Negotiations for a new WGA film and TV contract broke off Thursday, dramatically increasing the possibility that there will be a writers strike when the WGA's current contract expires May 1.
The negotiations broke off nearly six weeks after they began, and no new talks are scheduled.
Residuals issues -- including videocassette, foreign, basic cable, made-for-pay-TV and residuals from Fox TV shows -- remain the key stumbling block to an agreement.
"What's holding this up are the major economic issues," said John McLean, the WGA West executive director and chief negotiator. "Until these issues are addressed, you're not going to be able to get a deal."
The two sides remain far apart on a wide range of residuals issues, and on Thursday, both sides held press conferences where they rolled out economic figures to support their respective positions. The trouble is their figures don't jibe, which may explain why they are having such a hard time making a deal.
The companies say that the two sides are $88 million apart on the money issues, but the WGA says they are only $70 million apart. The Writers Guild of America says that the companies are demanding "major rollbacks" in key residuals areas, but the companies say they are offering writers a "net gain" of $30 million over the next three years.
Despite their differences, the two sides have narrowed the gap in their economic demands considerably over the last six weeks. Just how much that gap has narrowed -- and just how far they still have to go -- was first revealed Thursday, when the "news blackout" that has shrouded the talks was lifted for the first time.
During the companies' press conference at Warner Bros., Nick Counter, president of the Alliance of Motion Picture & Television Producers and the companies' chief negotiator, revealed that when the talks began on Jan. 22, the companies came to the bargaining table seeking to "stet" the contract -- meaning that they wanted the guild to accept the same terms and conditions contained in the guild's old contract, with no increases in initial compensation or residuals.
"We started at zero," AMPTP president Nick Counter told reporters Thursday.
Counter said that by the time the companies presented the guild with their latest contract offer Thursday morning, they had sweetened the pot by about $30 million over three years, or $10 million a year. But that's not much of an increase. In fact, it amounts to less than 1% of the $1.2 billion that writers earned under the guild's contract last year.
The WGA, on the other hand, first came to the bargaining table asking for a $725 million increase in residuals. But by the time the talks broke off, the WGA had pared that down to only about $100 million. The WGA also started out asking for a 100% increase in residuals from videocassettes, but it has scaled that down to an increase of only 25%.
Clearly, both sides were moving toward a figure that they will eventually find acceptable, but whether that number can be found without a strike remains to be seen.
On Thursday, the guild and the companies couldn't even agree on how far apart their proposals are. The AMPTP said that the guild's proposals would cost the industry an additional $112 million over three years, but the WGA said it's proposals would only cost $99.7 million over three years.
Despite their differences, a writers strike is not inevitable. The two sides are expected to return to the bargaining table sometime before the WGA's current contract expires May 1 for one last attempt to reach an agreement and avert a strike.
Counter said that the AMPTP was willing to continue negotiating Thursday and that the talks broke off at the insistence of WGA leaders.
WGA West president John Wells said it didn't matter who called the talks off, but he acknowledged that the guild needed a break so that it could lift the "blackout" and communicate with its members about the status of the negotiations.
The breakdown in negotiations could also have ramifications for the Screen Actors Guild and the American Federation of Television & Radio Artists, whose film and TV contract expires two months after the WGA's.
SAG and AFTRA officials attended the WGA's contract talks as observers throughout the six weeks of negotiations. On Thursday, SAG and AFTRA leaders -- including SAG president Bill Daniels and AFTRA national first vp John Connolly -- took part in the WGA's press conference.
Daniels said that he was there Thursday to show his "solidarity" with the WGA and to express his "support" for their position. As he has in the past, Daniels downplayed the threat of an actors strike, telling reporters that "there is a deal to be made."
But that deal could be tougher for actors to achieve if the companies, once they sit down at the bargaining table with SAG and AFTRA, take the same hard line on controlling costs as they are taking with the WGA. SAG and AFTRA are expected to come to the bargaining table seeking many of the same gains in residuals that the WGA sought. But having said "no" to the writers' demands, it is unlikely that the companies will say "yes" to similar demands put forth by actors.
A strike by actors and writers, if it comes to that, would be crippling for the local economy. Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., has estimated that a dual strike by actors and writers would cost the Los Angeles economy as much as $2 billion a month (HR 10/31).
If a writers strike is to be averted, the guild and the companies will have to close the $70 million-$88 million gap that still divides them.
That isn't being made any easier by the fact that the companies are asking writers to accept significant cuts in several residuals areas. According to the guild, the companies are demanding as much as $34 million in "rollbacks."
"The companies want a 75% cut in residuals for the first rerun on network primetime television and for the first rerun in syndication and for the first two reruns on basic cable, which together would cost writers $32 million over three years," Wells said. "They also want a reduction in pension and health payments that would cost writers $2.8 million. We have rejected these proposals."
WGA East president Herb Sargent said that "the companies' economic proposals today contained zero dollars in residuals for basic cable reuse of television shows and zero dollars in residuals for videocassettes and DVDs. In addition, the companies refused to recognize that Fox Broadcasting is a TV network."
Wells noted that writers currently receive about four cents every time a videocassette of their film is sold or put into the rental market. The guild is asking for a 25% increase.
"Our last offer asked for an increase of one cent," he said, "and the companies said, 'no.' "
Wells said that the guild is only asking for a 2.7% increase in the "average annual increase in total compensation to writers," but the AMPTP's Counter disputes the computation of that percentage, saying that the guild is dividing apples by oranges. According to Counter, the guild's proposals would increase writers' compensation by 40% over three years.
Counter said that the guild used the "wrong denominator" in computing their 2.7% figure -- that they have mixed increases in scale, which are the minimums called for in the contract, with over-scale payments to get a percentage that looks lower than it really is.
"The writers contend that out of their total salaries paid per year, only 25% is influenced by scale," Counter told The Hollywood Reporter. "On that basis, you have to compute the amount of the increase as a function of the scale rates, to follow their logic. But they didn't do that. In computing their percentage, they threw in over-scale. The total compensation is $1.2 billion, but only 25% is scale. The guild makes one computation based on scale, and another on scale and over-scale writers. You have to do one or the other. And if you are consistent, you come up with the number that we're talking about -- 40% over three years, 40% of scale compensation and the residuals categories that we talked about."
WGA West secretary-treasurer Mike Mahern called Counter's 40% figure "absurd."
"It's absurd on its face," he said at the guild's press conference, noting that the $33 million increase the guild is seeking in each of the next three years is less than 3% of the $1.2 billion writers earned last year.
But both sides are in agreement that considerable progress has been made in the area of creative rights. DreamWorks' Jeffrey Katzenberg, who has been heading the companies' end of the creative rights talks, said that the two sides have made substantial progress in this area, and he mused that a creative rights deal could be struck with "one or two" more bargaining sessions.
Katzenberg, in fact, was downright upbeat during the companies' press conference, praising both sides for their hard work and saying that more progress has been made on these tough creative rights issues in the last six weeks than during the previous 25 years. He also praised the Directors Guild of America for being "extraordinarily responsible and responsive" to the creative rights issues raised by the WGA.
The DGA, which has been feuding with the WGA over creative rights issues for years, issued a statement Thursday saying that it is "disappointed" that the contract talks broke off, noting that the proposals that the DGA has given to the AMPTP in this area would "give negotiators the framework to make substantial forward strides on credit and participation issues."
The DGA did not specify what those proposals are, but the WGA's proposals would allow those directors who currently receive "film by ..." credits to continue receiving those listings. But the WGA's proposal would also reduce the number of such credits. The WGA has proposed that in addition to those directors who have already received "film by ..." credits, "no more than 10%" of all other films shot under WGA contracts be allowed to contain a "film by ..." credit and that another 10% would be allowed to receive a "film directed by ..." credit. The WGA said it would leave it up to the DGA "to establish standards to meet these percentage goals."