the strike. We’ve only heard from Nick Counter – their point man. Their lawyer.

I’m here to tell you, as a former litigator who spent several years at one of the biggest corporate law firms in the world, that we’re all in engaged in a huge lawyering game, and things are proceeding accordingly. For the record, I have never met Nick Counter, but I spent all of my years as a lawyer working for guys like him, in service of the types of conglomerates he now represents, against people like us.

So I’ll briefly spell out the rules of the game and my view of what it will take to win the strike – and by win, I mean accelerating toward a resolution with the studios on terms that are favorable to us.

BASIC RULES

First, understand the relationship between Nick Counter and the studios. It’s essentially a lawyer-client relationship. The AMPTP is run by lawyers like Nick Counter and Carol Lombardini. Think of it as an in-house law firm. Their goal is to “negotiate” deals with unions on behalf of their clients – the studios.

As lawyers, Counter and Lombardi have to justify their paycheck. What does that mean? They have to add value. They’ve promised to deliver a more favorable labor deal than the studios would get without them. Otherwise, there would be no point in hiring them (or more aptly, keeping them around). So our loss is their gain. And the bigger our loss, the bigger their gain.

Now here’s the thing to remember, fairness and reasonableness have NOTHING TO DO

with their approach. No corporate lawyer I’ve ever known has ever met with a

client and promised to get them the most “fair and equitable deal” possible.

That’s not their goal. Instead, they promise to save them a lot of money –

remember, added value. If the studios were genuinely interested in reaching a

fair and equitable deal, the CEOs and their CFOs would talk directly to our negotiating committee and financial people, and a deal could be reached today – by the way, this is what we’re driving towards. We will know we will have won when the CEOs and their CFOs talk to us directly – more on this later. Back to Counter…

So, what exactly have Counter and Lombardi promised their clients – the studio heads? Two things: a specific outcome by a certain point in time and peace of mind.

CEOs hate uncertainty. They run their businesses based on long-range plans that are based on long-range assumptions. So as a lawyer, you do your very best to put their mind at ease when faced with an inherently unstable situation – be it a lawsuit, a takeover deal, or a strike. You say to them, “You don’t have to worry about a thing. We have this under control.” Then you spell out what you believe (more often hope) is the most likely outcome. “We feel confident that we can
…get this suit dismissed at the pre-trial stage.”
“… get this deal closed by Christmas.”
“…resolve this strike by_______ on ________ terms.”
The CEOs nod their heads happily, confident that their well-heeled, well-paid lawyers are looking out for their interests, and then go about their business.

So what is that timeframe and what are the terms? My guess is that Counter and Lombardi promised to hold the line on DVDs (still a significant source of revenue for the studios at $15.7 billion in U.S. sales last year) and to rollback residuals and the attendant pension and health contributions that flow from them. By now, we all know that no payments on new media equals a rollback in residuals. And given pattern bargaining, getting rid of our residuals means getting rid of residuals and attendant P and H contributions industry wide. A huge cost savings. Fairness and equity have nothing to do with it. Remember, added value.

By when? My guess is just short of killing pilot season. Writing off the rest of this season may have been worth the gains that Counter promised. We’re talking about rolling back residuals and P and H contributions not only in this year, but also well into the future.

So why not write off pilot season also? Remember, CEOs hate uncertainty. They can quantify the losses from writing off this season. But they can’t do that with a write-off of the entire upcoming pilot season. Too many variables. How will reality do? How will their advertisers react? How much audience will they lose permanently? On top of that, they forego a huge revenue injection from the upfronts – over $18 billion was reportedly taken in by the TV industry as a whole in 2007 (nearly double the box office take on movies for all of last year). And they face a second labor strike in June – SAG. Shareholders are only so patient… or forgiving. And remember, they like certainty, too. That’s why they’ve already been taking their money elsewhere – shares of media companies have been falling at a greater rate than the market at large (check out TheStreet.com’s December 20, 2007 article, “Strike May Rewrite Stocks’ Script”).

Going back to CEO peace of mind. This comes in a couple of forms. First, lawyers tell their clients that they won’t have to get their hands dirty. Lawyers will be the bad cops on their behalf. They’ll serve as a shield for their clients. Lawyers always want their clients to feel comfortable – that’s part of what’s promised. “Go about your life. Don’t worry about a thing.” Second, it comes in the form of laying out how things will play out. “You can expect that the plaintiffs will engage in several months of discovery…” “…the company you’re hoping to acquire will seek a white knight,” “…the strike will lose steam and the writers will fragment.” All things that have a very good chance of happening. And when they do, the lawyer looks like a genius, and his client thinks, “Man, I’m in really good hands. I have nothing to worry about.” It’s about managing expectations.

THE LAWYER’S STRATEGY

Lawyers try to do three things to their adversaries: (1) get them to doubt the validity of their position; (2) undervalue whatever cards they’re holding (in other words, underestimate whatever leverage they have); and (3) kill their resolve.

How does a lawyer get an adversary to doubt his position? Well, in litigation, it comes by spinning the facts. In transactional deals, by spinning the financial numbers. And in a strike situation, by spinning both. One common technique is making a nonsensical argument so many times that it begins to take on the air of a legitimate one and eventually some people (judges, jury, the public in general and sometimes even your adversaries) begin to accept it as truth. Lawyers are masters of this. Think of these doozies: “If the glove doesn’t fit, you must acquit,” “Smoking doesn’t cause cancer,” and my personal favorite, “We don’t have a business plan for or any real revenue from the Internet.” Or how about that $130 million offer that the studios supposedly made us several weeks back? The one that didn’t actually add up. Facts and numbers are spun every day in the courtroom, in the negotiating room and in the press by lawyers.

Now, here’s the thing to remember. It’s the lawyer who does the spinning. No CEO wants to do it. Why? Because so many of them want to be known as “straight shooters” – i.e., guys who don’t lie. Plus, they like to be liked. And going out and spinning facts and numbers… well, that’s like acting like a lawyer. Like Nick Counter. That’s why they hired him to do it. They want to be comfortable. Notably, neither Counter nor any of the CEOs has actually done any real press interviews to defend their position. Not hard to see why: it’s utter nonsense. So they spin in press releases or “leaked” stories that are regurgitated by mouthpiece trade papers and other seemingly “unbiased” but wholly bought off parties.

And how does a corporate lawyer gets an adversary to lose confidence in whatever leverage he has? One way is to engage in positional bargaining. That means anchoring your negotiating position to an extreme and unprincipled number over such a long period of time that your adversary starts to doubt the cards he’s holding and eventually moves off of his number and gets closer to yours. That’s what the AMPTP has been attempting to do with its new media proposals – or actually, lack of proposals. They’ve anchored to basically zero payments for new media in the face of our fairly principled new media proposals. They’re hoping that doubt will creep into our psyche – “Wow, man, those companies are really holding to that number, maybe our bargaining position isn’t as strong as a I thought. Maybe we should take whatever the DGA gets.” And so on…

Once you start down that path, you’re losing your resolve. The corporate lawyer knows you’ll start to rationalize why you should take a really bad deal. And you start to buy into the arguments he’s making – “That lawyer of yours isn’t doing you any favors.” “I hate to tell you this, but you’re wasting a lot of time and energy with this case. It’s a loser.” “As a guy who knows, you should take what we’re offering you because it’s not going to get better.” Sound familiar? It’s the sort of stuff being put out by the AMPTP’s PR guru, Chris Lehane, who, by the way, is also a lawyer – and a classmate of mine from law school. Small world, huh? Couple this psychological warfare with the increasing expense of fighting… and people will crack.

Posture and overwhelm with superior power – or the semblance of power. That’s Corporate Lawyering 101.

So… how do we win?

OUR STRATEGY

In my experience, the guys that win against corporate lawyers and their clients – and believe me, I’ve seen it happen – are the guys that (a) never lose sight of their cards – in other words, aren’t fooled into believing that they’re holding garbage, and (b) play lots of offense.

I’ll begin with playing offense. That means taking the fight to the other guy’s client – the decision makers – the CEOs. Remember, THEY LIKE TO BE COMFORTABLE. That’s what their lawyer promised them they would be. So how do you take the fight to them? Well, in litigation, you bring them into the game by making them the target of discovery – you depose them, go through their papers, ask them all sorts of question. You take them out of their comfort zone. You make them the focal point of the case… they’re the bad guy. In transactional matters, say a takeover attempt where you represent the buyer, you go after the “entrenched management” that wants to deprive the shareholders of the real value of their holdings… they’re the bad guy. In a strike, you hold the CEOs accountable. Why? Because they are ultimately the bad guys… the buck stops with them, and they need to be reminded of that always. Counter is just their hired gun.

And by taking the fight to them. I mean, maintaining picket lines at the studios at peak levels, relentlessly picketing locations, continuing to put out creative videos that entertain and inform people about the strike, denying waivers to award shows and picketing those shows, seeking alternative ways to put out creative work on the Internet for pay, etc.

Playing this kind of offense serves a couple of purposes. First, when a CEO drives through the studio gates, or hears about how a location shoot was impacted by picketing (like for example, when an actor leaves the set or a day has been added to the schedule), or sees how his untenable bargaining positions are being ripped apart on websites, or is told about how his award show is falling apart, or reads how Google is about to form a competing entertainment powerhouse, it all collectively begins to call into question the promise that Counter made – i.e., that we would crumble. It’s a daily reminder that we are not losing our resolve. It makes him worry. His expectations aren’t being met. Things are uncertain again. And it begins to chip away at Counter’s credibility as the guy who could resolve the strike with minimal inconvenience to the studio CEOs.

This last point is important. Why? Because the way you win is by taking the lawyer out of the equation. Deny him the promise that he made to his client – i.e., that he would add value by battering all of us down. Once the CEOs begin to believe that we’ll stick to our guns until we get a fair and equitable deal, that’s when we’ve won. That’s when the CEOs and their CFOs will step in and begin to deal directly with us. Why not Counter? Because his job wasn’t to deal with real and fair numbers; it was to screw us. Once he fails at that, it’s time for others to step in. Trust me, it happens.

But it requires believing in the cards you’re holding – your leverage – and sticking it out. The bigger the show of resolve, the faster the CEOs will dispatch Counter. As profit losses mount and their share prices take bigger hits, the studios will realize that holding out for Counter’s promise looks increasingly like a fool’s game.

But the CEOs will only step in if they believe a fair a reasonable deal can be reached. That’s why it’s important to always maintain principled bargaining proposals on the table – as I believe we have throughout. Unlike Counter, I don’t believe we’re engaging in the positional bargaining. Having said that, I think we made one very serious mistake in continuing to keep our DVD proposals off the table. Bad faith bargaining – like the type that Counter has engaged throughout – can never be rewarded, and I have heard no compelling reason to keep our DVD proposals off the table. As I mentioned above, DVD sales in the U.S. alone were nearly a $16 billion revenue stream for the studios in 2007. I understand that DVD sales are declining, but they still dwarf revenue from the Internet – which is forecasted to total $4 billion over the next 3 years. And that’s the length of our contract: 3 years. So we gave up a piece of that greater pie for what? Nothing. Some might say: but it was either a DVD bump or a new media deal. Really? Says who? We have principled arguments to get an increased share of DVDs and a fair slice of new media – and, I believe, the leverage to get both.

As the upcoming DGA talks proceed, I predict that Counter will try to ram a really bad deal down the director’s throats. And he may succeed, given the makeup of that union’s membership and their historic appeasement of studios during labor talks. I suspect that whatever deal is reached will be slightly better than what was offered us (it certainly couldn’t be worse) and will be wielded like a stick to beat us into taking it as well. The DGA leadership will certainly have every incentive to spin it as a huge win for them and the industry. How could they not? It costs the studios nothing to take this approach. If we don’t take the same deal, they’re back to dealing with us, and the DGA is the only loser.

As for acting like “nicer” and “more accommodating” guys and gals… Well, let me just say that in all of my years as a corporate lawyer, “nice” and “accommodating” adversaries who never stuck to their guns and didn’t bring the fight to us never got better deals. They only get worse ones. So don’t buy into the our-leadership’s-too-militant line of argument. They’re not. They’re being appropriately tough. Trust me, you wouldn’t want it any other way. Now it’s up to the rest of us to hang tough with them.