JOHN WELLS ON THE DGA DEAL

This from "The Artful Writer" blog. I'm assuming John wouldn't mind being re-posted for my eight readers. Besides, I owe him a script, so at least he can see I've been busy plagiarizing...

John Wells On The DGA Deal

By Craig Mazin

While I continue to study the terms of the deal, I was forwarded a copy of an email John Wells sent to another writer who was interested in his opinion on the deal. John granted me permission to republish his email here. The following is the email, unedited.

Dear Jim,

I think the DGA deal is good. Very good. For writers, for directors, for the future.

Let me run it down:

EST - ELECTRONIC SELL-THRU (download to own)

3.25% of 20% on Theatrical product after the first fifty thousand units are downloaded (first fifty thousand units are paid at the old homevideo/DVD rate).

3.5% of 20% on Television product after the first one hundred thousand units are downloaded (first one hundred thousand units paid at old homevideo/DVD rate).

Our current rate is 1.2% going to 1.8% of 20% in homevideo (Ed. Note: Not exactly. It’s 1.5% going to 1.8% of 20%). This DGA deal doubles our much hated homevideo/DVD. A rate we have tried to improve on for over twenty-two years without success. Twenty-two years. As recently as a few weeks ago the Companies were still saying they would “never, ever” raise this rate. One company exec told me we were “out of our fucking minds” if we thought we would ever get an increase in the DVD rate for EST. This is a huge, historic victory for everyone.

MADE FOR INTERNET - DERIVATIVES (Webisodes/mobisodes)

The DGA got jurisdiction over made-for and derivatives. The AMPTP agreed that all “high budget” made-for and derivatives would be DGA covered employment. The Companies are required to make Pension and Health payments for a DGA director and his/her team and to negotiate minimum payments in good faith.

On “low budget” made-for and derivatives, the DGA has jurisdiction if the Company wishes to employ DGA members, with the same requirements to provide Pension and Health and negotiate minimums in good faith.

The definition of high budget is also very encouraging: $15,000.00 per minute, $300,000.00 per episode, or $500,000.00 per series — whichever is lowest. To put this into perspective, QUARTERLIFE, the web series that Herskovitz/Zwick are producing is being made for more than three times this amount and would clearly be covered employment, as would all of the mobisodes and webisodes made for existing shows so far. Another big win for all of us.

Just as an aside, this “high budget - low budget” solution was championed by several members of our WGA negotiating team and it’s great to see it’s the same solution arrived at by the DGA.

AD SUPPORTED STREAMING

A 17 day free promotional window on existing shows. A 24 day window on new shows. As a practical matter, this is actually a two week window (three weeks for new shows) with the Companies allowed to “preview” the show on-line for up to three days prior to it’s initial run for promotional purposes.

After the initial window, the Company would pay $600.00 (for an hour program) for the right to stream each episode for an additional 26 weeks. After the first 26 weeks, the Company would pay an additional $600.00 for 26 more weeks. For a total of one year at $1200.00.

If the Company chooses to leave the episode available for ad-supported streaming after the two 26 week cycles, they would pay 2% of distributor’s gross going forward. Distributor’s gross is the definition we always wanted and they didn’t want to give us.

The $600.00 figure is 3% of the standard residual rate (or 6% of the rate annually) and is tied to the minimums, so as minimums increase each year, the $600.00 will increase right along with it.

This is an extraordinary figure. I’d been pushing a 5% rate per year and assumed it was a real stretch to get that. We got 6%. Unbelievable.

A momentary aside, you’ve asked me before about the AMPTP’s earlier offer in streaming that would “replace a $20, 000.00 residual check with a $225.00 residual check”. A bumper sticker slogan that’s been repeated often in last few months. While this kind of statement is very useful for keeping people fired up on the picket line it doesn’t hold up under even the mildest scrutiny. It’s apples and oranges.

The statement assumes that streaming will replace network reruns, but for most shows, there are no network reruns. And the shows that do get rerun are rerun because their numbers hold up well on rerun and fill slots (Saturday night anyone?) where it’s not economically feasible to stick in original programing.

The total residual load for a network rerun across the three Guilds is approximately $100, 000.00 per hour. No other form of programming (reality/game shows) is that cheap. That’s why the shows get rerun. And for those shows that don’t get rerun, the studios are dependent on syndicated revenues and foreign sales to make a profit on these shows.

The Companies are going to jealously guard the value of our work to make sure they don’t undercut the syndicated and foreign market value of these episodes. I suspect we’ll find the Companies make most shows available online for the initial “free” promotional window and maybe one 26 week period and the episode will disappear online until the episode has been fully exploited in syndication and foreign. Only to “reappear” online as a library piece some years later in the hope of “soaking up” some library “gravy” after we’ve seen our full syndication and foreign residuals paid.

ONLINE RENTALS

This has not been widely reported, but the DGA was able to get the Companies to reconfirm the 2001 Internet Side-letter. What does the 2001 Internet Side-letter say? Well, in 2001 we were able to get the Companies to agree that all rentals occurring over the Internet would be paid at 1.2% of 100%. The recent announcement of the Itunes deal and the Netflix deal will clearly fall under the 2001 Side-letter and be paid at this much higher rate (four times or more the current average homevideo/DVD rate). As would any Internet “On Demand” models that emerge. This is very important. We had assumed that the Companies would make a run at getting the online rental rate down to whatever their eventual EST rate would be. The DGA made sure that didn’t happen.

This may become our most important rate as the Internet market matures. The Companies have made it clear that they would much prefer nurturing an online rental market rather than an EST market. Why? The EST market is going to cannibalize their highly profitable DVD market. An online rental market will supplement it. This is another big win for all of us.

FINANCIAL REPORTING

Also largely unreported is the DGA’s new language on financial reporting and auditing of these new markets. In an unprecedented move, the Companies negotiated with the DGA to allow the DGA full access to all of their un-redacted financial records and contracts in new media during the term of this new deal. This has never happened before. It will allow the DGA to analyze whether the terms of this new deal are working and if the revenues are being properly reported. This is another extraordinary aspect of this deal and a cause for celebration.

That’s it. The headlines. And because of pattern bargaining in our industry, we’ll get all of it in our contract.

While the DGA richly deserves our thanks and appreciation for negotiating a terrific deal that will serve as a template for all three creative Guilds, none of this would have been possible without the blood, sweat and sacrifice of WGA members during this very effective strike. The Companies made a deal they didn’t want to make because of our resolve. They clearly understood how important these issues were for our members and stepped up to resolve them.

Our Negotiating Committee has numerous issues that are specific to writers that must still be resolved with the AMPTP: the term of our next contract, pension and health issues, separated rights on new media, and jurisdiction for material written for derivatives that will not be filmed (show blogs, web-only stories, etc). But this is a historic deal. We’ve won. The strike was necessary to win it and I can only assume our Negotiating Committee will be sitting down with the AMPTP by early next week to resolve these last, final issues.

It’s a very good day for all of us.

John