The Strike Is a Lawyer's Game Part 2: It's Not Over... Yet

This is the second piece (and sequel to the first) by WGA strike captain Alfredo Barrios, a former corporate attorney turned writer.

I was asked to comment on the DGA deal. I decided to wait a few days. Like most of you, I was waiting for more information about the deal than a broad sketch in a press release.

In the meantime, it's my understanding that a small group of self-described “moderates” who advocated “patience” have ignored their own admonition and embarked on a mission to get as many names on a petition that essentially advocates that we should take the DGA deal, no matter its shortcomings – and as we all know, there are substantial shortcomings.

I’ve been heartened to hear that most people have resisted the urge to sign this so-called petition – regardless of whether they think the deal is generally favorable or bad. They know that the Negotiation Committee is about to go into meetings with studio CEOs in order to address problem areas in the agreement. And the CEOs seem willing to listen, given the leverage that we have at the moment. So why would you sign the petition, which only serves to undercut the Negotiation Committee’s power? You wouldn’t.

I won’t go into great detail about the DGA deal’s shortcomings. Most people know that the Electronic Sell-Through Rate is still abysmally low. As lawyer Jonathan Handel points out, the studios didn’t even meet us half way, and their rate only kicks in after certain sales volumes are met.

Most people also know that while the studios agreed to DGA jurisdiction over new works created for the Internet, it only applies to shows that have production budgets in excess of certain threshold numbers. Basically, if it’s a low budget Internet show, the guild doesn’t have jurisdiction over it. The problem of course is that most successful webisodes are low budget, and if you plan to create one, chances are you’d fall outside guild jurisdiction. So those threshold numbers need to move down in order for the jurisdiction provision to mean anything.

And then there is Ad-Supported Streaming… At the moment, the network rate for a rerun of a one-hour dramatic episode is roughly $21,000. The studios are now offering $1200 for a year’s worth of streaming of that same episode on the Internet, and this only kicks in after an initial two to three week period in which they would be able to run it for free. So as TV reruns become Internet reruns – and as anyone who owns a computer can attest, it’s happening now – our residual payments are obliterated. That’s why this proposal is characterized by many as a massive rollback. Remember, this is what we were fighting to avoid.

So what’s the answer? A flat rate closer to the existing network residual number? We can ask for it, but I think the studios will resist it. They argue that they’re still working out the business model for Internet streaming. They don’t want to be locked into a high flat rate number…

Which is why a graduated scale of residual payments makes so much sense. In other words, if a show streams on the Internet, and it’s successful (i.e., gets a certain number of hits), the writer of that show would get higher residual payments than the writer of a less successful show. It protects us and the studios. We both share in the upside. And if a show doesn’t do as well, the studios are only on the hook for a relatively low, initial flat rate payment.

I haven’t heard any reason why this wouldn’t work. I’d be interested in hearing what the CEOs have to say about it.

Some are asking: but would prolonging the strike be worth it? Would we want to strike for one or two or maybe several more months for a graduated scale and improved terms in various other areas? Fair enough. It is a cost-benefit analysis. And it depends – and this is critical – on what you think our leverage is.

The real question from my point of view would be: is it worth it to the studios to have us striking over a graduated scale that would protect them and us? I don’t think so. I think they want to do a deal now.

Before the DGA deal was announced, I thought the most interesting part of the deal wouldn’t necessarily be its substance – although important, we all anticipated it would have problems – but rather the timing of its announcement. That would tell you something about the studios’ timeline for getting this strike resolved. They back-channeled through the holidays and really pushed the DGA for a quick resolution. Remember, these were the same studios that wanted to make us feel the pain of the holidays to improve their bargaining position. So if they had more time, the smarter play from their own playbook would’ve been to sweat us out a little while longer. They didn’t.

They’ve taken a lot of financial hits over the last few months – much bigger than they probably anticipated – and have many more looming on the horizon (with the Oscars and the commencement of pilot season weeks away, and a potential SAG strike just months away). They realize it’s time to end this, and they have the power to do so…

… if they deal with us reasonably and fairly.


Mike Dieffenbach said...

Thank you for this thoughtful, level-headed post.

To raise a point I have yet to see addressed (my apologies if it has been elsewhere), it's important to remember that digital distribution is global, so $1,200 for a year of streaming video means you are getting $1,200 for worldwide distribution of your work.

This matters a great deal because under the current broadcast model you get paid for domestic reruns of your work and then get paid again when it is used outside the U.S. And this is exactly as it should be, because when you write an episode that generates overseas revenue for a conglomerate, your creative talents have delivered additional value to that conglomerate beyond the domestic market. You deserve to get a share of that new revenue because without you, it wouldn't exist.

Let's linger on this point for a moment. You possess the talent to create an endlessly renewable economic asset. Few people can do that. Sure, we all love to watch funny YouTube videos, but how many will you watch more than once? Compare that to how many times global audiences will watch Die Hard or the Godfather or episodes of Cheers or Law and Order over and over again.

Additionally, because many parts of the world are wired more extensively than the U.S. -- particularly Europe, South Korea, and Japan -- under this new $1,200 one-size-fits-all scheme foreign levies will dwindle quickly. (Sidebar: to be sure, right now we're all getting ripped off under the current system of foreign levies by the "international buyout" provision, but streaming video will make that system obsolete in the not-too-distant future so there's no point in revisiting that formula.)

Beyond eliminating foreign levies there is another reason the conglomerates would LOVE for us to take anything close to the DGA deal. When conglomerates sell your work outside the U.S. they get a license fee from a middleman -- the foreign broadcaster -- who then sells ads in the show you wrote. In a streaming video world the conglomerates elminate the middleman and sell the ads themselves, thereby maximizing revenue, all while paying you a pittance for having created the endlessly renewable economic asset they can't make without you.

So... while we're all making good and sure we get justly compensated for our work distributed to the 300 million folks here at home, let's not forget the other hundreds of millions (going on billions) of streaming video viewers around the world.

Mike Dieffenbach

hollarback said...

Well said. Everyone wants this over and to get back to work. But taking a deal without it being a good deal...that just means that all the pain of the last 3 months was for nothing.

A good deal is the objective. Not a perfect deal; a good deal.

Paul said...

Does anyone really believe that the DGA got a deal they liked because the DGA's leaders were more diplomatic? Please. If the terms the DGA got are forced on the writers -- due to the pressure the leaders are now feeling from the studios, from the agencies, from putrid fish-wrapping implements like the LA Times and Variety (and from some of our own, sadly) -- it will be a defeat and just make things worse for everyone involved in this business (except the studios and conglomerates, of course). The WGA should not give in. If the greedy ones felt forced to give something to the DGA it was not because the DGA was so much more polite. It was because the studios' numbers indicate that if they can force/shame/weaken the WGA into agreement on similar terms they can save a boatload of money in the future. I say hang tough for what will still seem fair, looking back, ten, fifteen years from now. Maintain the longterm view and fight.

JimBob said...

A good post, though not as fascinating as the first one in terms of the gamesmanship as seen by a former insider.
Also, Mr. Dieffenbach is painfully correct on the matter of foreign residuals.
We've got to get what we know we deserve this time, or we'll be striking again in three years. The only thing worse than a five-month strike in 2008 is a four-month strike in 2008 and another four-or-more-month strike in 2011. And that's what we're setting ourselves up for if we accept less than we know is right and fair this time around.

MrKlaatu said...


Agreed. The networks have the ability to block foreign IP addressed from streaming our content. They already do this in some cases, to protect their foreign business. Eventually, however, they will realize they no longer need to share the money pie with foreign broadcasters and use the Internet to deliver our content worldwide.

We cannot allow there to be a cap of Internet residuals. We especially can't let there be a cap without foreign IP blocking.

kju said...

Mrklaatu is correct. As an Australian viewer, I can testify that I do not get to see TV shows that are streamed by NBC, ABC, CBS etc. All I get is an irritating little message that says "We're sorry, but the clip you selected isn't available from your location. Please select another clip."

Occasionally I get to see the short 2 minute promotional snippets of TV shows, but I've never been able to watch an entire episode.

Unless I were to download it illegally.

jayeye said...

Just a question. I don't understand why the DGA accepted what is clearly a rollback. Are their interests that disimilar from the WGA's?

PJ said...

"… if they deal with us reasonably and fairly."

Truer words were never said.

Bill said...

jayeye said...
"Just a question. I don't understand why the DGA accepted what is clearly a rollback. Are their interests that disimilar from the WGA's?"

The so-called "rollback" is a hardliner spin on the deal. If you want to hear both sides you must look beyond this site to get a real picture of the deal.
(Of course I might be called a name here for saying that.)
We'll all have to wait and see what you (WGA) leaders have to say after the informal talks. Anything before that is like watching an NFL pre-game show where the pundits spout off.

BTL 399

Erik said...

Why have a cap at all?

It really is as simple as paying the writer (and our creative partners) a reasonable percentage of the distributor's gross.

If the distributors don't make money, we don't. But if they do, we do. Period.

If writers share in the risk that our residuals will be low on an unsuccessful show, then we should share in the rewards if our show gets a hundred million downloads. (Or billions of downloads over the generations to come. And if you think that's a fantasy, ask yourself how many individual people have watched Lucy stuff those chocolates in her mouth.)

It's a good point that the Internet will cannibalize our overseas residuals. I hadn't thought about that. But I don't think we should rely on technology to block overseas IP addresses. Why do that?

The distributors should simply make the product available to everyone, everywhere, and forever. Whatever revenue is generated, writers get their fair share. It may be three cents, it may be three grand, but those checks will keep coming as long as our movie or TV show is making the distributor money.

If you stop to think about it, taking only 3% is nuts. Seriously? As the creators, we're getting ripped off at that rate. It's an insult. The AMPTP should quickly lock us into that deal and laugh all the way to the bank.

But "what we have here," to quote a far better writer, "is a failure to communicate." The studios want to treat us as for-hire employees, rather than as creative partners. They want to pay us once and be rid of us.

I, for one, am not willing to accept that.

So for me, the idea of a New Media residual cap is a deal-killer. And from what I can tell, I'm not the only writer who feels that way. In fact, I'm having trouble finding writers who DON'T feel that that cap is a deal-killer.

If AMPTP thinks that we're going to be fooled into taking this shitty deal then the AMPTP is going to be rudely surprised when SAG joins us on the picket lines in June, and this thing drags into next Fall, or even longer.

I will not vote to approve any deal with a residual cap. And no other writer in their right mind should either.

And yes, I'm signing my name to this, because I'm tired of reading anonymous posts from "WGA writers" who are clearly just AMPTP shills pretending to be in the WGA.

lawrence said...

jayeye - "why did the dga accept a bad dead" - because cates is as much in the back poket of the amptp as tom short. Cates does one job a year - "The Oscars" - it is the only thing that keeps him relevant and he doesn't want to see that go away - even if it means throwing an entire industry under the bus. He blew it in '88 and here he goes again. I can't figure out why the DGA is gloating about making a deal in 6 days when they have until June to make it right. How shortsighted can you be. I'm a BTL'er and I say keep fighting WGA and SAG - get what's right for the good of all of us - and any BTL'er that is just a little bit informed should realize what's at stake and support the strike. Don't make the strike for nothing - stay strong. stay united, don't give away risiduals, don't take this deal - or I can guarantee I'll be looking at no Health and Pension in 5 years. Guaranteed.


Greg said...

Mike Dieffenbach--excellent, excellent point.
Lawrence--thank you!
Hang in there, WGA. I walked on the picket lines for four days when I was only in L.A. for 7, and i have no financial stake in this thing.

Jayeye--good question, with two answers.
1) The DGA is a lot more dependent on up-front payments, which were increased in their contracts.
2) The DGA's membership contains a lot of 1st ADs and 2nd ADs, who get very little in the way of direct residuals (residuals help fund the pension & health care plans, but they don't get very much up front.)
It's the writers who get residuals, as a reward for creating something that makes money for the networks/studios over and over again.
The DGA got improvements in other areas of their contract which benefit them more directly.

Neil said...

Adding to the thoughts of the great Mike D...

A hard dollar number on any aspect of the deal is there ONLY to screw the writers. If under a distribution % you would only get $600 and instead get the $1200, who really cares? It's on the upside that everyone starts to pay attention.

The networks always say they want to share the huge paydays with writers (usually when decimating the front end money) and this just proves they don't. This is what Zucker et al. are saying when they talk about throwing out the 'old model' -- and they're not wrong about needing to lower their front end costs. But when there is success, it's worth more than $1200.

The ONLY acceptable deal allows writers to share in the upside, with a % of distributors gross as probably the best measure.

And has anyone discussed if the DGA deal will get ratified by the members?

MrKlaatu said...

"Why did the WGA accept a bad deal?"

The big reason: They admittedly chose not to make new media payments and residuals an issue. Whereas, the WGA realizes this is THE issue. Instead, they are rumored to have secured a favored nations clause (which they failed to mention in their press release), choosing to let the WGA (and SAG) do their fighting for them.

Bonnie said...

Excellent, thoughtful posting. We've gone too far to accept a crappy deal. There have always been people like David Milch and earlier incarnations like Elia Kazan...those who turn their backs on the brothers and sisters for their own opportunistic reasons. Our strength is in our solidarity. Somebody called me "self righteous" because I defended our position. I not only accept that label, I embrace it. Win or lose, we are are on the side of right.

samwright23 said...

I think that a regroup is in order. I think that the WGA and SAG have to get together and ask themselves if this is something that you can live with.

Everyone had doubts about whether or not the DGA deal would be a good one, and now everyone knows.

I think that the studios thought you'd allow a waiver for the Golden Globes and after seeing what happened, and how the rating dwendled...they are now getting really nervous about the Oscars. Which is an even bigger cash cow.

With SAG by your side...you can do no wrong.

Shanna said...

Interesting and thoughtful posts here. I totally agree that the writers have to protect their interests which are decidely different from the DGA. The AMPTP seems to think that they are going to lower the up-front and back end payment to the writers and no one would notice (what do they know from numbers?! They're writers!) I wouldn't stand for it and neither would any other worker from any other industry.

Luzid said...

"The so-called "rollback" is a hardliner spin on the deal."

Nonsense. Asking writers who work less regularly due to the nature of creative writing (hint: it's not like, say, gripping or lighting, which are services used far more regularly) to take an 18k pay cut per rerun on residuals IS a massive rollback.

It takes some mighty tornadoesque spin to suggest that a 90% per run cut isn't a rollback.