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Take My Study… Please
Why shouldn't we take seriously the Companies' idea to conduct a three-year study of non-traditional media?
How can we take an idea seriously that means stalling for three
years the bargaining of fair contracts for the people who create and
produce the content that makes the entertainment industry so successful?
The studios assert that these are new technologies, so they don't
know how any of it will work from a business standpoint. This may be a
clever excuse, but as we all know digital distribution is hardly new.
Movielink, one of the earliest Internet websites for delivering movies,
was started by several of the studios in 2001. They've collected six
years of data from Movielink since then. We've had a residual formula
in place for this type of “temporary” Internet downloads since November
2001. More recently, in October 2005 iTunes began selling downloads
under a deal with Disney. In Internet years, two years is a long
The Companies claim that the business models for new media are unknown. (By the way, what is a business model?)
A business model is simply a description of how a studio gets paid
under a specific deal. The Companies have made hundreds of digital
distribution deals during the term of the current MBA, and each
represents a business model. A discussion of those deals at the
bargaining table is more informative than a study. We have requested
information about these deals from the Companies to enable us to
bargain effectively, and by law they are required to provide it. But we
have not yet received it.
What are the Companies proposing to study for three years? Their
written proposal contains an important limitation: the study would be
based only on “publicly-available” information. But we've already done
that study, and we assume that the Companies have as well. We don't
need outside consultants to present us with an analysis of public data
three years from now, while in the meantime the Companies pay nothing.
They say that residuals can't be paid until a dominant business model emerges.
The fact that delivery systems are changing, and will continue to
change, does not mean that residuals shouldn't be paid now. Collective
bargaining can accommodate change. The existing formulas for digital
distribution-and the formulas that the Guild is proposing in the
current negotiations–are based on percentages of revenue. These are
business-model neutral. If the studio generates a lot or revenue, the
writer gets more in residuals. If the studio generates less revenue,
the writer gets paid less.
Technology changes constantly. Don't we need to see which one dominates?
The percentage of revenue model does not require betting on a
winning technology. It is technology neutral. Under our proposal, when
the studio gets a dollar, the writer gets 2.5 cents-the technology
The studios claim they need flexibility in this new area.
A percentage of revenue model is 100% flexible. "Flexibility," as
the Companies use it, is a code word for paying less. The studios want
non-traditional media uses to generate revenues with no residual
obligation or with the heavily-discounted DVD formula, even when there
is no DVD to manufacture. That's not fair; it's greedy.
Non-traditional media could cannibalize existing media.
The “cannibalization” of old media by new media is a red herring.
There are several factors that affect the displacement of older
distribution methods by new ones. Business decisions that are
completely in the control of the studio executives exert major
influence in this process.
ITunes started with four ABC series and several Disney Channel
series. The Companies have been selective in releasing product through
new media outlets. No studio has licensed the thousands of features and
tens of thousands of TV episodes in their libraries in a wholesale way.
They release product to new outlets only when the viewing is additive
or when the new method of distribution is more profitable than the
displaced one. In other words, “cannibalization” is a business
The studios claim they don't know what they are doing in these new markets – it's “experimental.”
Experimentation is a normal part of any business, and in the
entertainment industry experimentation is a way of life. The studios
make a convincing case to Wall Street that they are in firm control of
their strategies, including their experimentation with new media. This
is the explanation they give for their high profit margins, and the
justification for their executive compensation packages. Since making
false statements to the markets is a violation of securities law, we
take their Wall Street pronouncements seriously.
Residuals in this area will be groundbreaking.
Not so. In 2001, the Companies negotiated the first new technology
residual, agreeing to pay 1.2% of the distributor's gross receipts for
Internet rentals. Now that other forms of distribution have arrived,
such as the sale of downloads or advertising-supported streaming, it is
time to negotiate fair residuals to cover these new uses.