Media Post: Report Puts Another Digit On TV Writers Strike, But Main Issue Is Digital

David Goetzl of Media Post reports:

A NEW REPORT SUGGESTS THAT the gulf between what striking writers want and studios will pay can be valued at some $120 million–considerably more than previous estimates of $20 million. Yet the divide isn't enough to impact major media companies' earnings. The real issue is future outlay.

"From Wall Street's perspective, we estimate the impact of accepting the [writers'] proposal is largely negligible," Bear Stearns wrote in a report last week.

The firm estimates that the $120 million figure would carry an average impact of less than 1% on annual earnings per share for the media companies. That does not factor in any concessions by the writers' side (the WGA), where the principal issue is a desire for a piece of ad dollars from new-media distribution.

The potentially small financial impact suggests that studios (Alliance of Motion Pictures and Television Producers) are more concerned about setting a precedent in new-media revenue sharing. However, Bear Stearns wrote that the writers' forecast for that market "strikes us as fairly aggressive." The firm hinted that studios are looking to the future. They are concerned that a favorable settlement would embolden directors and actors in their coming renegotiations.

Bear Stearns wrote its report after speaking with WGA leaders to determine the current state of negotiations. The strike negotiations ended Dec. 5.

Even with residuals from online streaming and paid downloads at the top of the writers' agenda, there's another issue. Bear Stearns notes that the studios (AMPTP) fiercely oppose. The WGA wants to expand its membership to include writers for reality series, hoping to gain bargaining power.

TV networks rely on reality series for low-cost programming and hope to keep it that way, although Bear Stearns doesn't believe the proposal will add much to their costs. "Financially small, emotionally huge" is how Bear Stearns described the divide. The demand, however, may be something the WGA would be willing to concede for another gain.

The principal divide remains the 2.5% of revenues from sales and ad dollars gained from shows streamed off-air–which the WGA estimates could reach $3 billion annually by 2010. Writers currently get a small cut from download sales, but nothing from ad revenues, Bear Stearns said.

In addition, there are issues involving salary increases. Bear Stearns asserts that the latter would only add $13 million in costs for studios, but the issue is "pushing the sides further apart than what the actual size of the 'ask' would justify."

"Despite the perception that reality programming is unscripted, the WGA argues that reality writers are performing the job of a writing staff for a scripted series, as reality television does have pseudo story lines, such as tension build-up between characters," Bear Stearns wrote. "Therefore, the WGA's position is that reality writers deserve the same benefits and protections as scripted writers."

The work stoppage by the 10,500-member Writers Guild of America will be two months old on Jan. 4. Networks are scrambling their schedules, adding reality programs and saving new episodes of scripted shows to offer as much fresh programming as possible.

On a broader level, Bear Stearns suggests that studios could be helped in the near term from lower programming costs and other factors. The firm also said it does not subscribe to the theory that viewers won't return en masse after a settlement. "We find this notion fairly hard to believe


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