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Rewriting the script

As they craft a contract, Hollywood writers and producers must recognize that the Internet is a whole new deal.

October 18, 2007

Hollywood writers meet tonight in Beverly Hills to decide whether to authorize a strike that could idle tens of thousands in the entertainment industry. Most of the issues that divide the Writers Guild of America from the Alliance of Motion Picture and Television Producers are no different from those that have split unions and management from time immemorial: The writers want a larger piece of the pie, and they want more work to be done by union members.

There are a couple of elements, though, that are peculiar to the entertainment industry and its struggle to adapt to the Internet. Because the value of a TV show or movie is unusually hard to predict before it hits the market, writers (like actors and directors) receive only part of their compensation when they submit their work. That initial payment covers just the first use of the script, such as the initial run of a TV show. If the show is successful enough to go into syndication or be released on DVD, the writer receives a residual -- a percentage of revenue from those sales.

But what if the network that buys the show makes it available for free online after it airs on TV? Producers don't want to pay the writers extra for that, even if the webcast is generating advertising dollars for the network. After all, they say, the Net is just being used to help build an audience for the TV broadcasts. Producers also want to limit what writers receive for Internet-only programming, saying profits are uncertain. Writers, on the other hand, want a share of any revenue that their scripts generate away from the TV set.

Both sides need to recognize, though, that the Internet isn't like the VCR, nor is it the broadcast networks' minor league. It's a new medium that makes possible new forms of video entertainment as well as new ways to find an audience for them. At the same time, it is hard to control and exposes producers to new threats, such as the many foreign sites offering free copies of movies and full seasons of TV shows. The opportunities and the threats will both be magnified in the coming years as set manufacturers make it easier to bring the Web straight to the TV.

That means it's crucial for producers and writers to reach a deal that will promote experimentation online. The best way to develop business models for the Internet is to try out as many as possible, not just study them (as the producers had proposed) or lock them into rigid payment formulas (as the writers seem inclined to do).

Perhaps the biggest hurdle to a deal is the distrust over numbers. Producers initially proposed to pay no residuals on a program until it broke even, but they abandoned the notion Tuesday in the face of fierce opposition. Writers have little or no faith in the entertainment conglomerates' infamously creative accounting, which can make even hit shows and movies look like money pits. If the two sides can't find common ground on these calculations, they may never agree to the kind of flexible, profit-sharing approach that would align their interests as they venture online.

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