LOS ANGELES: Mired in the second week of a bitter strike, Hollywood’s studios and writers appear headed for a long stalemate over how to share the wealth from the next media bonanza – delivering TV shows and films over the Internet.
Just as their last labour contract still pays “residuals” for TV reruns – a 50-year-old artifact from the days when the western drama “Bonanza” graced prime time – writers want a new deal to shape how generations earn their living off the Web.
Although the Web and wireless devices such as mobile phones account for a fraction of revenues generated from film and TV now, experts see the Internet growing into Hollywood’s distribution channel of choice in the not-too-distant future.
High-speed Web delivery could prove as big a watershed as film talkies, technicolour, the VCR or even television itself.
Already, some industry analysts estimate that major media companies are bringing in hundreds of millions in advertising and other revenue by posting video content on the Internet. But the studios argue it is too soon to know how much money can be made, let alone how much they can share. Writers want to ensure their piece of the pie in the long term. Neither is budging.
“We’re looking at the future, and the future is so big that we’ll be kicking ourselves for the next 20 years if we aren’t part of the Internet,” said Greg Daniels, executive producer of the NBC show “The Office”, the network’s No. 1 comedy and one of TV’s biggest online hits.
Longtime media lawyer Howard Fabrick, a veteran of numerous Hollywood labour talks, said the Web issue has galvanised film and TV writers. “I have not seen that kind of cohesiveness of position in prior negotiations. That’s different,” he said.
In fact, the promise of the future is so potentially lucrative that the Writers Guild of America gave up its quest for a bigger share of flourishing DVDs to press demands for a greater stake in new media on the last day of contract talks.
That tactic struck some as a huge gamble when the talks with film and TV studios collapsed Nov 5, leading to the first major Hollywood strike since a 22-week WGA walkout in 1988.
That action lasted 22 weeks, delayed the fall TV season and cost the industry an estimated $500 million. Economists say a similar strike now could produce $1 billion in losses.
One vestige of the 1988 strike is the formula still used to calculate how much screenwriters earn for film and TV work that gets repackaged into DVDS – 1.5 per cent of 20 per cent of gross revenues, or roughly 4 cents for every disc.
The writers say they settled for that rate in the 1980s because studios argued that the video home market, dominated by cassette tapes at the time, was still in its infancy. The WGA claims studios never made good on their promise to negotiate a more generous residual once the home video market took root.
Writers are now unwilling to accept what they view as an equally penurious rate for Web downloads while the studios wait for digital distribution to gel. For now, the money at stake seems relatively small, but it is expected to grow rapidly.
The US download-to-own market for all movies and TV episodes totalled a mere $107 million in 2006 but should triple to $315 million this year, according to accounting firm PricewaterhouseCoopers. The sum is expected to more than triple again by 2011 to nearly $1.2 billion a year.
Downloads still pale in comparison to revenues from DVD sales, which will reach an estimated $17.3 billion this year and $20.7 billion by 2011, according to Pricewaterhouse.
Still, the Internet is widely expected to evolve into the pipeline used to carry all TV shows and many movies into homes, and the future could arrive far sooner than the studios think.Ted Sarandos, chief content officer for DVD rental service Netflix, sees home Web delivery posing a serious challenge to “packaged media”, such as DVDs, in seven to 10 years.“We named the company Netflix because we absolutely believe that most content will be delivered to houses over the Internet. It’s just a matter of when,” he said.
Allen Weiner, an analyst for technology research company Gartner Inc., predicted “convergence” of Internet and TV “probably (in) a three-to-five-year window.”
But the studios argue they face an uncertain business model on the Web, piracy, competition and soaring production costs eating at their bottom line. They say it would be foolish to give away too much too soon. They, too, seem entrenched.
“We’re not going to do something stupid at the bargaining table,” said Nick Counter, the chief studio negotiator as head of the Alliance of Motion Picture and Television Producers.
Screenwriters counter that much of what the industry calls promotional actually makes money in download fees or advertising, and they point to bullish declarations from industry brass about the world of digital media.
Since starting downloads on Apple’s online iTunes store two years ago, the Walt Disney Co. has reported sales of 24 million TV shows and 2 million movies via iTunes. Disney CEO Robert Iger said digital commerce accounted for about $1.5 billion of Disney’s $35 billion in annual revenues last year.
But it was not clear how much of that comes from downloads.
NBC’s “The Office” alone posted 7 million downloads from iTunes before NBC removed its shows from that service in a recent pricing dispute with Apple, according to Daniels.
“That’s a lot of downloads for our show at $2 a pop,” he said, adding that advertising rates for shows “streamed” by NBC.com are nearly double what NBC charges for broadcast advertisements.—Reuters
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