Ad Industry and Union Agree on Contract Extension

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The American Association of Advertising Agencies/Association of National Advertisers and the Screen Actors Guild/American Federation of Television and Radio Artists have reached a tentative agreement to postpone the deadline for a new commercials contract for two years, it was announced Friday. The two year extension allows third party groups developing proposals to revamp the industry's compensation models time for thorough research to develop a contract that adeptly addresses talent compensation problems arising with the advent of new media platforms. "There's a lot to contemplate right now," says AICP president Matt Miller. We've all known the SAG contract's been broken. What this allows these guys to do, rather than go to war, is to agree to two years to truly try and study it and figure out a solution. A lot of these things were just using existing TV definitions—what this has done is it has dealt with things specifically for the Internet. They can then work for the next two years to do something on a permanent basis."

The extension agreement won't be final until it passes through the boards of the ANA and AAAA (represented in the negotiations by the Joint Policy Committee) as well as the unions' joint national board and a membership-wide (around 140,000) mail-in referendum. In addition to the extension, the groups agreed on several changes to the existing framework. The agreement that now covers television, radio and Internet performances will also apply to new media, platforms such as cell phones in addition to yet-to-be-developed outlets. Basic compensation for actors will increase 6% across the board, in both upfront and residual compensation. Pension plan contributions will increase from 14.3% to 14.8%. Representatives from the unions and industry will form a New Media Committee to adjust the agreement to fit emerging forms and technologies. Advertisers were afforded "more flexibility" to edit commercials for the Internet and new media, a move that increases the clarity between the two forms, and will be able to pay talent according to a shorter cycle in new media and the Internet. The latter provision stipulates a lower minimum to transfer a commercial to the Internet, but larger premiums for its use beyond an eight week period. "Clearly the JPC likes this edited piece," Miller says. "The actors are probably very happy with the compensation increase, and the contribution for their plans going up."

Jeffrey A. Greenbaum, a partner at Frankfurt Kurnit Klein & Selz who specializes in advertising law but wasn't involved in the current negotiations says the agreement is sensible. "This is all going to take some time, and it is not going to be easy. Not only does the extension provide for a substantial pay increase, but it appears that it is going to significantly broaden the scope of the commercials contract. The way advertisers use commercials has changed dramatically over the last decade. The contract is finally starting to catch up."
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