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Guilds Eye iPod Residuals

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If Apple's new video iPod is as successful as expected in delivering paid programming over the Internet, Hollywood's unions want their share and are worried about being shortchanged on residuals.

WGA West president Patric Verrone was the latest to voice these fears, issuing a letter to members last week that said WGAW and its sister guilds are unwilling to accept the DVD residuals formula, which takes most of the money off the table before sharing a set percentage of gross revenue.

Verrone said he was particularly concerned after an ABC executive suggested that, indeed, the DVD model might be the most appropriate.

"Make no mistake, that formula (which significantly discounts the revenue streams upon which the residual is based) is clearly not applicable in this case," Verrone said.

Said ABC: "The guilds are our business partners, and we always welcome a dialogue with them on any business-related issue that affects their members."

The unions want to have those discussions in the next few weeks.

Verrone said he was having lunch with AFTRA president John Connolly when both first learned of the new product last Wed., Oct. 12.

Apple hopes to do for video what earlier versions of the iPod did for music, especially in making it easy for consumers to buy individual songs and episodes through its iTunes store. The initial video offerings include such ABC and Disney Channel series as "Desperate Housewives" and "Lost," with episodes being available the day after their initial broadcast for $1.99 apiece.

Verrone said he and Connolly immediately realized that they, as well as DGA, SAG and WGA East, need to "ensure that this new distribution system is covered by the appropriate formulas in our respective contracts."

WGAW continues to believe that the proper formula is the existing one covering pay television. That entitles writers to 1.2% of the entire producers' gross. DGA has an identical formula, while SAG gets 3.6% and IATSE gets 5.4%.

The DVD formula, by contrast, is much less lucrative for all of these guilds because it pays a slightly higher percentage based on only 20% of the wholesale receipts. The remaining 80% is withheld by the studios to cover manufacturing, distribution and marketing costs.

The unions feel the DVD model is outdated and fundamentally unfair, leading them to demand a greater share in last year's negotiations with the studios and networks. The effort was unsuccessful as the Alliance of Motion Picture and Television Producers made it clear that they were willing to endure a strike to protect DVD revenue because it has become so fundamental to the economics of film and TV production.

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For more news from The Hollywood Reporter, click here.

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