Chance of Actors Strike Threatens Hollywood Boom

Hollywood’s decade of labor peace may be ending.

This week, representatives of the Screen Actors Guild sat down in earnest with producers for what promises to be the most contentious negotiations in years, largely over the age-old issue of residuals, the amount paid when shows are re-run. Some believe the gap between the sides is so wide that it could prompt the first strike by actors in 18 years and the first by a major Hollywood union in a decade.

Many studios and producers already are taking precautions in case SAG members walk out this summer. A lengthy strike would be a devastating blow not only to the entertainment business but to Southern California’s economy as a whole.

To be sure, labor strikes in Hollywood are rare. The last major entertainment industry strike came in 1988 when the Writers Guild of America went out for 22 weeks in a walkout that cost the industry and writers an estimated $500 million. Actors, whose current contract expires June 30, last struck in July 1980, causing havoc with that year’s fall TV schedule until they went back to work in October.

Any lengthy disruption of television’s fall schedule or feature film production today would ripple through Southern California far more than in the past. Since the last strikes, entertainment has moved to the forefront of the Southern California economy. An estimated 262,000 people work in the core business of TV and movies.

Hollywood fears what is called a “de facto strike” almost as much as the real thing. Because of the lead times involved in getting projects financed--signing actors and directors, booking sound stages and the numerous other logistics--the mere possibility of a strike can cripple production. Should talks drag on into April and May with few signs of progress, many projects are likely to get put on hold and financing for independent filming could dry up. Indeed, a handful of projects are in limbo already.

Metro-Goldwyn-Mayer/United Artists, headed by studio veteran Frank Mancuso, has moved up the start dates of two of its upcoming movies, “Carrie 2” and “Toby’s Story,” to the end of April to avoid getting shut down if a strike hits.

Sherry Lansing, chairwoman of Paramount Pictures, said, “We’re hopeful there won’t be a strike, but obviously we have to prepare as if there could be one.” The studio chief added: “We are not starting any movies that cannot be finished before such a strike could occur.”

A potential strike could impact TV production even more dramatically than films because the business operates on a more pressing time schedule. The networks announce their fall prime-time schedules beginning in mid-May with production of new and returning shows typically starting in July. A strike would force the networks to accelerate their shooting schedules and rely more heavily on news, documentaries, repeats and movies of the week to compensate for the lack of fresh product.

Fox network sources say they may begin production early on series after next season’s prime-time schedules are announced.

Many Issues on Table

What makes the talks different this year is the plethora of issues that have been put on the table, ranging from major economic matters such as residuals paid when TV programs air in the exploding foreign market and on cable channels to seemingly mundane issues such as where extras change clothes.

One Hollywood labor expert, citing the number of proposals on the table, said, “This could be a real train wreck. You have literally over 100 proposals from both sides.”

Representatives of both actors and producers are abiding by a news blackout and won’t comment on the talks. But sources close to them say tensions have already surfaced.

Producers are whispering that the proposals are excessive and make little economic sense, while SAG is arguing that actors should share in the global bounty that’s pouring in.

Since the writers struck in 1988, industry and labor representatives in Hollywood have shunned traditional fist-pounding negotiations over scores of issues for a so-called “fast track” approach in which talks start well in advance and focus on a narrow set of issues.

The goal is to maintain labor peace, and it has largely worked, although lately the system has been threatened. Writers in the West last year approved a contract that was torpedoed by writers in the East, many of whom argue that fast-track negotiations favor producers. A new contact still hasn’t been approved.

SAG and its negotiating partner, the American Federation of Television and Radio Artists, which represents such actors as soap stars, have submitted 34 pages of proposals, with the Alliance of Motion Picture and Television Producers--which represents networks, studios and producers--countering with a 12-page list.

Although the contract does not expire until June 30, both sides are hoping to reach a settlement by a self-imposed deadline of April 2.

An actors strike would not have a serious impact on the wallets of Hollywood’s superstars like Tom Cruise, Tom Hanks and Jim Carrey, who earn $20 million a picture, nor would it faze the guild’s fair number of nonworking actors.

It would, however, significantly hurt the rank and file of the guild. Eight out of 10 SAG members make less than $10,000 a year from acting, holding down part-time jobs to make ends meet.

That range of membership makes SAG unique in the world of unions and labor negotiations. Can the interests of Hollywood’s highest paid actors like Cruise, Harrison Ford and Julia Roberts be in sync with other SAG members? Most top stars are prohibited from serving on the guild’s board because its rules bar actors with production companies, which rules out virtually every major actor.

SAG is led this year by Richard Masur, an actor known for his role on “Picket Fences,” among other shows. Masur, who fills a position once held by Ronald Reagan and Charlton Heston, has said that no one wants a strike but the union will call one if it is necessary to achieve its members’ goals.

The two biggest SAG demands involve residuals paid when shows air on cable television and overseas, both sticky issues for years with all of Hollywood’s guilds. They are bigger issues now because of the explosion in television worldwide and the number of cable channels that have come into being.

The foreign marketplace has bounded upward over the past 10 years, which is precisely why actors are arguing that they are entitled to a bigger chunk of the pie. Producers counter that residuals paid for domestic television airings are too lucrative given the inroads cable television has made on the networks. So if actors want to open the issue of foreign residuals, they will open up the domestic TV issue.

SAG also is asking that residuals on cable television be entirely restructured. Actors now receive 6% of the license fee for shows airing on cable. SAG wants a sliding scale. For example, performers would get 40% of the minimum salary they qualify for the first time a show runs on cable, 15% the eighth time and 5% the 12th time into perpetuity.

Producers have countered with a list of proposals to cut back on benefits actors now enjoy, including the residuals on broadcast reruns, a lower salary structure for theatrical movies with budgets under $15 million, and lowering the ceiling on pension and health contributions they have to make.

While some studios are already juggling production dates, others are watching warily.

“We haven’t started curtailing projects--yet,” said Disney Studios chief Joe Roth, noting that the studio has several movies, including ones to be directed by Michael Mann and Lawrence Kasdan, that are still slated to go in the strike-vulnerable time period.

Rick Hess, who heads production at Phoenix Pictures, which made such films as “The People vs. Larry Flint” and “The Mirror Has Two Faces,” said, “Every studio and production company is certainly taking the prospect of a strike very, very seriously.”

Tom Pollock, who recently partnered with director Ivan Reitman in a new production venture, likens it to America’s current political stance on the Mideast: “It’s like Iraq. Maybe the best way to prevent a war is to prepare for one.”

Pollock pointed out that while everyone is hoping for a settlement, “both sides prepare themselves for a strike because it gives them the best negotiating posture. If neither side prepares, then there’s no pressure to settle.”

Industry Flourishing

No matter where the producers and actors stand on the issues at hand, they agree that nobody wants a strike.

The entertainment industry is flourishing today under the dominance of such deep-pocketed media conglomerates as the Walt Disney Co., Time Warner and News Corp., which reap billions of dollars from the products they sell around the world.

Industry veterans suggest that there’s good reason there hasn’t been a major strike in years.

“The business is pretty good and ancillary markets provide actors, writers and directors with residuals that have been on the uprise every year,” said Pollock, chairman of the American Film Institute and former head of Universal Pictures.

The writers strike was so financially devastating both to the talent and the studios that industry observers say it is in everybody’s interest to avert a similar shutdown.

“Both sides want to make a deal,” said one source involved in the negotiations. “Business is good in town. There’s more original product for TV than ever before in history, and employment is up at astronomical levels.”

A production shutdown not only hurts the studios and talent, but all the representatives and support services to the industry, including talent agents--who could lose lucrative commissions and package fees for TV shows they helped put together--not to mention attorneys, business managers, public relations firms, advertising outfits and other entertainment-related organizations. A strike would touch businesses that cater to the industry, such as restaurants and hair salons.

Jim Wiatt, president of International Creative Management, said, “From the agency’s standpoint, we’re aggressively trying to get clients into movies before the [potential] strike.”

Independent projects may be the first to feel the punch, especially ones in which lenders require producers to have completion bonds to ensure they will be finished on time and on budget. Steve Ransohoff, executive vice president of legal and business affairs at the bond company Film Finances, said though projects aren’t being affected now, they may be soon.

Michael Grillo, head of physical feature production at DreamWorks SKG, said, “Our philosophy is to move ahead and prepare movies. And, any time there’s a large financial commitment to be made--to a creative person, a location or building a large set--you stop and evaluate the situation.” He added that the main objective is “to minimize any financial impact.”

Grillo said DreamWorks, the fledgling studio of Steven Spielberg, David Geffen and Jeffrey Katzenberg, plans to go ahead with its two mid-June productions, “Forces of Nature,” starring Sandra Bullock and Ben Afleck, and “The Crew,” to be directed by Dean Parisot.

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Items at Issue

Actors and producers are squaring off in negotiations to replace a contract that expires June 30. Here are some of the highlights of what each wants, according to proposals obtained by The Times:

WHAT THE SCREEN ACTORS GUILD WANTS

* Foreign Residuals: Double the residual rate currently received when shows air on foreign TV, from 35% of the actor’s minimum salary to 70%. In addition, actors want an “up side” in the form of 3.6% of a distributor’s foreign gross. That would be split among the actors after those grosses reach certain levels for half-hour, hour and longer shows.

* Domestic cable residuals: Restructure cable television residuals. Actors now receive 6% of the license fee for shows airing on domestic cable channels. The new formula would resemble a sliding scale used when shows rerun over broadcast stations. For example, performers would get 40% of the minimum salary the first time a show reruns on cable, 15% the eighth time and 5% the 12th time.

* Health and pension: Increased ceilings on amounts producers pay into health and pension plans.

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WHAT PRODUCERS WANT

* Residuals: Reduce by uspecified amounts domestic television residuals for shows re-run on broadcast TV.

* Health and pension: Reduce the ceiling on pension and health contributions.

* New salary structures: Reduce salary structures for TV movies with budgets under $5 million, which would likely include most TV movies, and for theatrical films with budgets under $15 million.