Unions Seek Higher Residuals for New Media

Hollywood's labor leaders, who believe current residuals paid for content sold over the Internet already are too skimpy, are now being asked to accept even slimmer payments for ad-supported streaming of TV shows.

And that's slimmer as in nada.

"Downloading is an actual retail venture, but with streaming everybody is experimenting right now," an industry insider said. "And everybody needs to experiment because we're trying to save our business."

Because streaming is best viewed as merely promotional in nature, network execs argue, actors, writers and directors are thus owed no extra payments for Internet-repurposed programming. It's a contention that closely follows an argument over which formula to use for residuals on Internet and iPod downloads of movies and TV shows.

Producers are paying under the home video formula despite guilds' demanding the much higher pay TV residual, and that slippery debate recently entered arbitration, well-placed sources said. But the situation with streamed content is even squishier.

For one thing, the guilds normally are paid residuals by producers, not distributors. Yet even producers are being shut out of any streaming disbursements for the present, so the guilds must seek residuals directly from the TV nets.

Notably, most of the programming set for streaming in the two biggest initiatives announced to date -- by ABC and CBS -- involve network-produced shows. NBC has yet to jump into the ad-supported streaming fray, and Fox has limited its efforts to streaming select episodes and show clips.

ABC offered free Internet viewing of four shows -- "Lost," "Desperate Housewives," "Alias" and "Commander in Chief" -- for two months in the spring and plans to resume streaming in even broader fashion in the fall. CBS plans to begin streaming all CBS-produced primetime shows over the Internet the morning after airing on TV, as well as two apiece supplied by Fox and Warner Bros. for four-week promo runs on CBS' Web channel Innertube.

Eventually, networks may tag more shows made by third-party producers for ad-supported Internet viewing, potentially for full-season runs. But network execs hope streaming ventures will be more profitable by then, allowing some sort of payments to producers and perhaps guild members.

The lack of direct dialogue between networks and labor on the issue has left many unclear about what to expect and claiming that some sort of streaming residuals may be forthcoming. Residuals aren't due until months after the use of materials, but management execs make it clear any such hope is misplaced for the present.

On the other hand, studio and network execs privately acknowledge that new-media residuals are sure to be a big area of discussion in the next round of guild contract negotiations. So a more realistic hope for labor may be that management agrees in contract talks to pay some retroactive residuals for content streamed up to that point.

A letter went out last week from the Alliance of Motion Picture & Television Producers to the major guilds stating that the streaming ventures to date are still evolving and remain in the promotional stage of development.

Guild leaders are talking regularly among themselves about such issues in an effort to form a united front, and the matter of residuals for streaming has figured in meetings among guild presidents.

Still, the sheer complexity of the topic and disparate guild constituencies call into question whether labor leaders can march in lockstep on the issue. Many in SAG and the WGA still harbor a grudge over the DGA's accepting the much-bemoaned existing formula for home video residuals in its 2004 contract settlement, a position that effectively undercut the other guilds' ability to leverage the issue.

The DGA is known to be working on an ambitious white paper on new-media's impact on income streams, and SAG/AFTRA has greenlighted a similar joint study with the ad industry. There's no reason to view those projects as anything but complementary, but some suggest the guilds' distinct agendas may cause them to interpret the results of the studies in different ways.

"After all, if you get three experts in a room you're likely to get five different ideas," suggested one industry wag.

Meanwhile, SAG is disadvantaged by a long-running search for a permanent chief executive, with interim CEO Peter Frank unlikely to thrust himself into any early talks over such a still-evolving subject. Also, it appears for now that the studios are loathe to engage in any dialogue with tough-talking execs at the WGA, where onetime labor organizer David Young recently was granted permanent status as the guild's exec director.

The WGA's contract expires in October 2007, but current DGA and SAG agreements run until June 2008. Until then, the guilds will likely continue to grouse about new-media residuals and arbitrate individual disputes where possible.

But apart from that, nobody is holding their breath for meaningful dialogue among the various parties anytime soon.

"We are at earliest stage of seeing the influence and impact new media may have on audiences, advertising and traditional business models," said Nick Counter, president of the AMPTP and the studios' chief labor negotiator. "All we know for sure is that we have more questions than answers."

Carl DiOrio writes for The Hollywood Reporter.

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