If you’re into that sort of thing, this summer is shaking up to be a wild one in Hollywood. While blockbusters galore are filling the screens and record-breaking sales are making the headlines, a revolution is about to emerge. Our sleepy little town is about to enter what I believe will be the most contentious Guild negotiations ever.
This is a fight that has been simmering since, oh, 1981 or so. Back when Betamax and VHS were slugging it out with Laserdiscs. The studios, who were just beginning to see the endless programming possibilities of cable television (satellite being, if not a dream, a fantasy), and you can imagine their confoundment (is that a word?) when they learned just how much people would be willing to spend to own movies.
It would be close to a decade before these selfsame studios really grasped the lucrative nature of television series and consumer ownership.
Back in these days, the making of videotapes was extremely (by today’s efficient standards) expensive and it was easy enough to justify basing the payments of residuals and participations on a 20% royalty. You know how it goes, a percentage of 20% is better than a percentage of nothing. Though not necessarily included in many agreements, the 20% rate became the de facto standard, higher amounts going only to the few, the proud.
The DVD explosion changed all that. What were low grumblings and the focal point of negotiations became rallying cries. “We want more!” the Directors Guild, the Writers Guild, the Screen Actors Guild shouted in unison. But at the end of the day (or, rather, the last round of negotiations), they kept the rates essentially the same, opting for health insurance protection.
Nobody, from the casual bystander to the industry expert, believed that this sudden capitulation was the final word on the topic. There was a bigger prize on the horizon, something both studios and talent expected to change the way consumers interacted with entertainment media forever. DVD was dying, online media was rising. Why waste time on the last big thing when you could get in on the ground floor of the future?
Sounds like a lousy sales pitch, doesn’t it?
Except, this ground floor leads to a building of endless possibilities. In a few weeks, the Writers Guild of America will sit down and begin negotiations on a new contract. Already, scripts are being stockpiled in anticipation of a possible strike. Despite Hollywood’s reliance on so-called “unscripted” television, without writers, the studios are burned. Do you honestly think those actors can figure out what to say all by themselves?
For television producers, this is a lousy time to be caught short on new product. Already (as I’ve noted ad nauseum), they have left viewers high and dry. Consumers are getting away from their televisions and discovering new ways to entertain themselves. You know what they say about new habits: it only takes 20 or so times before the new behavior sticks. Sending your audience off into the wilderness when there is so much to be discovered seems like a bad business move to me, but that’s probably while I’ll never be a studio executive.
For motion picture producers — a group that encompasses the television group — these negotiations are likely to prove costly. That 20% figure isn’t going to fly in this day and age. Unlike days past, the cost of producing and distributing the media does not represent a huge chunk of the net profits. In many cases, the burden of marketing and distributing falls on a third party provider such as iTunes.
(For what it’s worth, the studios’ opposition to various iTunes schemes such as the new rental pricing, $2.99 for a short-term rental, feels a little too much like circling the wagons after the camp is empty.)
The studios are going to have to give up a far bigger chunk of money than they have in the past. The writers are merely the first wave. Do you honestly think the actors are going to sit passively, accepting the historical 20% rate when there’s gold in them there hills? The directors will surely follow suit. And so it goes. Everyone will want more, right down to the musicians.
And I’m not even counting the participations negotiations. By the end of the summer, I fully expect that new deals will contain calculations and definitions that would make an advanced calculus student squirm. Yes, Virginia, you will need algebra when you grow up.
The studios have had a long, lucky ride. That they’ve held the line on 20% home entertainment royalties for so long is nothing short of amazing. This time, however, I think they’re going to lose. I can’t see how they’re going to stop progress. I also think whatever emerges from this summer’s negotiations will be the accounting challenge I noted above. There is no way anyone will rise from the table until the outcome guarantees the most complex methodology for reporting possible.
But it’s going to take some time before agreement is reached. And that’s why it’s going to be the longest, hottest summer Hollywood has ever seen.
Let’s just say that now is a great time to be in the business of creating alternate programming for voracious viewers!