The Writer's Strike: Networked Television's First Death Match
Shelly Palmer Report

The WGA went on strike this past Monday and everyone from blogger to professional pundit has been talking about which shows will continue to air which will stop when how some reports have even taken a shot a why Sound bites and articles written to scare TV fans into abject despair are both useless and insulting If the writer39s strike isn39t over by later today or early next week it will probably last until June 2008 when SAG The Screen Actor39s Guild will have to renegotiate their contract Let39s not speculate The strike will be over when it39s overWhat I39d like to explore are some of the underlying issues that make this negotiation networked TV39s first death match and why both sides really need to win Sadly both sides won39t win In this case there will be a clear winner and a clear loser as opposed to a compromise that both can live with I am not aware of any past zerosum entertainmentrelated union negotiations but this certainly won39t be the lastI39m told by people who are intimately involved that the union caved on the DVD issues last Sunday night and that the strike is almost exclusively about how guild members will be remunerated for alternative media advanced media and online use of their works Vote at JackMyerscom What Should Members of the Writers Guild DoAt its simplest this is a strike about money The writers want to be paid when producers make money from the additional use of their intellectual property On its face this sounds like a reasonable request And it certainly doesn39t sound like a death match But if you think about what39s really at stake it doesn39t take long to realize that the underlying issues are profoundly fundamental to the future of the businessThe writers are asking for a share of revenue To quote Michael Winship president of the Writer39s Guild of AmericaEast quotIt39s simple if they get paid we get paidquot In this case the quottheyquot Michael was referring to are the members of the AMPTP The Alliance of Motion Picture and Television Producers Many people suggest that this model can work because it is how so many Internet companies do business and online video is like the Internet rightWell not exactly It39s true that people in Internetrelated businesses are used to partnering and rev shares are extremely common The business culture has evolved to reward cooperation and coopetition In fact sweatequity is a respected currency of online and technology startups We can all picture a bunch of 20somethings sleeping in their cubes living on chocolatecovered coffee beans Doritos and Red Bull writing code Clichamp233 yes But bootstrapping is a culturally accepted way of doing tech startups because so much technology needs to be shared and there is very little economic incentive to reinvent the wheel On the other hand there is zero incentive to sharing anything with your competitors in the entertainment business And unlike their tech counterparts most established writers would not be willing to work for free or for slave wages in exchange for stock As we know 995 of television shows and movies are born dead Or to put it another way the businesses of movie and television production enjoy a spectacularly high failure rate While most businesses in the techsector are seeded by venture capital entertainment is almost never financed in this way The risk is assumed by the producers their bankers and in many cases the distributors of the final product Even a primer in film and TV finance is outside the scope of this writing but suffice it to say that quotHollywoodquot accounting is an opaque art form because the economics of the business dictate it to be soAny truly meaningful percentage deal between the parties will require a level of accounting transparency that is unprecedented in Hollywood The thought of sharing a percentage of revenue by calculating actual profit is simply antithetical to the riskreward profile of the businessFor example If a producer puts up 1 million dollars to make a show How much are they entitled to recoup before sharing the profits with the rank and file Certainly the number must be much greater than 1 million How much greater Are they entitled to quotfirst money outquot What is a reasonable profit I39m sure you have your own opinion about it the writer39s certainly do Here39s the problem the show isn39t getting made unless the producer risks the capital And in the entertainment business that risk is extremely highNow you might argue that no matter what the risk profile of the business smart professional risk managers can build models that can satisfy both parties This might even be true if it were the entire issue But it is notUnfortunately for everyone involved it is incredibly unclear if the current model of television and movie production can survive the behavioral changes in media consumption You have a personal story about how differently you consume media now than you did a year ago In fact everyone you know has a story on the subject You use your iPhone your kids play video games and have IM windows open on their computers your 18 month old nephew likes to watch Sponge Bob on TiVo and can already use the remote control etc This fundamental shift can be attributed to a significant increase in consumer control of media and more importantly the stunning difference between open and closed networksA chain of movie theaters a cable system or a broadcast television network is a closed network The public Internet is an open network When you watch a movie at a theater you are using a timetested business model Pay Per View You buy a ticket see the movie once and go home This is a closed network You are asked to leave the theater after the movie is over and you must buy another ticket to see it againOn the other hand should you find the same movie as a Bittorrent file on the public Internet you can watch it all you want share it with your friends and keep the file forever without paying anyone anything everHummm how much of that revenue should the writers be entitled toAs a practical matter nobody knows how and when online video will actually become a business At the Future of TV seminar David Poltrack Chief Research Officer CBS CorporationPresident CBS Vision said quotIf you really want to watch something I guarantee that we will figure out a way for you to pay for itquot He was talking about how online video might be supported by advertising or some other business model I am a big fan of David39s but I completely disagree with him The only way that you can make someone pay for content from 2007 into the foreseeable future is on a closed network On the public Internet content is and will probably always be free Just to clarify people with more money than time pay people with more time than money pirate As people get better computers better broadband connectivity and better software the casual or even unintentional bootlegging of content will increase exponentiallyThis may make some people very sad but there39s very little that can be done about it in today39s technology Can we create technology that would so seriously invade the privacy of individuals that we could protect content on the public Internet Yes Will we I don39t know and neither does anybody elseSo why is this a death match Why do both sides need to winIf the writers really win the producers will have to fundamentally change the way they do business And happy as it might make some people this kind of tectonic shift would so demotivate risk capital that the business would truly never recover It would also open the door for every other union and guild to quotget theirsquot and that just can39t happen How much rev share should the key grip get Hyperbole yes but rev share has to stop somewhereIf the producers really win the writers are going to be absolutely screwed out of any hope of proper payment for their work Big media will continue to be subsidized on the backs of creatives who have become defacto bankers with zero ROI If you39re a writer you should put your pencil down until the producers agree to pay you fairly for your work whatever it takes for them to accomplish itHow will it end Badly I fear But let39s revisit this issue in 2012 We39ll know quite a bit more after the transition from analog to digital is complete after the spectrum starts to become commercialized and after about 10 more generations of personal media devices Or maybe we will be even more confused about the future of media you know that39s why there39s just never really a good time for a death matchShelly Palmer is Managing Director of Advanced Media Ventures Group LLC and the author of Television Disrupted The Transition from Network to Networked TV 2006 Focal Press Shelly is also President of the National Academy of Television Arts ampamp Sciences NY the organization that bestows the coveted Emmyamp174 Awards He is the ViceChairman of the National Academy of Media Arts ampamp Sciences an organization dedicated to education and leadership in the areas of technology media and entertainment Palmer also oversees the Advanced Media Technology Emmyamp174 Awards which honors outstanding achievements in the science and technology of advanced media You can read Shelly39s blog here Shelly can be reached at shellypalmernet

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The Writer's Strike: Networked Television's First Death Match
Shelly Palmer Report