Actors, Ad Firms Reach Tentative Deal to End Strike

The longest talent strike in Hollywood history appeared over after negotiators announced late Sunday that actors and the advertising industry had reached tentative agreement on a new three-year contract.

A deal aimed at ending the bitter six-month strike was hammered out in New York shortly after 9 p.m. EDT. Details of the settlement between advertisers and two unions, the Screen Actors Guild and the American Federation of Television and Radio Artists, are expected to be announced today at a New York news conference.

Two union sources familiar with the deal said that the ad industry agreed to two demands that actors have been making since September. They involve the rate of payments to actors for advertising on cable television, and jurisdiction over ads made exclusively for the Internet.

In exchange, the actors agreed to a contract covering three years. Union officials are expected to meet Saturday to ratify the agreement, and actors could return to work as early as Oct. 30, a SAG spokesman said.

The strike, which began May 1, was one of the most painful in Hollywood history, costing the Los Angeles-area economy an estimated $125 million in lost production. Much of the commercial work was relocated to Canada and Europe to avoid disruptions caused by union pickets.

The standoff also served as a bellwether for what has become the worst labor relations in more than decade in the entertainment industry.

Next year, actors and writers will negotiate separately with the major Hollywood studios, producers and TV networks. Because of the length of the ad industry strike, producers have been ramping up productions and stockpiling scripts.

SAG has 98,000 active members, although a large number either don’t work at all or are seldom employed. The union has estimated that as many as 40,000 actors make commercials, with about 5,000 getting enough work to earn a living.

According to the union sources, the new deal will pay actors a maximum flat fee of $2,460 in the third year of the contract for unlimited use of the ads on cable TV. This is the amount actors had asked for when negotiations broke down last month. A source put the overall increase at about 10%--compared to a boost of slightly more than 7% that the industry had been offering.

The ad industry won the right to show cable commercials an unlimited number of times without additional payments being made, unlike ads on network television, where actors are paid each time a spot runs.

The increase in cable ads is important to actors because they have long maintained that they accepted less money to help the industry grow, then were denied fair compensation when cable exploded with highly profitable channels such as ESPN and Nickelodeon.

The industry also agreed that any ads made exclusively for the fledging Internet would include union actors, although no pay rates were negotiated. This means that actors in those ads would receive credit toward their health and pension benefits.

Such an agreement is considered important because actors see the Internet as potentially where cable was 25 years ago. They argue that it is crucial to establish a beachhead in what may be a lucrative advertising medium.

In return, actors agreed to a three-year deal effective once the settlement is ratified. The industry pressed for a lengthy contract that would start when work resumes, not retroactively to the May work stoppage.

SAG members lost untold millions in commercial payments, with many suffering financial hardships that had to be eased through emergency strike fund payouts.

Union officials had estimated that members were losing about $2 million a day, although others said the final total will likely be less because many members unexpectedly received residual payments. That’s because advertisers, lacking new commercials, relied heavily on reruns of ads.

The industry, represented by the American Assn. of Advertising Agencies and the Assn. of National Advertisers, was hit by boycotts and high-profile protests that increasingly involved marquee celebrities, including Julia Roberts, Paul Newman, Rosie O’Donnell and Tom Hanks. Also affected were ads for such high-profile events as the Olympics, the World Series and the new fall TV season.

Actors launched a boycott on Oct. 10 of three products made by major advertiser Procter & Gamble brands: Tide detergent, Crest toothpaste and Ivory soap.

Advertisers played hardball throughout the strike, insisting that ad production had not declined. Actors countered that the commercials were prohibitively expensive to make due to the added cost of recruiting talent and relocating shoots to other countries.

In recent weeks the industry showed subtle signs of wanting to reach a deal. Procter & Gamble Chairman John Pepper met with actors protesting at the company’s annual meeting and vowed to try to help end the strike.

Both sides entered negotiations last spring seeking to make wholesale changes in the way actors are paid for ads.

The industry, citing the fragmentation of network audiences, asked that actors give up receiving payments, or residuals, every time an ad runs on network TV and instead accept a flat fee, as they are paid now for cable ads.

Actors, citing the lucrative boom in cable TV, demanded that they receive residuals whenever ads ran on cable instead of their flat fee. They accused advertisers of trying to squeeze the union by demanding a “rollback” in what they received for network ads.

In the end, the status quo remained, although at higher pay rates. Last month the biggest breakthrough came when both sides agreed to drop those two demands.

That left them apart on the payments for cable ads and on the Internet issue. Negotiations broke off in September before resuming last week.

SAG was plagued by infighting during the strike, including schisms between hard-liners from its Los Angeles office and negotiators from both AFTRA and its New York office. Los Angeles officials and the AFL-CIO had been urging a consumer boycott for months before the more moderate negotiators could be convinced that one was necessary.

Although clearly battered financially by the strike, SAG succeeded in galvanizing its membership and attracting major stars to the cause in impressive numbers. In the past, the biggest stars often shunned SAG politics and causes.

The challenge for SAG going forward will be to keep its membership united while continuing to attract the support of stars, because they have such clout with studios and TV networks.

Many of the same issues that were problematic in the ad industry negotiations are likely to be at issue during labor talks with studios and TV networks.

Actors, along with writers, believe they have not shared fairly in the riches that companies have made in cable TV and in foreign television. Studios and networks believe that what they make in cable and in foreign markets only makes up for diminishing network TV audiences.