by Howie Cockrill
After 100 days of strike, the writers and the producers have come to an agreement that will see both parties through until the next negotiation in 2011.
Both sides had to make difficult concessions, and the industry as a whole no doubt took a big hit. The estimates range from $1.3 billion to $1.5 billion lost by the industry and dependent businesses.
While the WGA made a number of demands throughout the course of the strike, the most ground-breaking and newsworthy were those pertaining to the writers’ share of online revenue.
After the news that the strike was over, the big story seemed to be that the WGA had convinced the AMPTP to share revenue in content streamed online.
Indeed, this was major buzz amongst the writers, most of whom received the new agreement only hours before it was to be voted on.
However, once the dust around the agreement had cleared, most entertainment media focused on the specifics of this perceived concession and how it is not quite as magnanimous an offer as it initially seemed.
The new Minimum Basic Agreement (MBA) provides that writers will receive 2% of advertising revenue from pre-existing programs, like “The Office,” that get streamed on the internet.
The catch is, and will be until the deal is renegotiated in 2011, that the MBA assumes that ad revenue is a fixed number.
This in turn means that the writers’ 2% share is also a fixed number.
So what is the fixed number?
The MBA fixes ad revenue at $40,000 per episode, no matter what the studio actually makes.
The writers’ 2% share means that they will receive $800 per streamed episode.
In exchange for accepting this fixed rate, in 2011 the WGA will get the right to audit the books of the studios to determine how much they actually made from online ad revenue during the period.
With regard to their other demands, the WGA roughly doubled the cut they get from programming downloaded online.
The WGA also received jurisdiction for new material created specifically for the internet. This is important because this area is likely to grow drastically in the coming years, and previously the WGA had no jurisdiction here.
So what will be the immediate impact of the strike’s end on the business of making TV shows and movies?
Studios will likely tighten their belts and be stingier about doling out money to develop programming. This in turn will translate to fewer big-money deals for writers on hit shows and films as well as a smaller pool of TV pilots to pull from for the next season.
The process for taking TV content to market has been the most disrupted, but comedies will likely be the first to return – hopefully by mid-March.
Dramas will take a bit longer and are projected to be back by early April.
The big losers are serialized TV shows (shows whose plots develop from week to week). These won’t be back until the fall, and “24” isn’t due back until January.
Those shows that do make it back this season will likely run deeper into the summer months.
As you have probably noticed, fresh TV content in the summer is rare. This is because of a chicken/egg situation, in which advertisers do not want to pay too much for summer programming because ratings are typically low.
As for the pilot season, networks would normally start ordering pilots right now – to the tune of 20 to 25 pilots per network. However, there is not enough time now to make that many pilots. Accordingly – networks will likely order between 8 and 12 pilots over the next month.
And where has cable TV been while broadcast TV has been languishing?
Generally, cable programming does not gear up until the summer – so cable TV did not get a significant bump in ratings during the strike.
Nevertheless, cable news did see a jump due primarily to election news coverage.
The general opinion of pundits is that neither the writers nor the producers can really be declared absolute victors in the aftermath of the strike.
The writers took the most obvious hit, giving up millions in opportunity costs while on the picket lines.
Not only that, some critics like Roger Smith accuse the writers of focusing on the wrong revenue stream (downloads and streams) and ignoring the most commercially successful aspects of their business (DVDs and syndication).
Smith, the co-founder of Global Media Intelligence, estimates that in 2011 (the year the new MBA will be negotiated) studios will collect about $2.5 billion from downloads, streams and online advertising. In that same year, Smith projects $15 billion in DVD sales revenue plus $2 billion from DVD rentals.
Combine that with rampant file sharing and a dearth of options in the internet-ready television market, and the writers seem to be staring down an investment that may take years to pay off.
On the other hand, with the exception of a drop in ratings, major hits to the studios are less apparent.
In fact, many were able to save money on production because of “force majeure” clauses, which allowed the studios to terminate deals that were going nowhere due to the strike.
Additionally, the AMPTP got the writers to cave on jurisdiction over reality and animation.
However, what the writers gained online should not be downplayed.
The studios opened the door to the notion that when the studios make money online, so do writers. And while this opening is just a crack for now, it is only going to get wider as consumers demand their favorite shows and movies be available online.