Studios call for study of residuals system

Times Staff Writer

Should Hollywood call for a rewrite of the way it pays scribes?

On the eve of what are expected to be contentious contract talks, senior studio and network executives on Wednesday called for a three-year study that could retool the decades-old residuals system under which Hollywood’s writers are paid.

The executives contended that a joint study with writer representatives, and eventually all talent guilds, was needed because of rapid changes in the entertainment industry -- including the rise of digital technology and online entertainment -- that continue to uproot the old economic system.

“This is the time to do it,” said Warner Bros. Chief Executive Barry Meyer, one of three executives who spoke at an industry briefing at the Encino headquarters of the Alliance of Motion Picture and Television Producers. “We feel that operating under terms, conditions and business models that were formulated half a century ago is just an outmoded way to look at things.”


But the proposal was immediately rebuffed by the union representing Hollywood’s writers as an attempt to put off coming up with a fair formula to share money that will eventually flow in from digital distribution.

“The industry conglomerates declare windfall profits to Wall Street while pleading poverty to the talent community,” said John F. Bowman, chairman of the Writers Guild of America’s negotiating committee. “We don’t need a study; we need a fair share for writers of the revenue our work generates.”

Securing fair compensation for work that is distributed via the Internet and across other new media devices is a top priority for leaders as they begin negotiations Monday on a new contract. The current one expires Oct. 31. The contract for actors and directors expires June 30.

Bracing for a possible walkout by writers, networks and studio executives have been taking steps to keep production pipelines flowing by pushing up shooting schedules, ordering more reality TV programs and renegotiating with writers to turn in their film scripts earlier.

Under the residuals system, writers, actors and directors are compensated for the reuse of movies and TV shows. Meyer noted that residuals were developed at a time when studios more than offset their film costs at the box office, which hasn’t been the case for nearly three decades.

Meyer advocated that studios pay residuals only after they’ve recouped their costs, an idea dismissed by Bowman.


“Our members can’t rely on Hollywood accounting,” he said.

Though they declined to discuss specific contract proposals, executives contended that it was premature to apply pay formulas to the world of online and digital entertainment because the business was too nascent.

“We don’t know yet where this is heading,” CBS Corp. CEO Leslie Moonves said. “It is a time of great experimentation.... Our hands can’t be tied to ask us to come up with a formula today on something that we know so little about.”

Network strategies for digital distribution are as diverse as the networks themselves, he noted.

ABC has created its own player that allows viewers to watch a variety of top shows on its website. CBS has opted to put TV shows on popular websites such as YouTube. And NBC Universal and News Corp. have formed a joint venture to distribute TV shows with advertising on a website they plan to create.

“We need complete flexibility when it comes to how we promote and how we market our product,” said Anne Sweeney, president of Disney-ABC Television Group. “Guild restraints limit our ability to do what we need to do.”