Streaming Residuals Could Set The Stage For A WGA Strike In 2020, But Would Packaging Play A Role?

David Robb

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The WGA’s demand for more streaming residuals from the studios could set the stage for the first industrywide strike in more than a decade. And it’s not just that writers are in a fighting mood after feuding with the agencies for more than nine months: there’s big money at stake – and not just from the ever-growing streaming market, but also from what the guild says are “hundreds of millions of dollars” that will be going into the pockets of the studios if it prevails in its lawsuit and packaging fees are eliminated.

According to the WGA’s original lawsuit against the Big Four agencies, packaging fees “generate hundreds of millions of dollars per year” for Hollywood’s talent agencies – “far more,” the guild says, “than they would earn from a traditional 10% commission from their clients.” Eliminating those fees, which the guild is demanding, would be a windfall for the studios, which pay the fees to the agencies for packaging their shows.

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The guild says that packaging fees are a conflict of interest, putting the agents’ interests ahead of their clients’. But many agents believe that the guild will not be satisfied with merely returning them to collecting 10% commissions on their clients’ earnings, which the agencies give up when they package shows. Some believe that the guild’s long term goal is to extract from the studios a piece of those hundreds of millions of dollars in packaging fees that until now have been going to the agencies.

“They’re a long way from getting what they want,” said an agency source. “But even if they get what they want, and that is purely hypothetical, how do they get that money into the pockets of writers?”

One way to get it is at the bargaining table with the management’s AMPTP, whose current film and TV contract with the guild expires May 1. Early last year, the guild asked the AMPTP “to reopen negotiations during the term of the 2017-2020 Minimum Basic Agreement to address the subject of talent agents,” AMPTP president Carol Lombardini said in a February 4 letter to WGA West executive director David Young. “Specifically, the WGA requested that a clause be added to the MBA prohibiting AMPTP-represented companies from doing business with any talent agency that fails to reach a new agreement with the WGA. Furthermore, this request was made without regard to the terms the guild would demand of the agents, essentially asking us to blindly accept whatever terms might ultimately be incorporated in that talent agency agreement.”

In rejecting the guild’s proposal, Lombardini told Young that “The AMPTP-represented companies have discussed your proposal at length and have also consulted labor and litigation counsel. Based upon that review, as well as reports of the agreement that the guild is demanding of talent agents, the companies have concluded that agreeing to your proposal would require them to participate in a group boycott of talent agencies that do not meet with guild approval. We believe that doing so would subject them, the WGA and individual writers to a substantial risk of liability for antitrust violations, including claims for treble damages. The Companies would also be at risk for violation of federal labor laws as well as state laws.

“For these reasons, we respectfully decline your invitation to reopen the Basic Agreement to negotiate a provision such as the one you have suggested. We remain hopeful that the WGA and the talent agencies will reach a successful resolution of their negotiations for a new WGA/talent agency agreement.”

But with contract talks between the WGA and the AMPTP set to begin soon – although no date has yet been set – will the guild make this, or something like it, part of their proposals? If not, and should the WGA ultimately prevail in court get a ruling that outlaws packaging fees (the latest hearing in that fight is this morning), will the guild have fought so long and hard against the agencies only to see the studios keep all the money, less their added development costs, that has until now been going to the agencies? Or will the guild want a piece of it for its members?

To be clear, the guild, which declined comment for this story, has not identified that as a goal in the upcoming contract talks with management’s AMPTP, but it could prove, at the very least, to be a bargaining chip for the other goals it has identified.

It also should be noted that, 10 months into the guild’s standoff with the major agencies that dominate packaging, which led to thousands of writers firings their agents, packaging of TV series for the most part carries on, driven by provisions in writers’ overall deals and other talent involved in projects, mostly actors.

Over the past 60 years, every industrywide strike in Hollywood has been the result of uncertainties created by new revenue streams. That was the case in 1960, when writers went on strike for six months over residuals from theatrical films shown on the relatively new medium of television. The Screen Actors Guild struck for 43 days that year over the same issue. SAG struck again in 1980 – this time for 95 days – to establish contract terms for pay TV and videocassettes.

In 1987, the Directors Guild launched the only strike in its history over the relatively new pay-per-view technologies – a strike that lasted only three hours and 15 minutes on the East Coast, and only 15 minutes on the West Coast. Writers struck again in 1988 – this time for six months over residuals from films and TV shows distributed on home video and cable TV. They also struck in 2007 for 100 days over money from content made directly for the rapidly evolving field of new media.

All of those strike had one thing in common: they all involved new revenue streams created by new technologies. And while the new streaming technologies haven’t triggered a strike yet, that could be in the offing, as well, come May 1.

As the WGA noted in a recent survey of its members’ goals going into the upcoming negotiations with the AMPTP, “Improving residuals for original TV and feature programming on streaming services” is expected to be a key issue, because according to the guild, “Residuals for reuse of original Streaming Video On-Demand programming on streaming platforms are often lower than in traditional reuse markets and have not kept pace with the global growth of SVOD.”

Other contract goals identified by the guild last month in its membership survey include establishing the same rate for a one-hour or half-hour script across broadcast, basic cable, pay TV and all SVOD platforms; establishing minimums for comedy-variety series on streaming services, and establishing a foreign box office residual for feature films.

But the survey also allows members to write in “Other” issues they want addressed, and it wouldn’t be a big surprise if some of the thousands of writers who fired their agents en mass in April would like to see a share of the studios’ windfall if packaging fees are eliminated.

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