Complex New Media Issues Are Put Off Until Next Time

Although Hollywood averted actor and writer strikes this year, maintaining labor peace will only get harder amid rapidly changing technologies, huge media mergers and shrinking film and TV profits.

While writers and actors made some gains in contract negotiations, they fell short of a full-scale restructuring of pay formulas they believe inadequately reflect the growth in cable TV, foreign, video and DVD markets. They also made few inroads into fledgling new media outlets such as the Internet. As a result, the day of reckoning that many in Hollywood thought would come this year has only been postponed, perhaps for as little as three years.

“These negotiations will stay complicated for the next couple of cycles. There’s a lot of unfinished stuff,” said Charles Slocum, strategic planning chief for the Writers Guild of America.

An agreement Tuesday by actors, coming on the heels of a May settlement by writers, dodges back-to-back strikes that were considered a virtual certainty as little as three months ago. Those threats disappeared largely because of an unexpected downturn in the economy and the continued slide in the stock market. Additionally, once-hot prospects, such as delivering programs over the Internet, became marginal with each dot-com that imploded.

Even though major pay issues remain unresolved, some entertainment company heads argue that averting strikes this year bodes well for future talks.

“Each side has shown problem-solving skills and recognition of the economic realities, and that’s a positive sign for the future,” said Viacom Entertainment Group chief Jonathan Dolgen.

News Corp. President Peter Chernin added that, as long as guilds continue to maintain the same high employment levels that they’ve had in recent years, “I’m not sure there would be tremendous impetus for a strike.”

Nonetheless, labor tensions could surface again as early as next year, when directors face off with studios over many of the same issues, as well as some unique ones, such as deciding how guild members will be paid when television shows are shot in the emerging digital format.

“You have rising labor costs, rising talent costs and an expanding universe of money coming from new platforms, new methods of distribution and new markets outside the U.S.--and that’s the tension,” said Jeff Berg, head of talent agency International Creative Management, which represents such actors as Julia Roberts and Mel Gibson.

Writers and actors predict that issues left unresolved this year at the bargaining table will reappear when their next contract is up in 2004.

For Hollywood studios, the trick will be to figure out how to get the guilds to return to the kind of preemptive negotiating style that got the industry through the 1990s without even so much as the threat of a strike.

After a painful 22-week walkout by writers in 1988, studios and unions defused tensions by negotiating well in advance of contract expirations and without deadline pressures.

That prevented the kind of frantic production ramp-up and inevitable slowdown that occurred over the last year when the threat of two strikes hung over Hollywood.

“The sides had to posture and position themselves and couldn’t do it below the radar as we had done it for the past 12 years without the paranoia of a work stoppage and without all the chest beating,” Warner Bros. Chairman Barry Meyer said. “Early negotiations have resulted in great deals for all the guilds and increased employment.”

But this year, negotiations with writers and actors went down to the wire.

Meyer suggested that guild memberships “were led to believe they could maximize their leverage by taking it down to the last minute.” But, he said, “even a short work stoppage is never made up by incremental benefits.”

But the guilds have been increasingly skeptical that early talks lead to the best deals and believed they had failed to make satisfactory gains since the 1988 strike.

“The ‘90s were a decade of holding still,” Slocum of the Writers Guild said.

Sounding more militant than they had in more than a decade, writers originally formed a lengthy list of demands for their most recent contract and openly warned Hollywood that a strike was possible. Last summer, one guild official went so far as to advise members against making any major purchases such as houses or cars in light of a potential work stoppage.

Now, other issues make it even more difficult to return to the peaceful 1990s-style negotiating: New ways to deliver movies and TV shows--such as the Internet, video on demand, satellite systems and digital television--are making the unions gunshy about committing early to contract terms before future prospects are clear.

Also, the proliferation of huge entertainment mergers continues to weave together massive conglomerates made up of studios, networks, cable TV outlets and Internet companies.

The consolidation strengthened management’s clout. But it also forever changed the business from the days when powerful moguls such as Lew Wasserman, who oversaw the Universal media conglomerate, could single-handedly forge a deal. For guilds, it also has raised suspicions that companies are depriving actors and writers of full proceeds by selling shows and films to their own subsidiaries at a discount.

“How people get compensated is getting more and more complex and difficult as technology emerges and as business becomes more and more centralized,” said Sidney J. Sheinberg, longtime president under Wasserman at Universal. The vertical integration of media conglomerates such as Disney--which owns ABC--and Viacom--which acquired CBS--”also introduces an element of questionable arm’s-length dealing,” Sheinberg added.

In addition, ICM’s Berg pointed out, “these media assets are traded at such huge premiums that it signals to talent that they contribute to the increased value of these enterprises and should be compensated accordingly.”

With new technologies lurking, no one at Hollywood’s guilds wants to repeat mistakes made when they failed to adequately recognize new trends, as they did with the explosion in pay and cable TV.

Channels such as Home Box Office mostly were an outlet for movies. Early on, MTV was seen as little more than a promotional vehicle for music videos. Today, both are lucrative original programming channels that generate huge sums for media giants such as HBO parent AOL Time Warner and MTV owner Viacom Inc.

Indeed, writers in the 1980s, as a trade-off for other offers, spurned what proved to be a lucrative payment formula for shows written for pay TV channels.

As the business continues to evolve, Sheinberg said, the last thing talent wants is to “be caught naked” and risk missing out on its fair share from new and emerging technologies such as the Internet. What troubles some observers is that both sides will let the issues languish until they boil over.

University of Texas professor David Prindle, author of the Screen Actors Guild history “The Politics of Glamour,” sees disturbing parallels between what is happening now and previous eras in which issues were put off. He said that it happened in 1960, when actors struck over residuals for movies shown on TV, and again in 1980, when actors walked out over cable and videocassette residuals.

“They always put off demands for five or 10 years. Then there’s a strike,” Prindle said.

What makes negotiations difficult, Sheinberg said, is when both sides are dealing with unknowns and disputed facts. “Then you’re negotiating from a position of fear.” And that is why some issues such as the Internet will continue to wait.

“The Internet is easier to deal with once you know what it is,” Viacom’s Dolgen said. “There will be a fair arrangement once we know what the business is. It’s hard to make a deal when you don’t know what the facts are.”

But Prindle said that any uncertainty about the development of new technology inevitably favors management because the companies can continue to claim it is too early to discuss the issue.

“You don’t have to know what the future will hold to say, ‘No,’ ” he said. “You have to know what the future will hold to make a deal.”