SAG vs. AMPTP: A Zero-Sum Game

Should SAG go on strike? No. Should they be willing to strike unless they get meaningful remuneration for advanced media content? Yes. Solidarity is where collective bargaining begins. Which leaves only one question, “What is meaningful remuneration for advanced media content?”

Perhaps the most serious problem SAG is facing is internal. Its executive committee has asked the rank and file for strike authorization. While many prominent Hollywood figures have joined in support (Mel Gibson, Martin Sheen), equally prominent stars like George Clooney, Morgan Freeman, Tom Hanks and Matt Damon have vocally objected. Let’s assume that SAG can hold itself together long enough to actually get back to the bargaining table. What should they hold out for? And, more importantly, when (if ever) should they walk?

First and foremost, nobody is making money from video content that is exclusively produced for the Web — no matter what numbers you think you’ve seen. The cost of production, distribution and promotion far exceed any potential income for Web-only online video. This is not going to change anytime soon.

On the other hand, big media is best positioned to take advantage of new media. To this end, the most profitable online video content can be found on the Web sites and portals of the major media companies. You can call it “Internet television.” You can see examples at abc.com, nbc.com, fox.com, hulu.com, tv.com (soon, Les is working hard to relaunch the site), discovery.com, etc. These are full episodes of network and off-network television content finding new audiences through new distribution online.

Although you might think this is just semantics, words are the weapons of the legal profession and contracts are written with them. There is no such thing as “online video.” There are at least three individual value chains in common consumer experience: Video snacking, Internet television and Download-to-own. Video snacks are short and hard to directly monetize because they cannot carry traditional advertising loads. Internet television is, for the most part, ad-supported and profitable. And download-to-own is an electronic form of distribution that may one day replace DVD or Blu-ray, but is struggling to find consumers and remarkably susceptible to piracy.

• Should a SAG member be entitled to residual payments for Internet television that are identical to broadcast TV? No. Internet television carries only 20% to 30% of the ad inventory of its broadcast counterpart and has a bandwidth cost associated with every watched hour that must be paid by the distributor. Understood, but shouldn’t they be fairly compensated?

• Should a SAG member be entitled to residual payments for a video sack (clip of a show) that is being used on YouTube or another video aggregation site for promotional purposes?

• Should a SAG member be entitled to residual payments for a download-to-own file of a movie or television show?

The answer to all of the above is absolutely, unequivocally, yes!

Now, from the AMPTP’s point of view, “online video” does exist. They’d have you believe that all of this is experimental and that there’s not enough money to discuss. Guess what? They’re right too!

And, more to the point, the AMPTP cannot have actors, writers, directors or any non-risk-taking workers control how they might exploit any given work for the highest return on investment.

Remember, productions are not one-offs. There is no such thing as a TV show in the real world. There is a risk-management business that is funding a slate of TV shows or movies and the investors are looking for a substantial ROI. The only problem with this model is that you never know which work is going to succeed and which will fail. You can only guess.

We have arrived at the most critical juncture in SAG’s history. In fact, the outcome of this negotiation may well preserve or destroy SAG’s posterity. But, sadly for everyone involved, the AMPTP has arrived at the same place. Both sides must absolutely win.

Of course, both sides can’t win. This is a zero-sum game. The best that can be hoped for is a compromise. I would suggest that a “fractional percentage of gross income” is the only possible number that can work. This would betray the opacity of big studio accounting and is probably a non-starter from their point of view. But any attempt at a measurement of online activity should be a non-starter for SAG.

A strike will seriously hurt everyone. If you’re a union actor, you have to authorize one and be ready, willing and able to walk. If you’re the AMPTP, the reality of these harsh economic times are forcing you to change your corporate governance and financial reporting anyway. Maybe it’s time to meet the actors halfway.

Shelly Palmer is a consultant and the host of MediaBytes a daily show featuring news you can use about technology, media & entertainment. He is Managing Director of Advanced Media Ventures Group LLC and the author of Television Disrupted: The Transition from Network to Networked TV (2008, York House Press). Shelly is also President of the National Academy of Television Arts & Sciences, NY (the organization that bestows the coveted Emmy® Awards). You can join the MediaBytes mailing list here. Shelly can be reached at shelly@palmer.net