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The Writers Guild Of America just sent this email to members:
December 4, 2007
Fellow Guild Members:Rumors, half-truths, and misinformation about what is actually happening at the bargaining table fly across the internet, are posted on blogs, passed across picket lines like a game of telephone, and appear in stories and advertisements in the trade papers.
So, to clarify exactly where we are, we have prepared a report and analysis, which you can read in its entirety [here].
In the meantime, here’s a brief summary:
The latest WGA proposal would cost the companies $151 million over three years. It is reasonable, serious, and easily affordable. For instance, it would cost Sony only $1.68 million per year. Paramount and CBS would each pay only $4.66 million per year. MGM would pay only $320,000 per year.
The AMPTP claims its proposal would give us $130 million over three years. Our analysis – and again, please visit the website to see for yourself – tells us their offer is worth only $32 million. But if you factor in the companies’ regressive proposal on “promotional use” (streaming TV shows and feature films in their entirety for free) writers could potentially lose $100 million in income over the course of this contract.
So while we don’t see how their proposal adds up to anywhere near $130 million, we greet their public willingness to make such an offer with real interest. If the AMPTP is serious about this figure, the WGA is confident we are closer to a deal than anyone has suggested, and we are hopeful that the companies will respond positively to our proposal, which is a serious, reasonable, and affordable attempt to bridge the gap between us.
Sincerely,
John F. Bowman
Chair, WGA Negotiating Committee
Editor-in-Chief Nikki Finke - tip her here.
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There is no way Internet streaming for the studios is only worth $120 million a year.
Nbc.com reported 50 million full episodes streamed in October. Disney channel reported 74.1 million their first month (June 2006). That’s a billion and a half streams per year from just those two channels’ web sites.
Commercial ad rates on these shows vary from $20 to $50 CPM (or higher). Let’s say $30. That’s 3 cents per commerical viewed. Let’s say 3-4 commercials per show. Let’s call it an even 10 cents in revenue per stream.
That’s $150 million in revenue for just those two channels. Now add in ABC, CBS, Fox, theCW, Comedy Central, VH1, MTV, etc., etc., etc.
Nevermind the growth in online streaming that the studios are forecasting and touting to their shareholders.
There’s gold in them thar urls.
Gavin P.
A few points about your points:
–Hard to tell from your wording, but I assume you know that companies are already streaming full-length movies with non-skippable ads (on Hulu.com for one) and paying nothing for it (and calling it promotional).
–All the writers I know (which due to picketing is now more writers than anybody should ever have the misfortune of meeting) find David Yong to be smart and sensible. Soft-spoken, even. Some people have seized on a couple of quotes and painted him as an egotistical jerk, and I just don’t see it. Nobody I know sees it (and again this is upwards of 3000 smelly, awful writers). I would urge you to rethink him. John Bowman you don’t need to rethink because he’s awesome too.
–If you are talking about a company’s share price, it’s only fair to reference the company, not just one division. Time Warner profit was 1.1 billion through 3 quarters, making your “haircut” more like 4-5%. Also, and more philosophically, this “haircut” covers writers, actors, directors and below the line unions. These are all the people responsibly for making the product. They deserve this money, which seems to reasonably leave around 95% of the profit to the companies.
–Certainly nobody knows how much money will come from Internet streaming, but as long as you’re talking about Time Warner, they seem to be aiming their company towards a world in which people will watch TV on the Internet. In their latest quarter, “strong growth in new digital phone and high speed Internet customers offset a worse-than-expected decline in basic video customers at the cable division” (USA Today). In addition, Time Warner is revamping AOL to be ad-driven. Part of the reason their earnings were down was because they bought big-time internet ad company Quigo for 340 million. And there’s been a ton of speculation that Time Warner will reduce its stake in Time Warner Cable, which is right now its biggest earner.
–Executives get fired for dropping share prices, I agree…so doesn’t the rising cost of the strike and (if it continues) the loss of an entire TV season drop the share price more than a multi-union deal – some version of which they eventually have to make anyway?
–I’m all for a huge increase in the minimums. But as you say, nobody knows how much money there will be in streaming/downloads. So how would you determine a minimums increase that would be enough to offset us taking that issue off the table? Wouldn’t it have to be so prohibitively large that the companies would never go for it?
That is all. Thank you for helping me to once again successfully avoid my family by obsessing about something on Nikki Finke.
DVDs dead? No longer an issue worth mentioning?
Don’t tell retail stores that plan to make some serious change off them this holiday season… and next. The only ones getting short changed here are the creative people. And I’m not talking about the studio or network accountants.
pb
Gavin Polone,
Interesting comments. I never thought I’d say this, but damn, I agree with almost all you wrote especially the not-so-veiled slap at Mr. Young. That said, after posting I must go into hiding before hooded guild henchmen are pounding at my door to take me away to parts unknown for my blasphemus comments.
Re DVD argument: Call me old school, call me stodgy, call me a stubborn prick, call me anything, but DO NOT say I don’t understand that internet is the present and the future and that dvds will die out. Yes, I agree on all of the above. I’m still voting no on any contract that does not address dvds, and an informal poll of everyone I know in the guild shows that something approximating 60% plan to also vote no. (Of feature writers alone it’s closer to 90%) That’s IF we get around to voting in my lifetime.
Where is Gavin’s lackey, Erin Braun, to “challenge” us to accept the offer so that we will look stronger and more united?
Agentatanotheragency, DVD just replaced VCRs as the top home theater device as of 2006. With the shift to HD-DVD and/or Blu-Ray and the fact that the world is slow to adapt to new technologies as a rule, the limited penetration of broadband connections, the cost of revamping home entertainment infrastructure and its relative unimportance in a household, to make a three-pronged argument for leaving money on the table that will still be there for the next 10 years smacks of bullying and pro Big Media. If the Internet is so NOW, why is HD-DVD & Blu-Ray happening? Why do we still have brick and mortar stores? Why the double, triple and quadruple dips for DVD product by the corporations?
I think the writers should take as much money as they can get for however long they can get it, just as the people they’re dealing with would in any other deal. Milk that cash cow past the point when it’s only producing air. Milk it until it is the salt of the earth.
Money’s important to everybody involved in this, but the writers are only slaves to it because of the transitive property: the writers are slaves to corporations; corporations are slaves to money; the writers are slaves to money. Maybe if the corporations were different, the writers’ demands would be, too. But, since we know that will never happen, no sense in being the “bigger” person. That’s how the writers can best “embrace the present.”
Klaatu wrote:
Commercial ad rates on these shows vary from $20 to $50 CPM (or higher). Let’s say $30. That’s 3 cents per commerical viewed. Let’s say 3-4 commercials per show. Let’s call it an even 10 cents in revenue per stream.
Klaatu, can you point me towards your source for this CPM data? I can’t find anything specific. Even the quotes in that FT article only talk about value (as opposed to revenue) which made me think that the sources were trying to estimate the value of the streaming ads, since they are generally included in package deals with broadcast, etc.
“While a 30-second ad during a prime-time broadcast TV show typically fetches a CPM rate of about $20, a 15- or 30-second online video ad currently commands a CPM of around $20 to $50″
http://www.forbes.com/2006/09/19/video-youtube-ads-tech-media-cx_lh_0919video.html
“Today, the going rate for video advertisements is between $30 and $60 per CPM”
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B28F41CB7-5758-44F9-99BF-769322C9382A%7D
“YouTube Rolls Out Overlay Ads at $20 CPM”
[Klaatu: and that's on low-res, user-generated content]
http://www.insideonlinevideo.com/2007/08/22/youtube-rolls-out-overlay-ads-at-20-cpm/
There are many more sources (search for online video CPM). Some say it may even be way higher in some cases — the right demographics, etc. Also, people watch online ads closely, and they can’t be skipped.
And, there is no hard evidence that they are “generally included in package deals with broadcast” or that if they are, the advertisers aren’t paying EXTRA for that.
In fact, in some cases, such as with disneychannel.com, ad sales are entirely new revenue. The TV channel has no commercials, but the same shows are streamed on their website with three full-length commercials for HP, Pop Tarts, Tiger Toys, etc. And Disney Channel admitted to 74.1 million full episode streams their first month alone (Jun 2006). I would not be surprised if that number has grown in the year-and-a-half since.
Then there are banner ads, which I haven’t even factored in.
Mike Royce and Klatuu–
Time Warner had earnings of 1.1Billion for the quarter but that included the magazine division, AOL, Time Warner Cable, CNN, etc. They are not party to any of this. If those divisions were sold, they would not be part of the AMPTP. I was talking about the Filmed Entertainment division, which includes TV.
Mike, you use the word “deserve,” which I reject. You get what you have the leverage to get. If the guild can sustain a long strike, it should be trying to get something very significant and tangible during the term of the contract under negotiation. Under that scenario, it makes no sense to have given up on the DVD residual, a bona fide cash producer.
Klatuu, you are correct that there is some cross over to those other divisions and it should be considered but the amount, today, is relatively insignificant from the perspective of figuring out how much the film and TV divisions make. Anyway, if you’ll notice, I said they’d make much more next year than they probably will.
Klaatu, I’m your pal from that thread unitedhollywood. I know you don’t believe me about internet ads being bundled essentially for free with online time, and it’s true that there’s “no hard evidence” I can give you. But look at it this way– primetime network ad revenue is down four percent this year, according to Nielsen. Audiences for a lot of key shows are down ten or twelve percent. So, actually, ad revenue is holding up better than audience eyeballs in prime time, though still taking significant declines. The only reason this is true, the only reason why media buyers like me, and the advertisers we rep, are willing to pay roughly the same rates for significant fewer eyeballs is because the internet stuff gets thrown in. (Which is also why the streaming rights get given to the network by the studio for free, essentially- Warners doesn’t get anything from ABC for the ‘Pushing Daisies’ streaming it’s doing, for instance). It’s all making up for the lost eyeballs and lost dollars that are happening in broadcast.
Though you are also right that Disney Channel is a exception, it’s kind of a unique situation (honestly, I don’t know how they made a profit *before* streaming, I guess they rationalized it as a promotional vehicle, and those shows are super cheap).
Comment by is there hope??? – why cut and paste the same exact comment you left at united hollywood? Planting seeds? Go see the answer to your question there.
Gavin,
You’re using the word “reject” which I reject! Huh? What do you think of those writerly pyrotechnics???
When I bring it, it gets brought.
Actually, you didn’t answer any of my questions so I’ll just say thanks for the shout-out and hopefully this will all be over soon.
Sorry, Gavin, you’re wrong again. Here’s the link to Time-Warner’s earning report fr Q3:
http://ir.timewarner.com/downloads/FINAL_TWX%203Q07%20PR_110607.pdf
Filmed entertainment had operating income of $592 million, but networks had an operating income of $2.245 billion. Not their cable TV division (that was another $2 billion, BTW), but their TV networks. Filmed entertainment is the production side, networks are the broadcast side. Together they make their film and TV business. You can’t exclude all that income because it’s convenient.
And yes, they have other divisions, AOL, Time Warner cable, publishing that are not directly in that busiess — though they all derive at least some income as a result of material we write.
But at a minimum, they’ll make $3.7 billion this year from film and TV.
You don’t need to lie for the media corporations, they do fine one their own. I get that you’re auditioning for a job running one of these companies — I mean who wouldn’t want a $90 million dollar severance package? — but, please, enough already.
Anonymous Media Buyer,
Show me some sources. There are many that say what Internet video ads are selling for. Many that say how effective they are. Show me some that say they are given away.
And by the way, even if they are “bundled,” they are still being sold. Based on your description, they aren’t “make-goods” given later if ratings are low, them. They are pre-sold when companies by TV advertising. My car came “bundled” with power windows, a CD player, and GPS, but I still paid extra for them.
And as for how Disney Channel made a profit before streaming: the second highest basic cable subscriber fee that exists (behind ESPN), DVDs, merchandise, foreign broadcasts, iTunes sales — all of the things we’ve already been screwed on.
Klaatu: I can’t show you sources, because I’d get fired if I shared the financials of the company I worked for . But to be fair, you haven’t shown any sources either about CPMs for network streams. So neither of us have sources. But I have some knowledge about what I do every day for a living, which you are welcome to believe or not believe as you see fit. I’m just trying to add whatever I can in the conversation.
As for the bundling, yes, there is obviously *value* in streaming ads for networks. There’s just not really any *revenue*, yet (with an exception or two like Disney Channel, which I’ll get to in a minute). This doesn’t mean writers aren’t due compensation, but the difference between value and revenue isn’t just cosmetic . As you say, the streaming ads aren’t make-goods, but they are part of the constitutive packages I broker– if the online streaming wasn’t there, the network ad market would be even softer, dropping by, I don’t know, 7% yearly instead of 4%, in other words 500 million instead of 300 or so. That non-slippage certainly constitutes value, but it’s value in the context of overall losses.
I think the Financial Times article was pretty much on the money (and note that it NEVER mentions revenue), in that:
1) The current network streaming ad market has a value (again, not revenue) of around $120 million (not much more as you suggested earlier in this thread). Keep in mind, though, that network broadcast revenue has dipped somewhere beteerrn $200 and $300 million this past year (Nielsen pegs the loss at 3.8%), so overall, even if that value *was* revenue, the losses on broadcast are outpacing the gains on streaming as of now.
2) There is *maybe* a lot of growth potential, even *probably*, and we all have to hope that the revenue gains in streaming for networks starts to outpace the losses in broadcast within the next couple of years. I’m cautiously optimistic about this,. but, really, nobody knows. And of course what I’m telling you is happening now (and which you don’t believe) won’t always be the norm– it’s not hard to imagine then in a decade or two it’ll be the other way around, and broadcast ad space will be thrown in with internet deals.
3) The article mentions clustering– which is *really* important– the possibility that ad money might cluster around the higher quality content that networks are bringing online, and away from google / facebook / youtube. Again, I’m optimistic that this will happen as the market develops, but I don’t see much evidence yet. We have to hope that it does, or else scripted tv will never make up in streaming revenue what it’s losing in broadcast.
3a) The article also mentions the flip side of the clustering coin, which is that video ads can be (and are being) streamed on social networking sites, in other words, advertisers such as my clients have other means of distributing video ads online beyond running them on streaming shows. Again, anyone in the tv industry has gotta hope that clustering will work against this. Maybe it will, maybe it won’t. People make fun of management for saying the internet is “too new” to give residuals on, and the deserve to be made fun of for that, but it really *is* too new to figure out some of these more complicated questions about advertising revenues, which are going to determine in large part the extent to which the networks can successfully compete in this very weird ad frontier.
None of this is to say that there isn’t a viable residual system for streaming that can be found, though I think the initial WGA proposal to take a cut of gross (22.5% after pattern bargaining) was unreasonable given the severe and accelerating losses in primetime broadcast ad revenue. I’m glad that the conversation is now about a flat rate and bumps for traffic, which makes a lot more sense. (Though I think the numbers the WGA released today are either the far side of reasonable or the near side of crazy, esp. without some sort of short free re-use window– three days?– but anyway, sounds like both sides are willing to move some.)
(And I also would put in a side-letter to any agreement to cover the Disney Channel, or any other network that broadcasts commercial-free but puts ads on the streams, obviously, that’s a special case, though also, as I said in the previouos thread, some of that streaming might be bundled with ABC Family and ABC kids programming. But that, I’m just speculating on, unlike the rest of this post.)
I need to correct that previous post, the FT article does use the word revenues. But, look, you can either trust me or not on this bundling thing, and I think you do need to keep in mind that current losses on the network prime time ad side are severely outpacing the streaming.Again, I’m just glad the conversation at the table’s moved onto traffic-based residuals, because I think a deal can and will be made on those terms.
Hello All,
Took a break from the comments section of this site, because for me. personally it is more constructive to just read the reporting and not get senselessly in the mud-slinging. But I am my own worst enemy, so I caved and clicked through.
As far as being a lackey, okay. I’ll except that to a certain degree. As well as “annoying” and possibly “moron.” I do not know Mr. Palone personally. I cannot attest to his moral fiber nor do I have any reason to like or hate him based on my own experiences. But, I do believe he has a lot to say that does make sense. And even if you despise him and see him as a puppet for the Moguls, does that not give you a window into what you are dealing with and therefore help equip you with what you need to win your war? He, like the Moguls, like me, like the crews, live off what you create. But I still maintain the position that if you are a talented writer who can deliver a page on which any revenue can be made, there be no repercussions for anything you stand up for once the strike is over. You are dealing with BUSINESSMEN whose business is BUSINESS. That means making money. To fight big business, you need to act like businessmen yourselves. Not just rant about good vs. evil, unless you are modeling your negotiating strategy after Don Quixote. And, since Mr. Polone has been partcipating in the discussions on this site, I have seen a definite increase in actual and beneficial business debates and discussions. Doesn’t that benefit you? even if it was borne from contensiousness? Didn’t it force you to think and evaluate your position and therefore allow you to fight a better fight? And you don’t even have to pay him 10%.
This isn’t 50 years ago when my Grandfather worked in television. No network or studio will ever reject a talented writer based on a blog entry if they can deliver anything that can benefit them monetarily. Because they are businessmen. They are in the business of business. You are an assett that they cannot survive withou in the long run. You are in the middle of a strike. They expect you to disagree with them. But when you disagree with them anonymously, it still looks weak. That is not the most important issue at work here, but it all adds up. You know they already dislike a lot of you, but they look past that every day of production as long as a buck can be made off of you. And will continue to do so. Now, and when the strike is over. Right now they are just concerned with the amount of the bucks that can be made.
What is most important it that you seem to be starting to negotiate with businessmen, like businessmen. And that gives you a fighting chance. And even if you hate what not so much what I said, but what Mr. Polone said. Did it not at least make a some of you rally higher and further invigorate your fight? Did it not encourage you to think like negotiators instead of writers?
And, sorry, but the picket lines are somewhat anonymous to the PUBLIC. It is the same sea of red t-shirts and same statement every day on the news.
And now some people ARE using their names. And that shows strength. Would you be intimidated by somebody that called you a name or cast dispersions but wouldn’t say who they were? Are you intimidated by telemarketers?
And leverage IS an issue. But you DO have leverage, you just haven’t used it to your full advantage.
You will all twist what I say as anti-WGA. But if you actually read it, it is PRO-WGA. You just have to read it.
Maybe, in some wierd way, I am Gavin Polone’s lackey. But I assure you, it is a very poorly paid and unpopular job that gains me no benefit. But even if it is an unpopular position, I prefer it to to being someone who only pretends to stand up for what I say.
And, finally, so many of you on this site come down on Ms Finke for certain entries. And it is HER site that you are VISITING and at which you are WELCOMED. She doesn’t respond to any of those contentions or return an insult to a single one of you, but in fact posts your aspersions. I am glad that I do not have that task. She is a better person than I. And some of you.
Klatuu–
Not wrong, Klatuu. Filmed Entertainment pays most of the residuals. On the profit statement for a show that I did at WB, there is a very large residual number. Now, the network covers some of the residuals for repeats on their network, through their licensing agreement, but most of it comes from the studio. I also acted as the co-financier and studio on an independent film. I have paid all of the residuals that have accrued from its runs on three cable networks (that movie is still in the red but all of the guilds have been paid). When we’re talking about the internet downloads, it will be handled as it is for off-net sales and H/V. For some of the networks, like CNN and Court TV, it isn’t even applicable. Obviously, all of the movie residuals are paid by filmed entertainment and the Internet distribution would be handled the same.
Where I am in error, is with HBO, whose income is partly from studio activity, meaning they own their shows. I assume that income is lumped in with their network income and is figured as part of the Networks division of TW. Sorry for not breaking that out. In any case, most of the HBO income is from the 11 bucks they collect every month from subs.
So, use the low end of my 7% to 8% estimate and I’m probably still in the ball park. Sorry for my mistake.
Thanks for thinking I’d ever be allowed into an audition for studio head. They like me less than you. I am not lying and have no reason to do so.
Gavin:
Of course the studio side pays most of the residuals. They also pay most of the production costs. They defecit finance shows and license them to networks at prices well below their costs — even when the network earns more than that cost in ad revenue from the very first airing.
The thing is, in today’s era of mega media corporations, the networks and studios are owned by the same parent companies. So, it makes sense to shift as much of the profit to the network side. The studio side is where any profit participant deals (or revenue sharing residuals) are calculated. It’s just a way of accounting to keep more money.
When you had a show at WB, it was in their best interest to load as many expenses as they could on your show. We all know this. They charge higher prices for studio rent, parking, etc. TO THEIR OWN SHOWS!
And, yes, sometimes the shows they produce at a studio are for a network they don’t own (though less and less often), but that is balanced out by the occasional show their networks buy from another studio.
So, you MUST include (at the minimum) both the Filmed Entertainment division AND the Networks division, when looking at the issues of revenues for and residuals from film and TV.
Anonymous Media Buyer,
Yes, network viewership has decreased. But TV viewership is at record levels.
http://entertainment.tv.yahoo.com/entnews/va/20060922/115891347700.html
Any losses from the networks is more than made up on cable channels… which are all owned by the same companies. They don’t rerun “24″ on Fox. They run it on F/X. And News Corp. makes money from both. They may shift their revenues around, but it’s only to maximize them. And now, the Internet is thrown into the mix. The have netowrk, cable, foreign, DVD, iTunes, cell phones, and the Internet as places to make money off ofour content. And they own it all.
Klaatu wrote:
And, yes, sometimes the shows they produce at a studio are for a network they don’t own (though less and less often), but that is balanced out by the occasional show their networks buy from another studio.
Klaatu, you keep going on about this point, but I just went through the list of 2007 pilots that went to series, and it’s about 50-50 between affiliated studios and non-. Seriously, go do the math, and stop exaggerating this point just because it’s convenient for your argument.
Klaatu–
Some of what you say is true but including the whole Networks division excessive. Yes, most shows are on networks of the same corporate parent as the studios but underpaying of fees from one to the other is always met with audits and lawsuits from people like me. Some shows, like ER and 2 and a Half Men, are for competitor’s networks. And, including CNN and other of their networks that don’t pay residuals makes no sense.
But, the point was that it is a bigger hit to earnings than the WGA wants to admit. The point of my statement was to offer perspective on Barry Meyer’s position.
I think the WGA has only offered its members a skewed POV on the other side and extreme rhetoric when analyzing each proposal, which, I believe has a negative affect on getting the AMPTP to give more.
Speaking of that, have you compared the two spreadsheets on the WGA websites which outline the two proposals? Do you see what I’m saying about the $100M deduction from the AMPTP proposal without including the same number on the WGA side and how that further skews both the analysis and the discussion? It is like writing a check to your savings account without taking the debit from your checking.
All–
Anyone else either see what I’m talking about with the $100M deduction or have a response that shows how I’m wrong? Or maybe name calling and telling me, anonymously, that you won’t work with me after the strike is more productive than looking at the facts and discussing how they influence the outcome of this strike?
Klaatu: Yeah, but given the loss in primetime viewers and ad dollars, the overall ad dollars that *scripted television shows* produce are down, and their slippage is accelerating rather alarmingly. And meanwhile, show budgets go up, up, up. The average dollar spent on producing a scripted television show in 2007 attracts many fewer eyeballs and generates *a lot* less advertising revenue than that dollar did five or even two years ago. That’s the metric you need to be thinking about.
Most of the cable adspace is for non-scripted non-WGA content, and the success of those formats are the WGA’s enemy, not a WGA talking point. Sure, iTunes and DVD sales help a little, but not that much.
The $100 million dollar thing is silly and should be ignored. It’s an attempt to “respond” to the studios’ demand for unlimited “promotional” use, which they say can include programs in their entirety and that they can make money from the “promotional” use.
The WGA membership will NEVER vote for any agreement that has this provision. It’s basically like adding a line at the end of any contract that says, “Or we can pay you nothing if we want.”
It’s better to forget about the $100 million deduction and look at any offer/counter-offer without the promotional clause, because it can NEVER be part of any agreement.
Klatuu–
So, when the WGA leaders post statements on their websites, ostensibly to fill in the membership and other concerned parties on the state of the negotiation and explain where both sides stand-including charts to show the two positions-there are some elements that are “silly and should be ignored?” I think I’m getting it now. Sorry I was too stupid to figure that out. Now that you have explained it, I have to say I agree with you. Fancy that. Maybe this is the day the earth stood still.
But maybe, this speaks to the my claim that the WGA is not handling the negotiation well. That their rhetoric is just inflammatory and lacks perspective on the state of the business and their leverage with their adversaries? One could argue that, in these kinds of negotiations, publicly coming out with information that is “silly and should be ignored,” is not a good strategy and may have contributed to extending the length of the strike. Isn’t that possible?