WGA Strike: Understanding The Basic Issues

November 9th, 2007 · 18 Comments
by Kassia Krozser

As you’ve noticed, I am greatly preoccupied by the Writers Guild of America strike. Not only is the gleaming BS headquarters based in Southern California, but I know people on the picket line. I’ve grown accustomed to seeing some of them hard at work while I’m pretending to do the same.

I also know people on the other side of the table. I have had a vested interest in both sides of the issue for as long as I can remember. There are strong, valid arguments being made by both the writers and the producers. There is also a bit of sleight-of-hand in the various arguments as well. Hyperbole is to be expected in public statements and tough positions are to be expected in negotiations.

Bottom line is that the two parties are not only far apart on these issues, they’re in different universes.

Let’s set the table with a little historical perspective. Warning: this involves some basic algebra. Not enough to make your eyes cross, but there are numbers involved. The basic calculation should look familiar to anyone who has ever looked at a royalty statement. Second warning: I have not had enough coffee to read the precise language in the Minimum Basic Agreement to do a full-blown residual calculation (I’m not even sure there’s enough coffee in the world for this), but when I read this item on another blog, I realized that someone had to do the math:

* Home-video and DVD residuals: The WGA wants to double the current base rate for payouts from 20% to 40%.

This was the Spanish Inquisition nobody expected. Home Video and DVD are eating mightily into film receipts and are now also eating into Cable TV and, more slowly, Network TV. Many people are choosing to pay $15 at Target to own the DVD versus $20 for movie tickets to see the thing first-run. As the bulk of the audience changes its viewing model, writers are seeing their bottom line hit hard. But 40%? I don’t think so. There’s no way that a writer’s work is worth 40% on most productions. And I say that as a writer. I’d be all for increasing the payout to 25-27%, but no more.

Let’s start with the history. Way back in the early 1980s, when videocassettes were all the rage and people were doing really bad things with neon clothing and hairspray, writers, actors, and directors, among others, realized that the studios were not paying a fair share of video income as residuals. Back then — and this argument might seem familiar to those of you following today’s discussion — the studios (and it was mostly the motion picture studios) noted that they had no idea what kind of money they’d see from this newfangled video technology. It was too soon to tell.

After wrangling back and forth, the parties (producers, writers, actors, directors, etc) settled on the basic formula (again, not the full-blown formula). The logic behind the 20% was simple: the net amount left over from the sale of a videocassette, after deducting returns, discounts/rebates, cost of manufacturing, distribution, and even marketing was approximately 20% of the original sale. This is how it all started, way back in, what?, 1984?

    Video Sales: $100
    Less 80%: $80
    Base: $20
    X 1.5%: $.30
    X Writer Share Based on Credit

Even as this original formula was being developed, the costs related to video distribution were decreasing dramatically while the sales were increasing at dizzying levels. When DVDs hit the scene, it was near-impossible for the producers to argue that expenses ate up 80% of every dollar earned. Likewise, it’s not even worth trying to maintain a straight face when arguing that it’s too soon to tell what will happen with Internet/mobile distribution. Talent fell for that the first time; they’re not going to be fools again.

To be fair, it makes no sense for the producers to give away large sums of money. As with other entertainment media, new production must be funded with profits from other products. There is a high level of risk in this business — you cannot predict with absolute certainty how a movie, record, or book will do; some bomb, some succeed beyond belief. There is also the importance of having the money available to take artistic risks. While there is no question that DVDs have been cash machines for the producers, it is also true that these funds have gone right back into other creative endeavors.

But it’s not just this calculation that is fueling the strike. The article noted above discusses the concept of streaming media on the Internet, concluding that no payment is due or necessary. While I believe the economics of how broadcast television (and, again, including pay and basic and whatnot), let’s be clear on one thing: the producers are not doing this for purely promotional purposes. They are seeking (and will find) a viable source of income. As traditional television viewing declines, there will an increased push to make up the lost money online.

Minisodes, webisodes, whatever you want to call them are likewise viewed as ways to make more money. Treating these short-form videos as “promotional” allows the producers to avoid certain types of third-party payments while using the creative product. Again, the economic model is still in flux, but to suggest that no payment is due misses the point. The producers are not running charitable organizations; they are trying new ideas in order to build up new markets.

Brenda Coulter finds herself unswayed by the assertion that 48% of WGA members are unemployed at any time. She’s missing the point. For example, let’s say you, the writer, are involved in a pilot that gets picked up. You are then committed to that show; taking a second job or contracting for another show jeopardizes that commitment. Let’s say you enter into a lease (housing being very important) based on the fact that you’ve been promised a job for a certain time frame. Then, for whatever reason, the show gets dropped from the network schedule or cancelled abruptly. You’re out of work suddenly. Finding a comparable job is not as easy as it sounds.

The timing involved in motion picture production — whether it be due to spec scripts, hiatus periods, vagaries of schedules, or nervous network executives — impacts a writer’s ability to pull down a regular paycheck. These writers are not sitting idly, hoping that money falls from the trees. Collective bargaining agreements, agreed to on the side of producers because they know the value of this talent, protect writers, via residuals and other benefits, against this uncertainty. For many writers, the residuals they receive is part of their overall cash flow calculation.

Creative people are seeing a lot of money being made due to their efforts. People do not buy a video or download a song because it’s a Warner Brothers product. They are drawn to the artist — the writer, the singer, the director, the actor, the guitarist — and the story. The producers reap the benefits of the appeal these artistic contributions have. They acknowledge this contribution via payments such as residuals. The talent has accepted a relatively low percentage of the money for many years. They believe now is the time to make a stand.

The business is very different than it was fifty years ago. Thirty years ago. Twenty years ago. Ten years ago.

The writers have a lot of the current argument right, but the producers have many valid points. Both parties need to negotiate with this understanding (and both understanding that they’re setting precedent for the other guilds). If I recall correctly, collective residual costs are approximately 15% of every dollar earned (different media, etc have different rates). What seems unfair in isolation changes as you look at the entire picture.

[tags]writers guild of america, wga, writers, wga strike[/tags]

File Under: Square Pegs

18 responses so far ↓

  • Brenda Coulter // Nov 9, 2007 at 2:30 pm

    For example, let’s say you, the writer, are involved in a pilot that gets picked up. You are then committed to that show; taking a second job or contracting for another show jeopardizes that commitment. Let’s say you enter into a lease (housing being very important) based on the fact that you’ve been promised a job for a certain time frame. Then, for whatever reason, the show gets dropped from the network schedule or cancelled abruptly. You’re out of work suddenly. Finding a comparable job is not as easy as it sounds.

    Understood. But that kind of uncertainty exists in nearly every occupation. Don’t auto workers get laid off? Don’t white-collar workers get downsized? And didn’t you post just a day or two ago (over at Romancing the Blog) about the sad plight of some contracted romance novelists whose publisher went belly-up before releasing their books?

    Writers Guild members are in the same boat as the rest of us. Everyone worries about whether they’ll be able to meet their mortgage payments six months down the road. That’s why the WG failed to arouse my sympathy when they hinted that they deserve more compensation because 48% of their members are unemployed at any given moment. Maybe they do deserve more money. But if they do, it’s not because they have bills to pay, but because their work is valuable.

    If my dream is to ride circus ponies but riding circus ponies doesn’t pay enough to feed my family, the responsible thing for me to do is find a job that will feed my family. Of course, it would be really nice if I could convince the world that circus-pony riders are worth a lot of money–and so I understand the writers’ strike. But if the writers earn my support, it won’t be because they’ve manipulated my emotions. It’ll be because they’re presented a rational argument.

  • Laura Vivanco // Nov 9, 2007 at 3:23 pm

    But from what BookSquare is saying, part of what the writers are asking for is recognition in their pay of the fact that they are often “on call”:

    “say you, the writer, are involved in a pilot that gets picked up. You are then committed to that show; taking a second job or contracting for another show jeopardizes that commitment.”

    As this university website explains, “On-Call is compensation for an employee who must remain available to be called back to work on short notice if the need arises.”

    I think this is the same as stand-by pay:

    “Stand-by time means a period of time outside an employee’s regularly scheduled work hours, during which the employee is required to remain available within a specified response time.”

    Lawyers often charge retainer fees:

    “A retainer fee is typically, but not always, an advance payment on the hourly rate for a specific case. The lawyer puts the retainer in a special trust account and deducts from that account the cost of services as they accrue. During the course of legal representation, clients should review periodic billing statements reflecting amounts deducted from the retainer. Most retainers are non-refundable unless labeled “unreasonable” by a court. If you decide to drop a case that your lawyer has worked on before the retainer has been exhausted, you may forfeit the remainder.”

    That last part, about the client deciding to drop a case seems particularly relevant. The retainer fee ensures that the lawyer isn’t penalised for something that isn’t her/his decision and still gets paid when he/she has devoted time and effort to a case.

    Those who provide consultancy services also have to take into account a variety of factors and they’re not simply charging for the time they spend directly working for a client. Here’s some advice from Forbes.com:

    “Start from the bottom of your income statement and build up to get to your top line (i.e. the fees that you will charge).

    Profit + Labor Costs + Overhead = Daily Fee Revenue […] Overhead includes recurring expenses associated with running your business, such as rent, a secretary, phone bills, postage, benefits, insurance and equipment. Say all of that equals $15,000 per month, or $180,000 per year. Next, divide your annual costs by the number of working days per year. Market-research firm Kennedy Information figures most consultants spend 58% to 62% of their time working directly for their clients; 62% of those 260 days equals 161 days per year. Grand total: $1,120 per day.”

    Writers are also highly skilled professionals who are expected to work irregular hours and don’t have job security so it seems reasonable that they should be asking for similar types of remuneration.

  • Katherine Coble // Nov 9, 2007 at 3:33 pm

    So the 20% and 40% are not “of total sales” but 20/40% on profits?

    I guess it doesn’t matter, though, since the WGA took this demand off the table altogether.

    I suppose I would also echo much of what Brenda says in her comment.

    I’m a writer. I know about lean times; I also know about working as a secretary, graphic designer and travel agent to support myself during the times when my writing won’t cut it.

    As I’ve said elsewhere, most of what I do is Work For Hire–I see no “residuals” at all. Of course I would LOVE even a penny of residuals for the books I’ve sold into Wal-Mart, but that’ll never happen.

    And I suppose that’s why I’m viewing many of the writers’ demands with a jaded eye.

  • Kirk Biglione // Nov 9, 2007 at 4:01 pm

    Katherine,

    I’m sure Kassia will correct me if I’m wrong, so here goes:

    The writers royalties are based on the net profits. Obviously, it’s to the studios advantage to deduct as many costs as possible. The original home video formula assumed that the net profit would be 20%. This formula was based on the cost of manufacturing and distributing video cassettes. The formula was never adjusted after the move to DVD’s (which are substantially cheaper to manufacture and distribute).

    Studios want to maintain the same formula for digital video downloads. Obviously, the cost of “manufacturing” downloadable files is almost non-existant.

    There’s a trend here. Every time technology changes, the studios use it as an opportunity to keep a bigger piece of the pie.

    Musicians are up against the same thing with record labels.

    As for your Wal-Mart comparison, there’s a huge difference between the market for books and the market for television and motion pictures. WGA writers receive residuals because their work is sold to cable, syndicated to television around the world, and sold through the home video market (there are probably quite a few other markets that I’ve missed). The vast majority of revenue for the studios come through these secondary markets. The residual system compensates writers for the vast amounts of money made after the initial release.

  • Kassia Krozser // Nov 9, 2007 at 4:42 pm

    Brenda — not disagreeing that everyone worries about being out of work. Most of these writers work “day” jobs. The motion picture business works differently than the publishing business. It’s not pretty, but there you have it. Since 1960(ish), residuals have been part of the compact between writers and producers. This money has been part of the compensation package agreed to between the two parties. The writers (and members of SAG and the DGA) compromised mightily on the video issue in 1984. And again, and again. They have an interest in making sure that the studios have the money to keep producing new product.

    However, it is disingenuous for the studios (or, better, producers given the business works these days) to cry poor on matters of DVDs. It is wrong for them to try to hide behind a “three year study” when it comes to new media. And by declaring “webisodes” as promotional, there is what appears to be a deliberate attempt to bypass the established contractual agreement between the two parties.

    Katherine – The writers, in theory, should retain the copyright to their work. Because movie making is such a collaborative process, the collective effort is copyrighted by the producer (studio). Residuals are an acknowledgment that the producers are making money off this work (whereas in a traditional situation, the author of a work would earn royalties). When you sign a contract for a work for hire, you are weighing the benefit of signing over your copyright for a specified fee versus earning royalties.

    When a WGA member writes a script, they are doing so knowing that the contract they signed includes basic compensation (payment for work) plus residuals. As noted above, this fight was a long time coming — and the producers all knew it was a matter of time before the guilds took a stand.

    What will be most interesting is watching how new media changes the current entertainment industry content ownership rules. The producers (studios) offered a particular service to the creative people — and the creative people saw the benefit of this service to the point that they were willing to make these compromises (including the loss of copyright) in exchange for the distribution and production of their work. This is changing. Now, more than ever, the studios have to prove that they offer something more to talent — and the first step, from the perspective of the talent is fair compensation for repeated reuse of their creative output.

  • Robyn // Nov 9, 2007 at 8:13 pm

    You know, it would be a lot easier to have sympathy for writers if the rest of us didn’t have to sell our souls (or more technically 60% of our waking hours — I may be bitter; my writing time this weekend will be indexing a manual I wrote, for which my sole compensation may be a bonus, if other people put out) to eat. 48% unemployment sounds like writing time to me. Oh, man, I sound so conservative, saying that.

  • Kassia Krozser // Nov 9, 2007 at 10:35 pm

    Robyn — let’s be very clear here. That 48% is 48% of the WGA membership, not 48% downtime for working writers. Nobody’s sitting around half the year, living la vida loca. Writing isn’t that kind of lucrative career.

    I am presuming that you approach your writing as a job. So does every working writer in the WGA (at least the ones I know — I may be the only person in Hollywood not writing a screenplay, but I have friends who write them). They’re writing. They’re writing on spec — no promise of a sale. They’re writing as part of a production. They’re writing. If you think there isn’t a lot of soul selling going on here, you are dead wrong. Every writer I know gives up everything to write. That’s how we work. Very few writers in any medium make enough to live a life of leisure.

    While Katherine chose to go the work-for-hire route (and I believe all writing choices, as long as they’re well-informed, are valid), I do not believe that Brenda (for example) would be willing to sign over her royalties in exchange for a flat sum…thereby allowing her publisher to exploit her books in any and all ways they could — and making a lot of money in the process — without compensating her a dime. Smart writers demand due payment for their work; how you get paid depends on many factors.

    Right now, there is a huge disparity between what is being retained by the producers and what is paid to the writers. While that fuels further production, it’s a hard pill to swallow if you’re the one who is not earning money from your creative efforts.

    As I noted previously, residuals are, if you will, a trade-off for giving up copyright (and the associated benefits, like, oh, being paid for reuse of your material). Defining a single copyright holder on a motion picture (be it a movie or television production or Internet program) is damn hard. Dividing the payments between all the possible copyright holders would bankrupt the producers. Look at what’s crippling the documentary business right now — paying for copyrighted material is extremely expensive.

    While it is surely a devil’s bargain on both sides, the ongoing residuals paid to creative individuals keep this industry alive. If the producers had to negotiate and pay out every time they wanted to exploit a product in a new market, then the cost of releasing a classic television series on DVD or via iTunes would end up making the venture unprofitable for all parties. The current process allows the industry to move forward and innovate without involving lawyers every time someone sneezes.

    That being said, it is unreasonable to expect the talent to both relinquish copyright and fair compensation. They have done so for a long time. If this were your work being exploited, surely you’d want to be paid your fair share?

    As I’ve noted, this has been a long time coming. Nobody in this town expected the creative people to sit idly by and accept the current formulas forever. There is a middle ground — and when this settles for all parties, it’s going to be a live with it situation, not everybody’s happy all around. But I cannot believe that anyone who knows the facts of the matter believes the writers are not entitled to fair compensation — it’s just a matter of what that means.

    And for what it’s worth, the writers on my floor in my building? Today, they moved out their furniture. Really weird, really sad. These writers are not striking for small issues.

  • Kassia Krozser // Nov 9, 2007 at 10:41 pm

    PS — When I discussed the possible cost prohibitions related to individually negotiating rights to rerelease old product in new media, I should have offered a real-life example. Television series that used a lot of third-party music — or, if you, most series — are finding that going back and retroactively licensing music for video or other uses is extremely expensive. There are series you won’t see released or released with, shall we say, unoriginal music because the copyright holders have set the license fees at a level that cut too far into potential profits.

  • Misti // Nov 10, 2007 at 6:35 am

    As someone just reading over the post and comments cold turkey, here’s what I’ve gotten out of this:

    A certain percentage of income was previously deemed fair for the artist and producer, because of how much production cost. Production costs have dropped, but artist payment hasn’t raised accordingly.

    My impulse is to say that someone who expects a writer to be on-call should at least pay some sort of retainer fee, but when I think about the logistics, I’m not sure if that could work. Perhaps a better option would be to allow people involved to get other jobs “just in case” that can be dropped if things go well. It would slow down production, probably, but it might increase job security.

    Of course, the current setup seems to be very good to producers, so I don’t think they’re going to be changing anything anytime soon.

  • Brenda Coulter // Nov 10, 2007 at 1:25 pm

    I do not believe that Brenda (for example) would be willing to sign over her royalties in exchange for a flat sum…thereby allowing her publisher to exploit her books in any and all ways they could — and making a lot of money in the process — without compensating her a dime.

    Uh, well, that would depend entirely on the size of that flat sum.

    Kidding aside, Booksquare, here’s something that may interest you: The authors of the popular Online Reads at eHarlequin have always been paid a flat fee for those stories. The authors were led to believe their stories would always be available for free online, and many sent their faithful readers over to eHarlequin to check them out. But last year when Harlequin began offering e-books, many of those old Online Reads were removed from that free library and recycled as income-producing e-books on which the authors received no royalties. I have always thought that was a stinky move because many of the authors had accepted those contracts (at least in part) because they wanted the online exposure for their writing.

  • Edward Champion’s Return of the Reluctant » You Only TiVo Once // Nov 11, 2007 at 12:58 pm

    […] Kroszer has a solid overview of the basic issues behind the WGA strike, pointing out how “promotional” material is […]

  • Kassia Krozser // Nov 11, 2007 at 7:11 pm

    Brenda — that’s just wrong. Really wrong. And makes my point entirely. Content is valuable and Harlequin should not be making money off of “free” reads without compensating the authors. I’d be curious to see how the underlying agreements are worded — is this even permissible?

  • Katherine Coble // Nov 12, 2007 at 12:41 am

    I’d be curious to see how the underlying agreements are worded — is this even permissible?

    Oh, it’s permissible alright. The authors most probably sold “electronic publishing rights” as that’s the most common wording in ‘net contracts. What most folks think that means is “anything published on a website”. What they don’t realise is that the courts have upheld that to mean anything published outside of the print realm.

  • Brenda Coulter // Nov 12, 2007 at 9:43 am

    Katherine, the contracts were work-for-hire. Once the authors delivered the stories and were paid for them, they had given up all ownership and control of their works.

  • Katherine Coble // Nov 12, 2007 at 11:18 am

    Well, then, all the more permissible, I suppose. Of course, when you gamble on WFH (that the check you get now would be bigger than the sum total of the smaller checks you’d receive over time) that’s one of the drawbacks.

  • Rachel Cohen // Nov 13, 2007 at 11:36 am

    The writers who have non-show biz day jobs are people who sold a script a zillion years go to their brother-in-law. The WGA has been very cagey about the actual number of working, career writers. Feature film writers can sell a script which is never produced but the earn a tidy living doing re-writes and polishes (Carrie Fisher does tons of this work).

    TV writers aren’t on-call or on stand-by alert. Staff writers very seldom write a script–from concept to final shooting script–by themselves. Someone else came up with the characters, the season’s story bible, and then each episode is hashed out in the writers’ room. Then someone or a team write a script. So who owns that copyright?

    Most of the basic cable doc. and how-to shows are written by non-union writers as for-hire, and while we’d love to get WGA rates, ain’t never going to happen. I know plenty of Guild members who write these shows and are glad to do so. They’re all at work, but the WGA counts them when they claim the numbers–and counts them as “unemployed”.

  • Rachel Cohen // Nov 13, 2007 at 12:08 pm

    Pilots aren’t usually written by groups, but even if a pilot episode has multiple writers, they have NO guarantee that they’ll work on the series. If they’re smart, they’ll make that a condition of the pilot contract, but no show runner wants to get stuck with someone just because they worked on the pilot.

  • Kassia Krozser // Nov 13, 2007 at 10:47 pm

    Rachel, I’ve been puzzling over your comments all day. First, of course, I do not believe that the writers who have non-industry day jobs are those who sold scripts a zillion years ago. From what I have seen (and you need to know that I’m coming from the other side of this business), we’re talking a broad age spectrum. No matter what the medium, earning a living from writing alone is hard work. I personally support writers who find ways to do this.

    Bottom line is that there are only so many productions done in a single year. There are more writers than slots. No writer that I know is earning a traditional salary. Not only is the business dicey, but planning for retirement is tough going. The current system give those writers whose work is still earning money for the producers a share in the money. I don’t think it’s optimal.

    However, as both of us have noted, in the collaborative environment of movie-making (TV show making), assigning copyright is near-impossible. But someone must be the copyright holder — to have five or ten or two copyright holders turns the whole act of licensing products to various media outlets a logistic (and expensive) nightmare. For better or worse, the copyright holder is the studio (or producer). Sharing the traditional benefits of copyright becomes more complex. The current system sort of, kind of fills the gap.

    My position is that all writers deserve fair compensation for their work. On the flip side, it’s hard to determine fair compensation. You’re calling out a specific type of writing that’s not covered by the guild agreement. I can’t tell if you think it should be — I do, because right now the current contractual structure doesn’t give you much recourse while the current selling/revenue environment provides plenty of opportunity for the producer to make money.

    I understand why WGA members who write for non-represented programming are counted as unemployed. For the purposes of collective bargaining, only work performed under the terms of the agreement can be considered. Every contract has parameters. While I have my own feelings about how creative endeavors should be compensated, I believe that negotiations between contracting parties need to follow the rules of engagement. Expand the rules to include other types of writing and I fully support this. I think many of the non-covered writing should be folded into the negotiations.