WGA Strike Fall out
By CYNTHIA LITTLETON
One year later, the evidence is clear: The WGA strike crippled the film and TV biz at a time when the industry was already caught in the buzzsaw of a radically changing marketplace for Hollywood's wares.
The strike by the Writers Guild of America that spanned Nov. 5, 2007-Feb. 12, 2008, sent the congloms on a cost-cutting binge that is as much an opportunistic drive to downsize the cost structure of production as it is a necessary effort to help offset shrinking profit margins.
As the industry still grapples with the upshot of SAG's long-running contract drama, the collateral damage of the WGA walkout is coming into sharper focus. The impact has included the following:
* A swift and dramatic reduction in fees paid to above-the-line talent, particularly thesps and scribes. Feature scribes, in particular, are grumbling about massive reductions in post-strike script fees.
* Primetime development business that has yet to fully recover from the disruption caused to the 2007-08 TV season and development for the current season.
* A de facto strike caused by uncertainty surrounding the Screen Actors Guild that has put this year's film business in a coma, even after the WGA settlement.
And then the broader financial meltdown hit.
Given the state of the global economy, some of the downsizing and budget-slashing that Hollywood is now enduring would have come even without the 100-day walkout. But the realignment of the biz's investment priorities is coming more swiftly and more comprehensively because of the scrutiny of operations that took place while the scribes were pounding the pavement.
At the outset, the strike starved the major nets and some cablers of original scripted programming at the worst possible time for a disruption to primetime's status quo. Even top-tier shows -- think "CSI," "Grey's Anatomy," "House" and "Heroes" -- haven't recovered from the ratings hit they took after being MIA for most of the second half of last season. As any network skedding exec will tell you, when viewers break a given habit, even for just a few weeks, it's next to impossible to get them all back.
Nonetheless, WGA leaders and many members remain resolute that the sacrifices of the strike were well worth it. The hard-fought contract set a template for residual formulas in new media on which the guild hopes to build in future deals. Most importantly, from the WGA's perspective, the deal prevented a repeat of the reviled homevid compensation battle of the 1980s, in which scribe residuals were based on only 20% of revenues generated by vid sales.
The damage for California from the strike has been estimated at $2.1 billion in lost economic activity, according to a report issued in June by the Milken Institute; according to Jack Kyser, chief economist with the L.A. County Economic Development Corp., there was an estimated $2.5 billion in lost wages for workers in Los Angeles County alone.
But the biggest impact may be the intangible cost of lost opportunities.
Most painfully for the town, the strike gave the congloms the force majeure cover to make deep, immediate cuts without fear of losing competitive advantage in the creative community or appearing as if they were retrenching. In the space of a few days in mid-January 2008, NBC Universal, Disney, News Corp., Time Warner and CBS Corp. wiped many millions of dollars in overall deals and other development obligations off their books.
In the year that has passed, series budgets have been hacked; ABC and CBS asked for cuts of 3%-10% from all scripted series even before the worst of the financial crisis hit last year. It's understood that several established drama series on the Big Three are under pressure to cut budgets by double digits or they will not be returning even though they deliver respectable ratings.
Talent reps report that for all but top-tier thesps, actor salary quotes have become a thing of the past, and there's little wiggle room for negotiation of the rates that studios offer for pilot and series deals. And reps are being warned that the industry tradition of renegotiating thesp salaries after the second or third season is going the way of the VCR and the pay telephone.
Of course, the boldest example of how the world has changed for the creative community is NBC's move to devote the final hour of its primetime sked to Jay Leno's yakker at 10 p.m. as of this fall.
The strike was surely not the only catalyst for all the upheaval in the creative community. But the strike came at a time when the stewards of the major congloms were under pressure to reinvent the biz's fundamentals, amid the disruptive effects of new technologies, not add to above-the-line production costs. A shared fear of uncertainty about Hollywood's once-and-future revenue sources was both the spark and the fuel for the strike.
The WGA came to the bargaining table with the Alliance of Motion Picture and Television Producers in summer 2007 with the legitimate demand that writers be compensated for work distribbed in new media. But the guild was highly unrealistic in its assessment of the size of the market and the myriad business challenges facing the WGA's major employers.
Faced with tough talk from the WGA, the AMPTP pushed back even harder with its incendiary proposal to shift all residuals to a "recoupment" formula wherein scribes would not be paid for reuse of film and TV productions in any market until a distrib had recouped its basic costs.
This amounted to pouring gasoline onto the fire stoked for more than a year by the WGA leadership among members about the urgent need for scribes to establish new-media residuals or risk facing a rerun of the reviled homevideo compensation scenario.
By many accounts, what largely prevented the WGA and AMPTP from cutting a deal and averting a strike was the lack of communication or relationship-building on both sides in the years leading up to the contract talks. By the time the negotiating teams met across the table, they weren't even speaking the same language. The DGA wound up serving as a very effective interpreter.
In the rush of relief that followed the end of the writers strike, there was talk on both sides of the aisle about the need for a stronger partnership between the guilds and the majors at such a pivotal moment for the industry.
So far, with the spectacle of SAG's epic contract drama and the WGA's accusations that the majors have not lived up to some terms of the deal, there's little evidence that diplomacy will play a bigger part when the WGA vs. AMPTP rematch comes in the contract talks of 2011.