SAG negotiator, president send out words of caution on DGA deal

January 29, 2008 Dear SAG Member: Everyone hopes the WGA strike will end with a fair deal for the writers. There has been much speculation about the impact on the WGA strike of the tentative agreement between the Directors Guild of America (DGA) and the employers’ representative, the Alliance of Motion Picture and Television Producers (AMPTP). Some have rushed to anoint their deal as the “solution” for the entertainment industry. We believe that assessment is premature. All we know of the deal are the general terms described in a joint AMPTP/DGA press release. That press release leaves many important questions unanswered. Apparently, many elements of this deal remain unresolved and/or have not been reduced to writing. The DGA press release suggests progress in some areas, but until the details are known, that is only speculation. Several examples: The formula for new media “electronic sell through (paid downloads or EST)” is based on the higher distributor’s gross revenues, rather than producer’s gross revenues, but the definition of distributor’s gross is vague and not sufficient to protect against manipulation by the employers. Also, information regarding employer “deals and data” will be available to the DGA to monitor distributor’s gross and paid downloads on the Internet, but the press release does not detail what data, who provides the data, and what happens if the data is not provided. The devil is in the details. In the tri-guild audits under the current guilds’ collective bargaining agreements (including the DGA’s), for example, some audits are still open after eight years, because of problems with enforcement under current contract language. Some have suggested that the new DGA deal contains a “fair market value” test for revenues included in the new media residuals calculation, to protect against self-dealing when one part of a conglomerate sells new media content to another part of the conglomerate at an unfair, low price in order to reduce residuals. We hope this is true, but the press release does not use “arms-length transaction” or “fair market value test” language, and says only, “If our exhibitor or retailer is part of the producer’s corporate family, (DGA has) improved provisions for challenging any suspect transactions.” This language could mean anything, and certainly does not guarantee against self-dealing by media conglomerates to hurt creative talent. Fair market value and distributor’s gross are two issues that the AMPTP demanded that the WGA take off the table, along with four other items, which resulted in talks breaking off in December. Now after prolonging the strike for another month, the AMPTP has negotiated these two issues with the DGA. That is the good news. There are also even more serious problems with other provisions described in the DGA press release, particularly those involving new media. For example, why are residuals for electronic sell-through (paid downloads or EST) for directors based on their lower DVD formula (.3%) rather than the higher pay TV formula (1.2%) in their current agreement? All three guilds – SAG, WGA, and DGA – filed for arbitration to overturn management’s attempt to impose the DVD formula for residuals on the calculation of residuals for downloads under the current agreement. The DGA stated in their arbitration filings that payment of the lower amount is a violation of the collective bargaining agreement and the proper residual formula is the higher pay TV percentage. The concession by the DGA in the new deal, to use the formula that management improperly imposed under the current agreement, is an AMPTP roll-back. The new agreed-upon percentages for television (.7%) or feature films (.65%) are much lower in the DGA deal than the percentage that the DGA claims is appropriate in its arbitration (1.2%). And these “increases”, which are based on the discredited DVD formula, do not increase residuals on the sale of DVD’s, but only apply to downloads; despite the fact that DVD’s will generate billions in revenue to the studios and networks for years to come. The very high thresholds in the DGA deal for full jurisdiction for made for new media content may well incentivize non-union work below the threshold amounts ($15, 000/minute, $300,000/program, $500,000/series, whichever is lower). What will stop the industry from making cheap, non-union pilots at below $300,000 per episode, for testing first on the Internet before the productions migrate to broadcast or basic cable? Your Guild has signed 210 Internet producers to SAG contracts in the past two years and only seven of them (or 3%) would fall inside the high DGA jurisdictional thresholds. We have worked hard, just as we do with low budget features, to capture this Internet work and to make sure it is done union. This DGA proposal appears to abandon jurisdiction over a huge swath of actual Internet productions, which we currently cover. This deal gingerly addresses certain issues now, with the apparent hope that in three years or more, revenues will grow and the agreement can be improved to capture more of it. Bargaining history in the entertainment industry, however, teaches that it is much harder to get a fair share of revenue after management puts it in their pockets for years. Residual compensation should be based on a fair share of revenue generated by covered content from the first dollar. Rather than a “percentage of revenue, payment from first dollar” approach to residuals, the DGA deal instead provides for a 17 day window for free streaming of television programs over the Internet without compensation (24 days for the program’s first season). The deal also allows a one year buy-out of $1200 for Internet use v. $20,000 for one re-run on broadcast television. For these specific reasons, and because so much of the new DGA/AMPTP deal is unknown, no one should assume this new deal is a template for anyone else, certainly not for actors. It is up to the leadership and membership of the DGA to decide if their new deal with the studios and networks is acceptable, but whatever they decide, their decision will not determine what will be satisfactory for the leadership and membership of Screen Actors Guild. Each guild must act in the best interest of its own membership, including rejecting management-imposed “pattern bargaining.” In solidarity, Alan Rosenberg Doug Allen President National Executive Director and Chief Negotiator