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The next scene

As Hollywood writers and producers resume talks, it's crucial that they embrace innovation.

November 20, 2007

The 2-week-old Hollywood writers strike produced its first piece of good news Friday, when negotiators for the studios and the Writers Guild of America agreed to resume talks. They're going back to the table after the holiday weekend, and for that we can all be thankful -- especially the tens of thousands of people whose livelihoods depend on the entertainment industry yet who don't have a voice in the negotiations.

In L.A. County alone, more than a quarter of a million people work directly in movie and TV production, according to the L.A. Economic Development Council. For every 10 of those jobs, though, there are at least 15 in industries that are dependent on Hollywood productions, such as caterers and recording studios. As a result, by the council's count, more than 10% of Southern California's civilian workforce is affected by the walkout.

With so much at stake for so many people, the least studios and writers can do is keep the negotiations going. The months leading up to the strike produced little in the way of fruitful discussions. The studios opened with conversation-stopping proposals to roll back the residual system or hold off negotiations on Internet compensation for three years. The writers countered by asking for twice as much compensation from DVD sales, which have gone flat and are threatened by rampant online piracy.

It's tempting to think that the resumption of talks signals a breakthrough, or at least a pang of social conscience, but that would be too much to hope for. The two sides appear far apart on some very difficult issues, most notably the question of how writers will be compensated for new TV shows that are shown online for free. All of the major TV networks are making reruns of their shows available online for weeks at a time, often with commercials but without fees. The studios argue that they shouldn't have to pay writers extra for that use because it promotes the episodes that air on TV.

The writers union, however, sees the Ghost of Contracts Past in the studios' current proposal for the Internet. They fear they will be locked forever into a lowball compensation model, just as the residual rate for home video has remained fixed despite the explosion in profits from DVDs. They want a small but sure share of all the dollars their works generate online.

Neither side knows what business models will work online, and both would be ill served by formulas that preclude revenue-maximizing innovation. It's crucial that they embrace experimentation during the three-year life of the new contract. That means negotiators need to ensure that the current contract won't prevent the industry from adapting, as has been the case in home video. Online distribution is a huge part of the entertainment industry's future, and the two sides cannot let their history stand in its way.

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