The Writers Guild went on strike earlier this month, suspending television and film production in Hollywood while they tussle with the studios over residual payments. So far, this has received significant coverage in the media, and today, Newsweek offers one writer the opportunity to explain the reason the writers walked off the job. What Douglas McGrath fails to provide is a reason to care about the issue:
When video came into being, a new accommodation was made, allowing a small residual for tapes and then DVDs. I am not being hyperbolic when I say “small.” For a DVD sold for $19.99, we are paid 4 cents. To put that in perspective, that means that to pay for one tank of gas, a writer needs to sell 1,500 DVDs. To put it another way, it’s a penny less than if we returned an empty can of Coke.
We negotiated this formula for DVDs back in 1988, and I think most members of the guild agree that in terms of desired do-overs, it ranks with President Bush’s decision to award L. Paul Bremer the Presidential Medal of Freedom. We had been asked by the studios to take a smaller share than we wanted because the video market was new and uncertain and our doing so would help grow the industry. (It sure did. That sector of the industry has boomed, helping many studios coast through bad years on the strength of their video libraries.) To redress what most writers feel was a bad deal, we have asked in this negotiation for 4 more cents per DVD—requiring only the sale of 750 DVDs to fill our gas tanks.
But there is a much bigger issue at stake, because it concerns where the future—and a good deal of the present—is: the Internet. The studios can now sell you a movie, or an episode of a TV series, or a whole series of series, right over your computer. Not only is it convenient for you, it has dramatically reduced the studios’ costs: they need not make a videotape, with its plastics and tape and spools and boxes. They need not print and package a DVD, with their team of overzealous shrink-wrappers that make your average DVD harder to get into than Princeton. They have no shipping costs, no storage costs, only the movie or TV show that already exists.
With their costs substantially reduced, this would be the right time to correct the old imbalance of the DVD rate and give writers a share more fairly in line with the level of our contribution. But the studios are not looking to find a more equitable residual rate—it seems they are hoping that the new media will allow them to do away with the idea of residuals altogether.
First, it helps to put those numbers into a little more perspective. Home video sales accounted for more than $24 billion in 2006, according to the industry trade group EMS. That works out to $960 million in residuals for the writers in that same period — a single year. That fills an awful lot of gas tanks. [See Update II below.]
McGrath also leaves out of the calculation the residual rates for the other participants in the industry. On one DVD, how much do the actors get? How much do the directors get? How far out of line is four cents per unit? Is it half of the director’s residual, or a tenth? What should the formula be? The context of the residual structure matters more than the unit fee. All we hear is that the writers want it doubled, and the only explanation forthcoming is that they want to fill their gas tanks twice as often.
That doesn’t make for a very compelling argument, unless one wants the sympathy of the oil companies. It causes one to suspect that they don’t have a very compelling argument, considering that McGrath writes for a living and he had a golden opportunity to make the case in a national news magazine. The writers may have a great case to make, but so far they haven’t made it here or anywhere else.
McGrath doesn’t give entertainment consumers much reason to care about this strike. It’s not about working conditions or the quality of the product. So far as any of us can tell, it’s a typical entertainment-industry strike, where both sides work against their own interests in failing to come to a reasonable formula to divvy up an avalanche of money. We see it in professional sports and in TV and movies, and quite frankly, we find it even more boring and formulaic than 80% of what all of them produce. Call us when everyone’s lost enough money to find their motivation to go back to work. (via Memeorandum)
UPDATE: Harold Meyerson makes a better case in the Washington Post:
The problem for the people who write the shows is that, at present, the studios aren’t bound to pay them anything for material that goes out on the Internet, and the studios are pretty much trying to keep it that way.
“Our current bargaining agreement doesn’t give us jurisdiction over content written for new media,” says Tony Segall, general counsel of the Writers Guild of America West. A side letter appended in 2001 to the guild’s contract with the studios exempted the studios from having to bargain with the union over the paychecks of writers turning out material for the Web, which the insufficiently futurist leadership of the guild (since replaced) apparently viewed as a distant prospect.
Last year, however, NBC-Universal asked the writers of “The Office” to create two-to-three-minute “webisodes” of the series for the Internet. Though the webisodes drove up the show’s ratings, the studio paid the writers nothing for their work. The writers, not surprisingly, ceased their webisode writing; the guild sought to negotiate for them with NBC-Universal and got nowhere fast; and the issue of the writers’ right to bargain collectively for Internet work became the crux of the writers’ conflict with the studios.
That is more of an issue. The Guild wants a percentage of revenue, and the producers and studios want a flat rate for Internet-distributed entertainment. If you want to access entertainment through the Internet, the dispute will have some interest.
UPDATE II: I made a pretty large error here; the writers get four cents per unit, not four cents per dollar. Given the heavy discounting on DVDs, the average price is certainly lower than $20 per unit, but even using $15 per unit, that would make the writer’s residuals in 2006 around $72 million, not $960 million. At 12,000 members, as Stephen J notes in the comments, that’s around $6,000 per year each in residuals. That’s still not insignificant, and McGrath still doesn’t explain where the writers fall in the overall residual schedule, which would give this the context it needs. It’s also important to remember that writers get their primary earnings from writing, not residuals.