Contract 2007 Opening Remarks from Negotiating Committee Chairman John F. Bowman



First of all, I want to congratulate our

corporate partners at CBS, Time Warner, News Corp., Disney, Viacom, and

NBC-Universal on what appears to be another great year for

entertainment revenues and profits. Box office is up, and broadcasters

are getting ad rate increases across the board, driven largely by

digital content created by many of the people in this room. We are all

of us very fortunate to be working in an industry that is thriving. It

is thriving not only because of the content created by members of the

DGA, SAG, AFTRA, and the WGA, but also because the CEOs of these

companies are proving to be extremely adept at finding ways to monetize

the Internet and other new technologies.

There is a real disconnect, however, between what the companies

are reporting to Wall Street and what they're saying to the talent

community. Investors are hearing about the changing landscape in

entertainment and exciting new markets to exploit. In contrast, the

AMPTP communicates nothing but problems to the Writers Guild. Problems

like-and this was mentioned by AMPTP at a recent press conference-ad

skipping, even though NBC Universal had just announced a one billion

dollar DVR deal. And while WGA member revenues have not kept pace with

industry growth-we are a line item that is definitely under control-the

companies balk at giving us a fair and reasonable share of the

industry's success.

I don't think anyone in this room is arguing about the right of

writers, actors, and directors to residuals. As collective authors of a

work, we are entitled to a portion of the revenue generated by that

work. But you have publicly stated that you no longer want to pay us

residuals on shows that are not in profit. Here's why that is untenable:

  1. Writers are a cost of doing business. They have no say in

    production, marketing, on advertising and publicity, directors,

    casting, the decision to spend tens of millions of dollars advertising,

    etc. They can't be expected to be paid from profits when they have no

    say in the costs which affect those profits. Profits are under the

    control of CEOs and their executive staffs.

  2. Intellectual property has rights, just as physical property does.

    Management has no problem paying the person who made the DVD box before

    a film turns a profit; they shouldn't have any problem paying the

    artists who created the intellectual experience that came in that box

    either. To claim that intellectual property has lesser rights than

    physical property is a dangerous argument for anyone in our business to

    make. You are making the same argument to us that digital pirates make

    to you.

  3. According to Hollywood accounting, The Simpsons is not in

    profits. How can we trust that kind of bookkeeping? What other business

    but ours has the accounting term, “monkey points?”

  4. Residuals from shows not in “profit" help support a writing middle

    class, and keep writers in the business until they finally create that

    one great thing. Do away with residuals, and you do away with

    late-blooming careers like Marc Cherry and David Chase – they couldn't

    afford to stay in the business. Your proposal transfers money from

    developing, promising writers, actors, and directors who need them the

    most to established pros who need them the least. It's bad for the


Ultimately, your complaint is not about unprofitable shows, it's

about the portfolio nature of the entertainment business. Risk is

spread out among many shows, some of which are unprofitable. This

economic fact will never be changed, even if writers work for free, as

you propose they do on the Internet.

Now let's turn to your proposal that we do a three year study before

bargaining about the Internet. Your reasoning is exactly the same as it

was in 1985. Models haven't emerged, the environment is uncertain,

we'll take care of you later. Well, we know what happened then. Home

video and DVD sales soared, and nobody got taken care of later. But

this isn't 1985, when TV writers didn't envision that their shows would

someday end up on DVDs, and they'd get stuck with a .3% return. This

time, TV writers can see how important the Internet is – our shows are

already there. And, unfortunately for your argument, positive economic

events are daily giving the lie to your doomsday scenario.

But if you insist on a study – I used to do studies for a living –

I'll give you one now. The Internet is a distribution channel with no

major fixed costs, no media costs, no shipping or handling costs, and

margins that are the envy of even the cigarette industry. Though you

lose your monopoly on distribution, you have a strategic advantage that

nobody else has: strong relations to the talent community. Above all

else, nurture this relationship. If you don't-if, for instance, you

insist that members of that community not get paid for three years, or

get paid, at most, a .3% residual rate, what possible incentive would

they have to work for you? What incentive do they have to help you

fight video piracy, when they're only getting .3%? If you don't pay

them someone else will-Yahoo, Youtube, who knows? It won't happen

overnight, but it will happen, and very quickly indeed, if you bargain

so unreasonably that you force talent to go elsewhere for a fair deal.

Of course this study is flawed, but then all studies are – you can make

them come out any way you want to.

I can imagine an NBC-Universal Wall Street press conference, 18

months from now. Revenues are down, profits are down, due to a work

stoppage which you, the AMPTP, collectively, forced. Shareholders are

restive. They ask the company this: “Your industry paid 84 million to

fire Tom Freston, 300 million to invest in “Last FM.” Yet at a time

when it was absolutely crucial that we establish a presence on the

Internet, you chose to alienate content providers, the best strategic

advantage you had. And you made this catastrophic decision over how

much money?

Today you'll receive our proposals. They are designed to help

writers keep up with the overall growth of revenues in our business.

Our operating principle is simple: if you get paid for the reuse of our

material, we get paid. So let's now back away from the edge, get real,

and get to work. Studies and profit-based residuals are not serious

proposals. They have no legitimate basis in the economics of this

industry. They are non-starters for this committee and membership. Our

response to such proposals will be a polite “no thank you.” But there

are serious issues to discuss, issues that come directly out of our

real relationship. Those issues are:

  • How we will share new media income
  • How we will produce material together for new media
  • How we will deal with the non-union shell companies that you've

    created to avoid paying the talent, especially on reality and animation

  • How talent will get a fair share of home video money
  • How we will work together on issues like piracy
  • How we will work together to make sure that new technologies are a boon for all of us

These are real issues. Writers and the talent community deserve to

keep up and we have not been. All of our proposals will be focused on

that central fact. Writers have to keep up with the industry growth

that we help create. It is simple and fair. We look forward to your

response, and thank you.