Writers and Producers at Standstill

Strike Deadline Passes; No New Talks Scheduled

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LOS ANGELES (AdAge.com) -- Halloween in Hollywood was all tricks and no treats as the final seconds of the Writers Guild of America contract with the Alliance of Motion Picture and Television Producers ticked by last night.
The producers' chief negotiator, Nick Counter.
The producers' chief negotiator, Nick Counter.

Despite a second day of federal mediation, recriminations flew on both sides as writers and producers remained at loggerheads with no new negotiations scheduled. Talks have centered on the issue of how writers will be paid for work delivered digitally, a thorny issue that's become the single fly in the ointment barring an agreement.

Heaping blame on producers
In a statement released at a little before 8 p.m. last night, the WGA laid the blame squarely on producers: "Just hours before the expiration of our contract, the AMPTP brought negotiations to a halt," the statement began. "The companies refused to continue to bargain unless we agree that the hated DVD formula be extended to Internet downloads."

On that much, the two sides agree.

Only an hour before the writers released their statement, the producers' chief negotiator, Nick Counter, adopted a more conciliatory tone, even as he articulated an intransigent position on digital.

"We've been working hard to come up with a package in response to your last proposal," Mr. Counter said. "But we keep running up against the DVD issue. The companies believe that movement is possible on other issues, but they cannot make any movement when confronted with your continuing efforts to increase the DVD formula, including the formula for electronic sell-through."

Lion share of home sales
In the early '80s, the Hollywood's writers made what has become to be regarded as the worst deal since Manhattan was sold for some wampum and blankets: When the writers originally signed their pact with producers about how they would be compensated for work viewed on home video, they agreed that 80% of the revenue would immediately be kept aside for the studios, leaving only 20% of the revenue available for royalties. The upshot? While a film or TV show might sell for $19.99 on home video, a writer will typically receive less than a nickel from that sale.

"Welcome to class warfare," deadpanned Jonathan Handel, an entertainment lawyer at Troy & Gould who specializes in internet law, and who formerly was associate counsel to the WGA from 1994-1995. "The home-video agreement doesn't even make sense for home video anymore, let alone the internet."

Mr. Handel explained that the 80/20 split of home-video spoils might have been tenable in 1982, when video cassettes were a costly media to produce and often subsidized by studios seeking to create a new revenue stream. But the cost of manufacturing a DVD is now pegged at 25 cents; digital distribution is, he argued, even cheaper, because there is no physical media to produce at all.

Moreover, the studios are making more than they ever had before: Last year, all-media revenue from filmed entertainment -- money from home video, TV, theatrical release and pay TV -- grew 8% to a record $42.6 billion.

Spiraling costs
No matter, the studios argue, because the costs of making those shows and movies have also increased astronomically, while home video's once-ballistic growth rate has flat-lined.

Home video was responsible for the biggest portion of that nearly $43 billion haul, but it also continued to show signs of decline as it dropped three percentage points to 45%.

In his statement to writers, Mr. Counter said: "No further movement is possible to close the gap between us so long as your DVD proposal remains on the table. In referring to DVDs, we include not only traditional DVDs, but also electronic sell-through -- i.e., permanent downloads. As you know, we believe that electronic sell-through is synonymous with DVD. To make any new agreement with you, residuals for the DVD market, including electronic sell-through, must be paid under the existing home video formula."

In the meantime, the writers plan to meet this evening to discuss what, if any, further discussion will occur, or whether the long-dreaded strike is finally at hand.
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