Guilds Veto ABC/Disney Proposed Rates for Digital Downloads

The Writers Guild East and west, the Screen Actors Guild and the

Directors Guild of America responded swiftly to ABC's announcement that

it would use the discounted home video rate to pay residuals for iPod

digital downloads.

In a joint statement WGA East and west

affirmed their plans to pursue legal action for the violation of the

MBA. The guilds believe that a more applicable formula would be that of

pay TV, which pays a 1.2% residual rate out of 100% of revenue.


members of our guilds demand the Companies pay what they are

contractually obligated to pay," said WGAE President Chris Albers. "Not

a paltry residual rate based on an irrelevant home-video formula from

the age of Betamax."

"ABC's unilateral decision to pay

digitaldownload residuals at the home-video rate is a violation of our

contract and an insult to our hard-working members," added Patric M.

Verrone, WGAw president. "It is unacceptable, and we will aggressively

pursue all legal options at our disposal."

SAG too has pledged

legal action and is planning to file an arbitration against ABC for

introducing digital downloads without first bargaining with the union

and for seeking to use a residual formula crafted more than 20 years

ago to address the emerging videocassette business. That formula allows

studios to retain 80% of revenue to cover manufacturing, marketing and

other costs while paying SAG residuals out of the remaining 20%.


ABC advised the guild that it intends to pay residuals to performers

based on the video-cassette formula — a formula that does not apply to

this new platform," SAG president Alan Rosenberg said. "ABC's actions

are flatly inconsistent with our collective- bargaining agreements and

with labor law obligations and fail to fairly compensate performers for

the use of their work and images."

The DGA has also said it plans

to pursue legal action over this application of the home video formula.

"Such payments are not consistent with the DGA's collectivebargaining

agreement, and we will be filing claims against ABC and any other

company that pays residuals on video iPod downloads according to the

home video formula," DGA president Michael Apted said.

The Walt Disney Co. reiterated its position that the iPod downloads should be covered under the home video residual formula.


the guilds have a different point of view, they have the right to

challenge the company's determination before a neutral arbitrator. In

the end, this is simply a dispute over how to interpret a provision

under agreements that provide the means for resolving that dispute,"

Disney said in a statement.

The issue began simmering in October

2005 when Apple Computer introduced the video iPod and offered

consumers the ability to buy episodes of Lost, Desperate Housewives and

other ABC shows through the iTunes store for $1.99.


AFTRA, SAG and DGA responded immediately, issuing a joint statement

saying that they had "not yet heard from the responsible employers of

our members" and looked forward to discussing the formula.


and other programmers have followed ABC's example, selling episodes

through iTunes. However, since ABC was the first to offer content in

this new medium it is also the first to owe residuals.

Meanwhile, other shows have been made available to watch or own through Google and mobile phone companies.

Back Story:

Message to Members Regarding ABC/Disney Formula for Digital Downloads

WGAE / WGAw Reaction to Download Rates Paid to Creative Artists