Threat of Writers Strike Looms Over Fall TV

Labor Action Could Sideline Episodic Shows That Need to Stay Connected to Audience

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Fear bordering on paranoia has always been a prime motivator in show business, but lately it's grabbed Hollywood's hindbrain especially hard.
Mike Darnell
Mike Darnell

Take, for example, Mike Darnell. As the reigning dark prince of reality TV, Fox Broadcasting's exec VP of "alternative programming" has never been in greater demand. With his contract just expired, a frantic tug-of-war for Mr. Darnell has erupted between just-fired NBC entertainment capo Kevin Reilly -- now Mr. Darnell's boss at Fox -- and NBC Co-Chairman Ben Silverman, with Mr. Darnell playing the part of Stretch Armstrong. That's a bad sign for Tinseltown -- and not just for aesthetic reasons.

Part of Mr. Darnell's appeal lies with the fact that whether he succeeds or fails, he does so spectacularly: Megahits such as "Joe Millionaire" and "American Idol" are matched only by aborted train-wrecks of taste such as "O.J. Simpson: If I Did It, Here's How it Happened," paternity game show "Who's Your Daddy?" and needs-no-explaining "Seriously, Dude, I'm Gay."

But, truth be told, another substantial part of Mr. Darnell's enormous leverage at this moment is fear of a strike by the Writers Guild of America looming large over Hollywood. For TV networks facing a work stoppage of scripted shows, the unorganized world of reality TV is about the only option available. The current WGA contract expires Oct. 31.

A labor action might not sideline all current TV series, since some of the fall slate booked for some $9.1 billion in the upfront is already in the can. But it would play hell with the futures of new scripted, episodic shows that can't afford to disconnect from their audiences for long, for fear of losing audience interest when they return. Take, for example, McG's high-tech thriller "Chuck," which starts shooting this week and makes its debut on NBC in the fall. In the event of even brief labor strife, "Chuck" would have a hard time making a comeback. A strike would also hurt late-night talk shows and put soaps out of commission -- two big ad venues for consumer products shut down.

So how real is the threat, exactly?

Like nervous forest creatures who can sense an earthquake long before the china spills out of the cupboard and shatters on the floor, talent agents are often the best barometers of the labor climate. That's because while they represent the interests of their writer and actor clients, they spend an awful lot of time gauging the moods of the guys who write the checks. And lately, they look worried.

'No trust anymore'
"Everybody feels a strike is imminent," says Sam Gores, president of Paradigm, a literary and talent agency that represents many writers on ABC's "Desperate Housewives," adding, "I'm usually the most optimistic guy who thinks that 'cooler heads will prevail,' but I have to say even I am nervous about this one. There's just no trust anymore."
Kevin Reilly
Kevin Reilly Credit: Jill Greenberg

The last time the writers trusted the producers, they forsook a major windfall. Back in the early 1980s, when then-Motion Picture Association Chairman Jack Valenti infamously compared the VCR to the Boston Strangler, studios pleaded for patience with the nascent home-video business. Under the terms of the residuals agreement reached with writers back then, studios got to keep 80% of the revenue from home video off the table -- a figure they've never adjusted, citing the rising costs of making movies.

Last year, consumer spending on DVD purchases rose 4.6%, cresting to $14.9 billion in stores, according to Rentrak's Retail Essentials point-of-sale tracking service. Add in online sales, and that tally swells to about $15.7 billion in DVDs sold.

According to a 2003 Merrill Lynch study, Hollywood studios enjoy a 65% profit margin on DVDs. With the average DVD wholesaling for $16, a studio's profit is $10.55, while the screenwriter makes ... a nickel.
The tiff in Tinseltown
What the writers want:
  1. Consultation on product integration
  2. Minimums on pay and online residuals
  3. Same pay from the CW as from other networks
  4. Doubling of the home-video residual rate
  5. To organize reality TV "writers" and TV and feature animation writers
What the studios want:
  1. A three-year contract that keeps the status quo and provides for a study on how to pay writers for digital content. That's been rejected by the Writers Guild.
  2. Now they're demanding a four-year deal that will institute a new residuals system.
What could result:

A strike, for one. A glut of product and a work slowdown.

What this means for advertisers:

Shows will be difficult to alter to accommodate product integration or branding. Late-night talk shows and soap operas may be vulnerable.

Back to the table
Now that digital distribution has arrived in earnest, writers are determined not to get snookered again. "Nobody wants a strike," said producer and director McG, but "it's time for an open-book discussion of how we're all going to make money online."

Last year, Touchstone Television became the first TV studio to work out a deal with the Writers Guild so their members could work on "mobisodes," or cellphone episodes, of hit shows such as "Lost." But so far, even the most successful show on TV isn't making anyone a mint in digital.

For the first raft of "Lost" mob-isodes, Verizon Wireless is paying ABC's Touchstone about $400,000. Executive producers Damon Lindelof and Carlton Cuse will get at least $800 each for writing each episode; the actors will be paid a minimum of $425 for appearing in them.

With the arrival of Apple's iPhone, which analysts estimate sold between 330,000 and 700,000 units in its first weekend alone, such low-ball pay for online work may change -- and quickly.

Carol Lombardini, exec VP-business and legal affairs at the Alliance of Motion Picture & Television Producers, posed an even more frightening question to writers last week: "How long will television continue to be an ad-supported medium?"

And so, Hollywood is at an impasse. Last week, the AMPTP offered the guild two stark choices: Either sign a three-year contract that will keep the status quo, but include a study to figure out how to pay writers from digital revenue, or get ready to rumble.
Ben Silverman
Ben Silverman Credit: Mitchell Haaseth

They chose to rumble. Nick Counter, the chief negotiator for the AMPTP, last week called the WGA's decision to reject the online residuals study "short-sighted and self-destructive."

The studios, in turn, are demanding a four-year deal that would scrap the current residuals system for one that paid writers only after a film reached "recoupment" -- meaning writers would receive residuals only after companies cover their production, distribution and marketing costs.

Knowing well the creativity of studio accountants, Eddie Murphy years ago coined a name for such offers. He dubbed them "monkey points," explaining that only a monkey would be stupid enough to agree to be paid a percentage of a film's profits as opposed to its grosses.

Said United Talent Agency partner and board member Jay Sures: "Everybody has so much to lose, and both sides are so far apart, it seems like there's a perfect storm."

In some respects, the question of whether a strike will occur is moot: A de facto strike appears to have already registered its impact on Hollywood, as studios' stockpiling of movies and shows takes a toll. Per a report from the Los Angeles County Economic Development Corp., entertainment-industry employment will decline 1.9% next year to 161,300 jobs -- even without a strike.
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