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The Nation

Residuals Debate: Old Script on New Set

October 19, 2006|Richard Verrier | Times Staff Writer

NBC lets consumers download "Studio 60 on the Sunset Strip" and "Heroes." ABC makes episodes of "Lost" and "Ugly Betty" available free online a day after they air. The MySpace website offers episodes of the Fox drama "Prison Break," and Walt Disney Co.'s "The Little Mermaid" can be purchased for download to a video iPod.

In a digital free-for-all, Hollywood trumpets another round of ventures nearly every week making TV series and films accessible on the Internet.

But with each splashy announcement, resentment builds among writers and actors who believe studios are ducking the issue of how to properly pay them when their work is viewed via the Web. With major labor contracts expiring over the next two years, fears are growing that digital distribution will become such a contentious issue that it could prompt a strike.

"We've learned from history that when these new technologies emerge that we can be left behind," said Alan Rosenberg, president of the nearly 120,000-member Screen Actors Guild. "We have to make sure we don't wait 20 years to get properly compensated."

For The Record
Los Angeles Times Tuesday October 24, 2006 Home Edition Main News Part A Page 2 National Desk 2 inches; 70 words Type of Material: Correction
Digital download payments: A Section A article Thursday about disputes in Hollywood over residual payments for digital downloads said talent guilds divided 20 cents of every wholesale dollar in home video sales. The article should have stated that both the entertainment unions and studios share in that pool of money, with amounts determined by formulas in union contracts. Ultimately, Hollywood union members get about 4 cents of every wholesale dollar.

Standard Hollywood labor contracts are largely vague on what payment formulas should apply to the presentation of films and TV shows on something other than a movie screen or TV set or for programs created for the Web. Studios would like to pay lower home video rates for movies and TV shows sold on the Internet, but actors and writers want better scales, similar to what they get when their work airs on pay TV.

Actors and writers now make pocket change from downloading because the business is new. In many cases, talent isn't paid at all because the download is considered promotional for a show.

The current rift can be traced to the home video boom that started in the early 1980s. Studios and unions agreed then that distributors would keep 80 cents of every wholesale dollar earned selling videos. The various talent guilds divide the remaining 20 cents according to complex formulas. In theory, the deal was needed to help studios launch the new medium.

Instead, videocassettes, and later DVDs, became gold mines, leaving actors and writers grumbling that they were saddled with an antiquated pay system badly in need of fixing. Unions have tried to revisit the issue, but studios refused to budge. Today's talent doesn't want to repeat that experience.

"We made a lousy deal for videocassettes about 20 years ago, and I think it's come back to haunt us," said writer Marc Cherry, who created the hit ABC show "Desperate Housewives."

Studio executives contend that it is too early to establish pay formulas for such nascent markets and technologies. In many cases, they say, online streaming is merely promotional and doesn't justify extra payments. Both producers and talent benefit, they say, if the Web exposure boosts a show's popularity.

In addition, they warn that digital distribution could end up cannibalizing their current primary sources of revenue: DVD sales and box-office receipts.

"We have the same fear of the unknown," said J. Nicholas Counter, president of the Alliance of Motion Picture and Television Producers, who serves as the industry's chief negotiator. "We don't know how these markets are shaping up. When we get to the point where we can make some intelligent decisions, then we'll sit down and negotiate."

Studios contend that the guilds, in invoking their experience with home video contracts, fail to acknowledge how much their members have benefited from the popularity of DVDs. In 2005, an estimated $570 million in home video residuals -- the extra fees talent gets when their work is reused -- was allocated to entertainment workers, up from $220 million in 1995, according to industry estimates.

As much as studios have benefited from DVD sales, they contend that it is not pure profit. DVDs offset rising marketing and production costs and help fund the big paychecks of stars such as Johnny Depp and Julia Roberts.

Patric M. Verrone, president of the nearly 11,000-member Writers Guild of America, West, contends that his members aren't naive about Hollywood economics and recognize the value in promoting a show with Web downloads.

But, he adds, now is a crucial time for writers. They need to cut a better deal for digital distribution with their contract expiring in a year. "We will not stand by while the industry creates business models that leave us out of the mix," Verrone said.

Actors will tackle the issue in 2008, when their contract is up. Both unions expect the studios to take a hard line in negotiations.

With a year before the first key labor contract expires, it may seem that Hollywood has plenty of breathing room. But it doesn't. Because of the long lead time required for TV and film production, some studios and producers are already ordering additional scripts and developing cheap reality shows just in case.

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