1/28/2008

TV Residuals and the DGA Deal: A SAG Perspective

The following was submitted by SAG board member and regular U.H. contributor Justine Bateman.

Remember how at the beginning of the WGA's negotiations, the CEOs made a threat about getting rid of residuals? Well, by my reading, the DGA deal does that for TV.

Are you ready to trade an entire year's worth of TV residuals for a one-time fee of $1,200?

Currently, writers and directors both make approximately $20,000 for the first prime-time rerun of an hour-long episode. The residual gradually decreases on any later reruns (if the writer or director is lucky enough to get more reruns). So the directors' deal potentially gives up 97% of the first prime-time residual while the corporations can "rerun" their work infinitely over an entire year.

It seems to me that if the DGA formula for streaming is ratified, the networks will be on a fast track to never, ever rerun our work on broadcast TV.

The DGA formula is based on current fixed residuals, not upon any measure of online revenue. And experts predict that that revenue will more than double over next three years. Today, advertising online doesn't begin to match that of conventional TV, but as ad dollars shift to the Web, why would the companies rerun content when they can stream it?

If this residual formula is accepted by the WGA or (god forbid!) SAG, I bet you will see more fiber optics get installed by the communications companies. The corporations will want everybody in the country to have the highest speed Internet so they can deliver everything over broadband.

And this isn't some vague future -- IPTV, with a set-top box that streams content directly from computer to your tv, is expanding market share right now, most notably in Europe and Asia, and is already the way many people watch tv -- it's replacing broadcast tv, but viewers still use their same tv set and see the same shows.

IPTV, and services like it, are exploding in popularity right now. And under the terms of the DGA deal, what people using IPTV see on their tv looks like a rerun -- but contractually, it's streaming.

I fear the DGA formula will, in one swoop, cancel out every single residual stride that older members sacrificed to gain in the 1960's. That would be shameful.

It's been said -- I personally have said it many times -- that this moment is like the dawn of television in the sense that the responsibility falls on us to establish the rates and terms under which we will work. But I'm sure the corporations have said the same thing themselves... in the sense that when TV began there were no residuals.

Content creators have lost millions upon millions on that twenty-year-old DVD deal, but at least we could make a decent living under the minimums for TV and film production plus residual payments for TV re-use. It's vitally important we get Internet re-use terms right. The Internet is not a "supplemental market," it's where we are all going to work. By my rough estimate, the formula that pays writers and directors $1200 would translate into $99 for actors.

And we can forget about international residuals too. The Internet is "international." And what about syndication market residuals? After a show has had its run in prime time, "syndication" will likely mean web sites. The health and pension contributions that BTL crew members in the DGA depend upon will gradually go away as there will be no residuals to support them. And I understand the pension and health over at IATSE is 60% supported by residuals. When that contribution disappears, crew members will have virtually no insurance or pension.

The above scenario is NOT a legacy for which I want to be responsible.

I urge all DGA, WGA and SAG members to look in their books for 2007. How much of your income consisted of residuals? Now ask yourself if you could get by if that number were reduced by 97%.

Just ask yourself that, and come back and tell everyone you want that deal.

-Justine

42 comments:

rubberpoultry said...

Excellent article Justine. I would hate to see shortsighted solutions become long term problems for those in the industry.

As a fan of good storytelling, I want to see you all get deals that will ensure the future of quality, entertainment for years to come.

If the AMPTP can find a loophole in residual payments, they will exploit it. I have no doubt about it.

Don't give up the fight you all have fought so well for a quick fix.

-Rubberpoultry
A fan

rational thinker said...

The fact that this ridiculous and illogical post is taken seriously on this blog is a sign that this blog can not be taken seriously. The networks will continue to air reruns, because it's cheap programming. They will continue to pay resids off these reruns. A 97% pay cut? Please. This kind of logic extends this strike to October.

stuiec said...

All good information.

The challenges are:

1) Right now, streaming video ads are going for about $20 to $30 per 1,000 exposures. 1 million viewers = $20,000 to $30,000 per ad.

2) Google and Hulu don't even want to run 15-sec video pre-roll ads on streamed content, because they experience significant viewer abandonment rates when they do.

So the question is, how much ad revenue can a streamed hour-long re-run generate compared with a broadcast re-run? How will that evolve in future?

BJ said...

This blogger is making an assumption a lot of people are making, which is that if the data entering your TV set comes over IP, then that's "new media" and the new media residual rate will apply. That's just not true.

"New Media" means a non-traditional media. Getting your NBC signal over IP into your TV set is NOT "new media" any more than getting your NBC signal over coax cable or satellite or HD broadcast instead of rabbit ears.

just a thought said...

I would like to know if this perspective is shared by the rank and file of SAG.
The opinion that the studios are wiring the nation so they can deliver content, yes that's what it is, just to screw all the unions out of residuals is just crazy.
First off the phone companies are doing the wiring. Those companies are much bigger than the studios. They can afford to wire. I don't think Time Warner has the stomach to spend the billions just to wire and deliver
Second. Right now the networks pay very little to have their content delivered. Fiber optics will be more expensive for them. Increassed
Bandwidth equals a higher fee for delivery.
Third. The consumer with have get on board and pay the price for the new delivery system. Right now in LA if you can get it. Verizon is offering a deal for TV phone and internet for 99 bucks for the first year and that doesn't include HBO. So how much will the consumer pay. I don't think Europe will pay what we do for the full TV experience.
Lastly it seems that the guilds want to keep the old formula because it pays so well and add a new formula that will pay just as well. I don't know if you can have it both ways.

jimmy said...

So, what's the rub here?

The DGA boasted millions of dollars in research into new media, and yet they took a deal that honestly looks like it will slash their residuals by an enormous amount as the internet becomes the delivery method of choice for entertainment.

So why would they take this deal? What are we missing? What are they missing?

Are the directors underestimating its growth with research that became obsolete about a month ago?

Or are writers and actors totally over-reacting to a market that will only change slowly?

Or is it simply that DGA actually believes in the sunset clause, and the writers and actors don't?

If WGA and SAG actually believed that these capped residuals and free days of use could be re-negotiated in good faith in three years when the new markets are more mature, maybe there wouldn't be so much determination to get this particular deal right at all costs.

But that is the legacy Nick Counter and the AMPTP have left for themseleves. A legacy of broken promises that makes them impossible to ever trust again. A legacy of pride in being unfair to talent and boasting such things to their shareholders.

And maybe because the AMPTP likes the DGA, it seems, maybe they are serious about that sunset clause with them.

But if the writers and actors trust that clause now, it seems like they'd be repeating the same mistakes of the past.

sara said...

As your common garden-variety full-time worker and parent, I rarely watch first-run television. When I find a free hour, I either visit iTunes or the network web sites, which increasingly post episodes within a couple of days.

I'm curious -- if someone records or routes a digital signal through DVR or TiVo, is that broadcast or digital by the definitions in the proposal? Call me cynical, but if there is any way to alter or reclassify that technology after the fact, I wouldn't be surprised to see that happen as well.

jakefarrow said...

Self-contained underwater breathing apparatus!

Mallory is right. And if Mallory can figure this thing out we all should be able to.

Michael said...

Look, I agree that taking a flat rate wouldn't be wise, but I think the reasoning in this post is way, way off.

Reruns aren't disappearing because of alternate distribution mechanisms like streaming. They're disappearing because, unfortunately, other programming alternatives make more sense.

The total cost of running a first rerun is about $180,000. That covers the residuals for all the unions. That used to be a very cost-effective programming option, and it still is, in some cases. But increasingly, first-run reality/game shows, which cost not that much more than 180K (often around 500-600K), perform *much* better than reruns.

So, networks have to decide, do they spend 180K on a rerun that gets maybe a 1.8 or 2? Or do they spent 300K more to get a 4.5 or a 5 in the same time slot? They do the latter. It makes more business sense. And, they'll continue to do it, no matter what streaming residual is negotiated. It's unfortunate, but there it is.

Since people always bring up 'Lost' in this conversation, let's look at that. Again, when 'Lost' *was* being rerun, it was averaging a 1.5 rating before they yanked it. That's pretty awful for such a high-rated (and expensive) show. ABC didn't yank it because they could stream it instead (though it's certainly nice for them that there's now this alternative stream of income). They yanked it because they knew for a few hundred thousand dollars more, they could find a reality show that would double or triple their ratings in that time slot.

The implications of this are, I'm afraid, that broadcast reruns are going to keep fading as long as reality shows keep working. And while we deserve some sort of scaled residual for streaming (perhaps credited against broadcast residuals for shows that *do* get rerun(, Bateman's analysis about why shows aren't rerun are way off.

(I think she is also off about the foreign stuff, but I know less about that.)

Michael said...

Oops, left out an important point from my previous post- the point is, since reruns aren't being 'replaced' with streaming, it's wrong to think of the fixed residual as a '97% pay cut.' Again, even if streaming didn't exist, broadcast reruns would be dying anyway. 'Lost' reruns would still be replaced with America's Top Poodle or whatever.

Before everyone starts calling me a shill, I'm not necessarily saying 'take the $1200.' I'm just saying the argument in this post is really misinformed.

Not An said...

Actually, rational thinker, the well reasoned comments below yours that point out the Ms. Bateman's flawed thinking are what makes this site an excellent alternative to the breathy, please refresh blogs.

Dennis Wilson said...

Hey (ir)rational thinker: if this strike does need to go to October to preserve residuals, then Happy Halloween. I'm not ratifying a permanent pay cut.

Geo Rule said...

There has got to be a way for creative, well meaning people to find a way to protect both sides against their "nightmare scenario" on this issue. It probably includes, as someone already mentioned, the idea of credits, so that it becomes rather like an "advance" in the book publishing world.

Jon Raymond said...

BJ, You're the one making assumptions. With any luck, NBC will not exist. You have no idea what content will come over the net or from where. TV as we know will likely be replaced by web casts much as Television replaced radio when it came out. New Media can include anything that streams over the net. But you make an interesting point. If NBC's signal does go over the net wouldn't that fall under New Media jurisdiction as far as residuals go? the AMPTP would certainly hope so. Who's to prove them wrong. It would effectively be internet streaming, would it not?

John said...

JB,

I think when anyone attempts to support their position with such an exaggerated claim to the facts, they actually undermine the credibility of their position altogether.

You can't expect them to pay more then they take in. Stuiec is right, the revenue streams for streaming are paltry presently with respect to ads in tv videos over the internet, compared to broadcast.

While it's prudent to prepare for the future and plan for a different environment where users view tv, on their tv, streamed through an internet connection, the reality is that consumer behavior will not make that transition for several years. Thus, any contract should consider our present reality but still plan for the future in a way that scales proportionally. i.e. A percentage.

I think the mistake here is the flat figure. If we can use a percentage of a reliable gross calc, then that makes the most cents in my my view.

As I've posted previously, I think a promotional period is also a mistake when the full program is streamed with ads. If they receive any revenue, the writers should also receive residuals. However paltry they may be.

BTL Guy said...

Reruns are not going anywhere. The sky is not falling.

I posted a full explanation here: The Irrational Fear That Reruns Will Disappear.

You can check out the link, or you can ask yourself what CBS is going to put on instead of a CSI:Miami rerun that currently beats any first-run show that NBC can throw against it...

(Self Contained Underwater Breathing Apparatus was brilliant, by the way...).

Jeremy Robinson said...

In 10 years there will be several "New Media" studios who won't be under the juristiction of the WGA. The "Big Studios" will go the way of the Dinosaur and this whole strike thingy will have been for naught. This is at least what they fear and probably why they do want to break the Unions. The unions will be broken anyway once more writers/directors/actors are not working for union houses anymore. Welcome to the global village people.

Fade In said...

rational thinker:

Your moniker makes me think of Bush's misleading names for his programs that mean the exact opposite. Rational thinking, which Justine was doing, is what is needed. Look up "irrational" and although you probably won't see the connection with you and several others here, it fits.


Unless "this ridiculous and illogical post" you were referring to was actually yours. In which case I agree.


Whatever. Logic eludes many people; facts are irrelevant; and common sense is illusive at best.


Thank you, Justine. Rational thought, though not universal, is always refreshing -- and right -- regardless of its overall or immediate acceptance.

Jason said...

Ok, so no one can authoritively say what will happen with web TV and when.

So then why would ANYONE, including commenters here, including the AMPTP, have a problem with a percentage-based compensation for web use? If the web makes no money...the writers will get nothing, and justly so. If the web makes lots of money, the writers will get their fair share.

What's the problem AMPTP?

stuiec said...

Here is a thought exercise:

Sunday night's highest-rated scripted show was Desperate Housewives with 18.9 million viewers.

ABC gets to sell 30-sec spots on DH for $270,000 each. I think (if I am not mistaken) that they can sell 12 of these in the hour. That is $3.24 million in revenue from the first run of the show.

If ABC only existed as ABC.com on-demand streaming, it might be able to get viewers to accept 6 interruptions an hour -- but not with multiple spots. Still, assuming all 18.9 million viewers "surfed in," and at the typical high-end of $30 per 1,000 viewings per ad, that's $3.4 million in revenue (6 ads times 18,900 M's times $30 per M). Viewers would be happier -- a lot fewer minutes of ads they'd have to sit through.

Except...

... ABC owns and operates 10 affiliate stations. By shifting its programming solely to the Internet, now those 10 stations have no ad inventory to sell.

And Fox and CBS own and operate around 35 stations each. (NBC has, I think, about 17.)

So shifting from network broadcast solely to Internet on-demand would represent a cratering of the networks' revenues. The same holds true of reruns -- take them off broadcast and you have to replace them with something else, put them solely on the Internet and only the people who really want to watch them will bother. It's hard to see how that is a winning strategy for the networks as they are currently constituted.

Not that it won't happen, and not that it won't happen sooner than later, but the transition will be accompanied by a shift in revenue models and business structures that will leave the entertainment industry looking quite different.

Vlad Tepes said...

Please. Let's negotiate. Let's simply take impossible-to-measure residuals off the table.

This will give the AMPTP what they suggested in the first place.

So let's give it to them, genuinely, and put the ball in their court:

We will give up residuals in exchange for copyright.

stuiec said...

One other thought to ponder...

... if a network goes Internet-only, how does one distinguish between "first-run" viewings and "re-runs"? If I can watch a given episode of Grey's Anatomy on the Net on-demand any time from 9 PM Thursday Eastern time forward, and that's the ONLY way I can watch it, how do you track its rating? What time frame do you use? Do you really run the systems to measure how many viewings were a user's first versus how many were a repeat viewing by a user?

Will the New Media future turn minimums into advances against totals, i.e., $X up front and residuals credited only for viewings in excess of Y?

Michael said...

Jason writes:

So then why would ANYONE, including commenters here, including the AMPTP, have a problem with a percentage-based compensation for web use?

Well, I'm playing devil's advocate to a certain extent here, but take a look at Stuiec's comment above re: Desperate Housewives. Per his calculations, the first run brings in about $3.24 million in ad revenue. Now, I don't know what the budget/license fee for that show is, but given the cast, etc., it's got to be at the high end, say $2.5-$3 million. So, under the present system, ABC is clearing about $750K per episode in ad profit, if it's lucky. Which is maybe a 20% profit margin on the license fee (or really, the budget, since it's a self-dealt show).

So, let's say 10 years from now everyone watches Desperate Housewives on the web, and ad revenues from broadcast have been replaced at a 1:1 ratio, and it still clears $3.24 million per episode. Well, the basic costs haven't gone down- it still costs $2.5 million to produce. So 750K of this revenue is profit.

EXCEPT, if the AMPTP agrees to a percentage of revenue, some percentage of the $3.5 million of ad revenue would have gone straight to residuals. Under the initial WGA proposal, it would have been 22.5% of revenue. (2.5% for WGA x 9.5 for pattern bargaining.)

So, 22.5% of $3.24 million = $729000. Add that to the $2.5 million show budget (which of course includes upfront fees for talent) and you get total costs for the episode of $3.29 million. And total revenue of $3.5 million. Profit per episode is now $210000 instead of $750000

In other words, ABC would barely make any money at all off of the first run of Desperate Housewives. Of course, there's still be back end money, but that too would be cut dramatically.

And that's Desperate Housewives, one of the biggest hits on TV. Run the numbers on a show which isn't a hit (but which tend to have similar budgets / upfront costs) and it gets even worse.

So that's the argument against percentage-of-revenue streaming residuals.

Dennis Wilson said...

stuiec, no matter what "business model" does or doesn't develop, nothing changes the fact that writers should be paid every time their work is used.

Harold said...

"just a thought said...The opinion that the studios are wiring the nation so they can deliver content, yes that's what it is, just to screw all the unions out of residuals is just crazy. First off[,] the phone companies are doing the wiring. Those companies are much bigger than the studios. They can afford to wire. I don't think Time Warner has the stomach to spend the billions just to wire and deliver. Second[, r]ight now the networks pay very little to have their content delivered. Fiber optics will be more expensive for them. Increassed Bandwidth equals a higher fee for delivery."

Just a Thought,

You are WRONG. Clueless and wrong.

The studios ARE NOT wiring the nation, but the conglomerate entities that own the studios and networks ARE.

For example, Comcast is:

1. The largest cable company in the U.S.
2. The second largest Internet service provider in the U.S.
3. The fourth largest telephone company in the U.S.
4. A 20% owner of MGM and its underlying properties such as United Artists.
5. The owner of E! Networks and some other cable channels such as G4

Another example is Time Warner. Time Warner owns:

1. Time Warner Cable
2. Road Runner High Speed Online
3. All AOL properties
4. HBO
5. Cinemax
6. Warner Brothers motion picture and television entities
7. New Line Cinema
8. Cartoon Network / Adult Swim, TBS, TNT, Turner Classic Movies

If you don't think that the entertainment conglomerates "are wiring the nation so they can deliver content," you have not been paying much attention.

They are not dependent upon phone companies for infrastructure. Comcast and Time Warner are two examples of conglomerates that are not just in the process of "wiring the nation." They've already wired much of it.

Justine Bateman is right on target for anyone who has a clue. The clueless can spout ignorant garbage like "I don't think Time Warner has the stomach to spend the billions just to wire and deliver" even though IT'S ALREADY DONE IT.

It's been done and is continuing. It's past tense, present tense, and future tense. It isn't theory. It's history, it's now, and it's the future.

Get a clue.

stuiec said...

dennis wilson: of course writers should be paid every time their work is used. But the business model (no quotation marks) matters, because the writers, directors and actors can't collectively be paid more than the entity paying them takes in -- or else, soon the entity goes out of business and no one gets paid.

Broadcast television works because advertisers are willing to spend a lot of money to present messages to viewers who put up with those messages to get to the content. The Internet changes the interaction, and how Internet viewers behave may seriously impact how much money advertisers are willing to spend to reach them. On one hand, the Internet viewer may be less willing to put up with commercial interruptions. On the other hand, the interactive nature of ads on the Net (and yes, even video ads are accompanied by click-through opportunities) may make that kind of advertising more efficient, requiring a lower ad spend.

The money to pay the writers has to come from somewhere -- that somewhere is the consumer, either indirectly through his or her purchase of advertised goods and services, or directly through pay-per-view or subscription.

Luzid said...

Vlad - that's genius. Never happen, but still genius.

Harold - nice smackdown! "Ignorance - It's What's for Dinner."

This strike could end today if the studios simply agreed to a fair percentage of (easily tracked) profit whenever ANY ad revenue is collected. But, since this is also about breaking the union(s), it won't be that easy.

Hold the line, everyone - it's about a fair deal, and that's possible as long as the AMPTP is willing to deal honestly.

Dennis Wilson said...

Stuiec, thanks for the Business 101 didactical (companies that spend more than they earn go out of business? Really?), but I don't know what you're trying to say.

If the internet does yield a "lower ad spend" on our reruns than Broadcast, writers too will make less under the WGA proposal, where residuals are a percentage of revenue. And even if our employers take a loss (revenues minus expenses) reselling our work, they have an obligation to pay us out of those revenues. We should be viewed as expenses, not profit participants.

But that's Business 102.

mheister said...

Bravo Justine!

Thank you!!!

Brian said...

I'm 25 and an unproduced, unanything writer.

$20,000 sounds a little... I dunno, high.

I'm still pro-strike and all, I just want more information on what writers make, I guess.

mheister said...

Stuiec - People are accustomed to seeing commercials when they're sitting in their barcaloungers, remote in one hand, salty snack or high-fructose beverage in the other, watching their big screen TVs. IPTV makes content delivered to the big screen TV through the Internet LOOK and FEEL like TV.

BJ - The AMPTP wants the New Media rules to apply. That's one reason the Internet negotiations are so important. Oh, and in 1949, television was the "non-traditional" media.

Jimmy - The DGA is largely composed not of Steven Spielbergs, but the AD's. Aside from that, I don't know why they'd make such a lousy deal.

Michael - Some reruns are disappearing, but not all. CBS and NBC do okay restripping CSI and Law & Order ad absurdium. The real issue is when CBS and NBC quit broadcasting or using cable channels, period, and deliver ALL of their content through the Internet, whether it's fresh or catalog (I'm adapting the music industry term for material that's more than three years old).

On the issue of Internet companies getting into the business of creating and distributing drama and/or comedy series and/or movies - um, to some extent it's already happening, it's just that almost all of it thus far has been short-form.

A list of a handful of the more popular independent ones:

Ask a Ninja
Tiki Bar TV
Galacticast
Goodnight Burbank
Mr. Deity

And then there's stuff like Funny or Die.

When bigger money comes in and wants bigger talent - in front of and/or behind the camera - those producers will have to sign with the guilds. I know new stars will be generated on the Internet (keep an eye on those Ask a Ninja guys and a New York-based podcaster named Keith Malley), but for the most part those guys are going to want into the guild for the same reasons we love our guilds - the protections and benefits.

On the issue of network affiliates - They will have to move their operations to the Internet, and to survive they're going to have to provide local or regional news and other content that's not available at msnbc.com. Their fat days of living off Seinfeld reruns are coming to a close.

Steven Hale said...

There are numerous flaws in the logic of those questioning Bateman's logic.

A few:

The question isn't WILL the congloms make more money from an IPTV (on-demand piped to the television set) model than from a broadcast / rerun model, but do the congloms THINK they will, and the evidence suggests that they do and that they are aware that the rate at which they're losing audience to other media sources is growing rapidly.

However, there are also some admittedly hypothetical reasons for assuming that an IPTV system WILL make money for those in charge of its distribution:

(1) Yes, many of the congloms own a few affiliate stations, but with a purely IPTV on-demand system, the studios will essentially own ALL the affiliates (there won't be any, except maybe for local programming).

(2) Ads for online entertainment can be more profitable than ads for broadcast content. Advertisers are increasingly aware that broadcast ads rarely reach viewer eyes, and even more rarely effect any change in consumer behavior. Online ads can be targeted to the viewer profile (much like Google's adsense links) and can demonstrate viewer interaction (via clickthrough or transactions). Nor do online ads have to be interruptions of programming. As on Blip.tv, ads can appear at the bottom or side of programming as it streams, and they can be tailored to match onscreen content (SITCOM CHARACTER: "Let's order a pizza!" SIDEBAR AD: "Click here for Domino's special offer.") What rational advertiser wouldn't prefer an ad that can prove results?

(3) Online broadcast can take advantage of the long-tail effect (lots of low-cost ads rather than a few expensive ads). All tv content can be archived cheaply. For the cost of a single Desperate Housewives broadcast spot, an advertiser could reach the same number of viewers through a series of ads on lower-demand (older or less popular) content. And advertisers who can't afford premium broadcast rates can get in on the game, much like the local car dealer who appears on your cable program.

(4) No one has disputed Bateman's argument that the flat fee proposal from the DGA agreement would be inequitable if online reruns replace broadcast reruns, and as many have said, if there's no money in online repurposing, why not use a percent instead of a flat fee?

(5) But additionally, look at the impact that IPTV would have on syndication, i.e. there won't be any. There won't be affiliate stations to divvy up the profit with, and studios can archive even those programs that didn't last long enough to be syndicated.

(6) The DGA contract doesn't partition "new media" created specifically for the Internet from "new media" repurposed from broadcast content in the "Ad-Supported Streaming" section."

(7) A set-top box like the one Bateman mentions available in Europe is already on sale in the U. S. for certain Sony televisions: the BRAVIA® Internet Video Link
DMX-NV1 ($299). And Slingmedia's Slingcatcher, which streams content from an Internet connection directly to a TV set, will be available shortly. IPTV will be, from a viewer's standpoint, no different from broadcast television, except that it will offer more choices and greater flexibility over when to watch them.

Although Bateman's scenario is alarming, it is neither alarmist nor irrational. Given the history of the Big 8 in the bargaining process thus far, trusting them or their deal with DGA to be in the best interest of content creators is the truly irrational response.

The primary goal of the major studios in preparing for and managing contract negotiations is to control the transition from broadcast to IPTV. In their model, provider costs will have to be kept to a minimum, specifically residuals, and more specifically, SAG residuals (not the relatively insignificant payments to DGA or WGA). It's the only explanation for the studios' willingness to sacrifice its upfronts and pilots for the coming season that makes sense. They're planning for the long-term, but they're offering the guilds a contract for the short-term. Once the major studios establish a stranglehold over electronic distribution, renegotiations (and guilds) will become a thing of the past.

Jason said...

Hey "devil's advocate" Michael, I didn't specify whether it's 2.5% or 1% or whatever, or whether it's a percentage of revenue vs. profit, and I wasn't even going to try to do that. I was just arguing for the concept of a percentage in general. How can anyone argue with that concept in general? Surely SOME form of percentage is fair, and also does not kill the producer financially.

Vlad, how can you say "impossible-to-measure residuals"? Difficult for the writers to verify perhaps (because the studios are secretive & dishonest), but certainly not impossible to measure. Certainly the studios know down to the penny EXACTLY how much profit/loss is coming off their online "experiments". I watch episodes sometimes on abc.com, etc, and I'm forced to see ads. I'm sure they know EXACTLY how much profit/loss that makes for them.

P.S. I am not a writer.

stuiec said...

Steven Hale: "Nor do online ads have to be interruptions of programming."

That's the best point of your post. If the online environment allows non-interruptive advertising that doesn't cause viewer fall-off, it can catalyze a lot more ad revenue.

Sucks for local TV stations, though.

stuiec said...

mheister: "Stuiec - People are accustomed to seeing commercials when they're sitting in their barcaloungers, remote in one hand, salty snack or high-fructose beverage in the other, watching their big screen TVs. IPTV makes content delivered to the big screen TV through the Internet LOOK and FEEL like TV."

I would suggest that IPTV make the TV look like it has an "infinite TiVO," where all programs from all time are ready to play. I don't know how well viewers will tolerate continuing to be forced to sit through commercials as more alternatives become available... but as Steven Hale points out, perhaps the other ad opportunities that the technology creates will expand the networks' revenue opportunities while at the same time reducing the irritation of commercial interruptions.

Jason said...

Advertisers know many people fast-forward past commercials when possible, that's why product placement in the content is getting more popular. Anyone know how that works? If the producer got a million dollars to say "Ambien" in their program, does that currently count as revenue which gets split with the contributors (writers, etc)?

just a thought said...

Harold and Luzid
You guys missed my point. I used wire as a verb. I'm fully aware of who owns what. I was working in this business when film makers still owned the studios.
I was talking about fiber optics and full tv experience. You guys were defending Justine point of view that the sky is falling.
If you cared about your Neg Com, her opinion was ill timed.
This will be my last post to this blog. The mean spirits that control this blog are frankly counter productive to your cause.
Goodby and farewell

annfan said...

Don't go, Just a Thought! You're a voice of reasonableness! Your views are in line with an an article in Broadcast Engineering, Jan. 16, 2008, titled, Automation today’s multichannel world, by Peter Hajittofi. He states:

"It does not matter if the channel is broadcast in HD, SD or 320 x 240 for mobile, whether it is received by satellite, cable, telecom circuit or over the air. At the heart of the service will remain linear TV channels, delivering structured programming at fixed times of the day and interspersed with commercials, promotions, trailers and branding."

An expert in the field is more a reliable source, is my opinion.

Suspicious minds invent scenarios! We ALL do - we're human! A cool assessment shows there's no need to panic over internet revenue because the technology hasn't ARRIVED, yet.

Everybody here is great, I enjoy reading the blog and the thoughtful, well-written comments. They are a delight and supply lots of info to a layperson seeking to educate oneself, such as myself!

So my solidarity is with the writers, and I refuse to watch Leno or any award show not approved by them.

As a side note, the AMPTP backed away from talks, it appears to this layman, to wait for the anouncement by Apple of its New Apple TV Software, which they must be really excited about! So it was nothing personal, and the union leaders shouldn't have had you strike! The announcement does specify, movies are "rentals," and tv shows are "purchases."

"Movie lovers can rent DVD-quality or stunning HD movies from their couch with just a click of a button . . . Choose from a selection of six million songs, over 600 TV shows and 10,000 music videos to purchase directly from their Apple TV." - Apple Introduces New Apple TV Software & Lowers Price to $229, January 15th, 2008

So it was nothing personal, but the media conglomerates are very excited about this Apple TV Software, it seems, and they're fighting to survive and not go down like the music companies!
- "This year, retailers and studios alike feared that online piracy, which has undermined the music industry, would devastate the television and movie businesses, too."
- Wal-Mart Pulls Plug on Movies via the Web By MATT RICHTEL and BRAD STONE, New York Times, December 29, 2007

Steven Hale said...

It's clear that the major studios expect viewers to watch programs on a fairly linear, scheduled basis (probably weekly, with fixed seasons); otherwise, they wouldn't have inserted the "no residual" window for the first week or two of streamed programs.

Internet-based shows like quarterlife or the programs on blip.tv add new episodes once or twice a week, but allow new viewers to access old episodes on demand.

The studios aren't switching to IPTV as a way to avoid paying residuals; their goal is to avoid paying expensive residuals so that they can experiment with and control the direction of IPTV. The shift to television on demand (with some limitations for scheduling) will be fairly gradual, but the studios don't want to lose any more control over the process than they already have.

If they had planned to stick with the current distribution model, they'd have no rational motive for prolonging the strike this long. I don't believe they're equitable, but I do believe they're rational, and have probably done a lot more homework than the DGA negotiating team.

just a thought said...

Thank you annfan for the links. I've read this stuff before, but what do I know I'm ignorant.

Steven Hale said...

Quote: "Don't go, Just a Thought! You're a voice of reasonableness! Your views are in line with an an article in Broadcast Engineering, Jan. 16, 2008, titled, Automation today’s multichannel world, by Peter Hajittofi. He states:

"It does not matter if the channel is broadcast in HD, SD or 320 x 240 for mobile, whether it is received by satellite, cable, telecom circuit or over the air. At the heart of the service will remain linear TV channels, delivering structured programming at fixed times of the day and interspersed with commercials, promotions, trailers and branding." " End Quote.

There wouldn't be any conflict of interest from a journal devoted to Broadcast Engineering, would there? And note that the quote doesn't refer to IP broadcasting.

Those who think the DGA terms are favorable for artists apparently think the technology switch Bateman describes will take years (if it happens at all).

Those who agree with Bateman's assessment believe that the change will take place sooner, and that the AMPTP isn't likely to give up the ground it gains during the transition.

Of course, nobody knows for sure, but there are several indications that "sooner" is a safer bet than "later."

(1) Historically, experts have tended to underestimate the speed at which disruptive changes in media occur (cd's, vcr's, dvd's, etc.) and the impact of those changes on old media.

(2) The main stumbling blocks to widespread adoption of Internet distribution by the average couch potato are lack of easy-to-use hardware, a single source for all digitally distributed channels, and a user-friendly portal to access all these channels. Slingmedia's Slingcatcher will pave the way for simple set-top boxes that provide access to Internet and pay services. Gemstar / TV Guide (among others) is developing a portal for cell phone-based entertainment, and that model should be easily transferable to the big screen.

(3) International demand for old media content in new media formats (also mentioned in the original post) is already established, even in China (where according to a recent Marketplace report, there are as many Internet users as here in the U.S., an audience that uses the Internet to watch American programs not available otherwise, like The Daily Show). When ad-supported content is easily available overseas, and when advertising is localized for diverse audiences (easy to do with digital distribution), then ad revenue will skyrocket.

just a thought said...

Steven Hale
I agree with everything you wrote, until you got to China
China is a closed country. They block access to most sites for fear of western ideas crawling in their peoples heads. Besides I think and not really sure, internet use is mostly for commerce.
There is another aspect to all of this. That's a cultural one. Does our content really play. Would Justine's show play in China or in a Muslim country. Those are questions that need to be asked
The other problem is the idea of the funnel. Lots going in at one end and a slow down at the other.
Example: when Apple releases a new version of itunes it might take me 45 to 60 minutes to download and install. Why maybe 10 million people are doing it at the same time. I have road runner so it's not me.