Six-month strike is over, but no victor is declared

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Don't be confused--the six-month commercial actors strike was not like a public presidential election. No one is declared the official winner.

Yet on closer inspection, executives close to advertisers are quietly rejoicing, truly happy about new long-term financial formulas as well as modest fee increases.

The Screen Actors Guild and the American Federation of Television & Radio Artists the week of Oct. 23 tentatively accepted the three-year contract, subject to a vote by members.

Costs for on-air commercial talent for advertisers will rise just 7% to 9% during the three-year contract, according to executives close to the negotiations.

Ira Shepard, counsel for the Joint Policy Committee on Broadcast Talent Union Relations for the Association of National Advertisers and the American Association for Advertising Agencies, refused to discuss specifics of the deal. But he said, "There was a series of increases that met the industry's demand and were within our budget constraints."


The unions have a clearer vision of the results. The three-year increase is "closer to 9% than to 7%," said Greg Krizman, managing director of communication for SAG. Still, did the unions win this battle? "As the cliche goes," said Krizman, "nobody wins in a strike."

It didn't seem that way for the unions during the Oct. 23 press conference, where a tentative agreement was announced at a gathering that felt like a victory party.

The absence of advertisers at Monday's press event might have seemed to mean advertisers had surrendered. But advertisers, led by attorneys John McGuinn, chief negotiator for the Joint Policy Committee, and Mr. Shepard, were very satisfied with the outcome.

Here's why:

• Unions wanted a three-year agreement postdated to the beginning of the strike, essentially making the deal a 21/2-year contract. According to an executive close to the negotiations, advertisers wouldn't budge. In agreeing to a three-year deal beginning Oct. 23, the ad industry gained six months in which advertisers paid below-market performing rates to actors.

• Advertisers essentially see virtually no increase to their talent costs for running commercials on broadcast networks. This is a big gain, considering that advertisers stopped any hikes on the biggest portion of their TV media plans--broadcast. According to PricewaterhouseCoopers, national and local broadcast ad dollars last year accounted for 77% of U.S. TV advertising--some $37.7 billion for broadcast vs. $11.2 billion for national, regional and local cable.

Advertisers did concede to a minuscule increase for session fees, a separate one-time initial charge to advertisers for the use of a commercial. This rose to $500 from $478. "In other words," said Mr. McGuinn, "all of the [new] money in this contract is put into cable," the smaller portion of an advertiser's media budget.

The industry mostly got what it wanted on the cable front, and also won part of the Internet skirmish.

• Advertisers kept cable commercials from moving into the pay-per-play formula, a formula that exists for commercials running on broadcast networks and local stations. Instead, cable fees will maintain a one-time charge, which will rise from $1,014 in the old contract to $1,390 in the first year of the new contract, $1,706 in second year, and finally to $2,460 in third year for unlimited use during a given 13-week period.

The unions would appear to be getting a huge increase for cable--more than a 100% increase by the third year over the previous contract. Yet, this isn't as large as it appears because of a complex formula that, among other things, increases the amount of time a commercial can run depending on the size of the cable network; that's a benefit to advertisers. This is in contrast to a proposed union pay-for-play formula for cable that would have raised the payout to actors by 400%, according to research conducted by the Joint Policy Committee.


Talent fees will increase more than 8% for radio spots during the next three years, according to SAG.

Concerning the Internet, advertisers seemingly gave up ground here. However, there were actual gains. They introduced a flat-fee approach to the medium by establishing a flat-fee pay-out of $1,500 a year for each "move over" commercial--a spot that appears on TV that is later shown on the Web. For ads that are original to the Net, advertisers prevailed in letting the marketplace decide on fees for individual deals with no union-fee standards.

"It was the advertisers' desire to wait a little bit so that the Internet was a more known quantity before starting to write rules in that area," said Dan Jaffe, exec VP of the ANA. "When the unions were insistent in moving in that direction, we were able to define it in ways so that it is knowable." Essentially, the union won in terms of getting the jurisdiction over Internet ads, while the advertisers won in terms of limiting the jurisdiction.

While the unions were extremely visible during the strike--putting big-name celebrities on TV news shows and appearing at well-covered rallies--there was consistent talk during the six-month period that SAG's unwieldy board of 125-plus members prevented it from making timely decisions.

This swiftly changed, when at the end of August, a coalition of some advertisers and actors worked behind the scenes to push SAG leaders to go back to the table in September, according to executives close to the negotiations. This included actresses Sela Ward and Heather Locklear, as well as a former SAG president Richard Masur.

The strike proved advertisers could still create commercials--producing 75% to 85% as many commercials as were shot in the same period last year.

"You can learn to walk with a limp. We probably had a little more reliance on the director to bring out the best in people who weren't as skilled as the union people," said Gerry Rubin, president-CEO of Rubin Postaer & Associates, Santa Monica, Calif.


The new contract will end in October 2003--right as advertisers go into production on Super Bowl spots. But advertisers could be well-prepared to cope with a strike next time around. Advertisers got used to producing commercials with less-experienced talent, as well as producing overseas and in Canada. Additionally, in the future many might be a little less reliant on big names.

Said Dave Moore, executive creative director-exec VP, McCann-Erickson Worldwide, Troy, Mich., which handles General Motors Corp.'s Buick account, "My big fear is we'll no longer be able to bring a name-brand celebrity to the table for a client for an on-camera presentation or voice-over because the client will remember this strike."

Contributing: Jean Halliday

Copyright October 2000, Crain Communications Inc.

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