Last week I posted a rather pointed polemic titled "Suicide by strike" in which I argued that the big entertainment companies were acting suicidally in picking a fight with the writers at precisely the wrong time.
In this post, I more dispassionately outline my theory of why that's the case, and what I think may happen next.
The writers' strike, and the studios' response to the strike, may radically accelerate a structural shift in the media industry -- a shift of power from studios and conglomerates towards creators and talent.
First, some context. In Hollywood, the talent -- actors, directors, writers -- is unionized, and those unions engage in old-fashioned collective bargaining with the studios, also known as "the Man". That collective bargaining establishes the economic framework by which most of the talent gets paid.
Last week, the writers' union -- technically unions, but I'll use the singular form for simplicity -- went on strike for the first time since 1988 after an acrimonious breakdown in negotiations with the studios over a new deal.
Significantly, the actors' and directors' unions are due to renegotiate their deals with the studios soon as well; some people in Hollywood believe that the studios are being deliberately hostile to the writers in order to send a signal to the actors and directors to not expect much.
The writers are on strike primarily over the terms by which they get paid "residuals", or ongoing payments, for various forms of distribution of television shows and movies. In a simplified nutshell:
* Due to amazing historical circumstances around the birth of the VCR in the early 1980's, television and movie writers are currently paid approximately 4 cents for each DVD sold -- bearing in mind that the average sale price for a DVD is over $10, and the cost of manufacturing a DVD is less than 50 cents. The writers want that residual rate doubled to 8 cents per DVD, and the studios are refusing.
* Currently, writers are not paid for Internet downloads via online video stores like iTunes and Amazon Unbox. The studios want to extend the current 4-cent DVD residual formula to Internet downloads; the writers are holding out for more.
* The studios are refusing to pay residuals on Internet streaming of television shows and movies -- even when that streaming comes from their very own web sites and contains revenue-bearing commercials. The studios call all such streaming "promotional". The writers are howling with outrage that if the studios themselves are streaming complete TV shows containing commercials, that's clearly not just "promotional". The writers have a good point.
Taken on their own, these issues are most likely negotiable and solvable. However, trust between the two sides seems nearly nonexistent; the writers feel like they have been repeatedly burned by the studios over the last few decades; and the studios may well have a vested interest in beating up the writers in order to motivate the actors and directors to not push too hard in their upcoming negotiations.
Read more at Marc Andreessen's blog.
From the New York Times:
A strike by Hollywood writers began in New York just after midnight Monday...So imagine you're a major media mogul, a captain of the film and television business, a shaper of global culture, one of the anointed few who can green-light major entertainment projects.[M]ore than 12,000 screenwriters represented by the Writer Guild of America West and the Writers Guild of America East in the early morning hours in New York began the first industry-wide strike since writers walked out in 1988. That strike lasted five months...
Throughout the weekend, guild leaders held orientation meetings for strike captains, who would supervise picketing teams, and otherwise prepared for an effort to shut down as much movie and television production as possible...
The sides have been at odds over, among other things, writers? demands for a large increase in pay for movies and television shows released on DVD, and for a bigger share of the revenue from such work delivered over the Internet.
You're faced with a massive, once-in-a-lifetime shift in mainstream consumer behavior from traditional mass media, including film and television, to new activities that you do not control: the Internet, social networking, user-generated content, mobile services, video games. It's been snowballing since the mid 90's, for like 12 years -- 12 years of denial and obfuscation -- but it's really rolling fast now.
Many of your current lifeblood properties are not growing anymore or are in outright decline, and you don't own enough of the vital new properties to offset that, nor are you certain how you would make money with the new properties even if you did own them. And the consumers you rely upon for revenue are so frustrated with your company's inability to supply them with what they want, when they want it, that digital piracy of your content has become mainstream and socially acceptable behavior practically overnight, and all of your efforts to stop it seem to only make it worse.
And your company's culture is not prepared to deal with the shift. Your company was founded 50 or 80 or 100 or 150 years ago by different people in a different time, and the overwhelming majority of your people now -- smart and well-meaning managers and bureaucrats, but still managers and bureaucrats -- have to be retrained and reoriented toward entrepreneurial thinking in a viciously dynamic and startlingly fast-changing world not of your, or their, creation.
Is this really the right time to pick a fight with the writers over royalties from DVD and Internet sales, leading to an industry-wide shutdown and massive economic pain for all sides in the world of traditional scripted film and television content?
Really?
Read more at Marc Andreessen's blog.
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