President's report:
changing times...

DGA President Jack Shea

     Many of you have expressed concern about the talk in the industry regarding potential strikes next year by the Screen Actors and Writers Guilds, and you have asked about your Guild's thoughts on this subject.

First, some background on what is the key economic issue of the upcoming negotiations for all three Guilds: residuals.

In the early 1980s, all three Guilds agreed to the current provisions concerning the use of product on cable television. At the time, cable was a startup business, and the Guilds agreed that the appropriate reuse payments should be a percentage of the license fee, rather than a flat fee. This was done for two reasons: it allowed product that would not otherwise have had an outlet to be shown, and therefore generate some residuals where there would have been none; and it allowed members to get additional work in this nascent industry. Cable has ceased being a new business struggling for survival: it is now a highly profitable industry, and it is time to reevaluate our residuals arrangement.

Foreign markets are also dramatically different than they were at the time our foreign residual provisions were first negotiated. Back then, there were low expectations for audiovisual products in these markets, so a deal was made requiring only three residual payments totaling 35% of the residual base. Once those payments were made, the product could be shown ad infinitum without generating any further residuals. Now, like cable, foreign markets have grown exponentially, necessitating a new agreement with the producers.

There are new TV networks that did not exist when our network agreements were made. Networks such as FOX and the WB are increasing their programming hours every year and we believe that they need to increase the percentage of their residuals payments as well.

And then there is the internet: an outlet for advertising that was nothing more than a gleam in someone's eye less than a decade ago, an outlet that will thrive on audiovisual content. While the reuse of product on the Internet is not currently a huge business, it is anticipated that it will be in the future. We want to assist in building this exploding market, and any discussion about upcoming negotiations must include this area of distribution.

Because of these significant changes in the industry since many of our provisions were originally bargained, in 1999, we - along with SAG and the WGA - agreed to do a residual study for the purpose of reviewing the current residual structure and the economics of television. Our hope was that this new approach would allow us to then negotiate new residuals formulae without any strikes.

Of course, the studios and networks with whom we bargain are no longer independent, self-sufficient entities. Instead, they are now simply parts (and in some cases, small parts) of larger, global companies such as Vivendi, Fox News Corp. and Time Warner AOL. The new captains of our industry preside over empires so vast that, as Variety editor Peter Bart pointed out in a recent column, "the potential shutting down of Hollywood may actually fall below the radar until the point of no return."

The economics of the new millennium are going to play a crucial role in determining whether Hollywood shuts down come the middle of next year. Fair compensation for audiovisual works distributed on the Internet, for works distributed overseas, and for TV shows and movies made for and/or shown on the ever-expanding universe of cable television are key issues for all three talent Guilds.

Some of the discussion about potential strikes has been premature and ill-thought out. Bart noted in his column that "the cost of a strike, or a series of strikes, would be devastating," and indeed it would. The entertainment industry employs tens of thousands of people, and it is vitally important to remember that strikes are not tea parties: people lose their houses and cannot provide for their children. But also devastating to the artists who create motion pictures and TV shows - the directors, writers and actors - would be a series of contracts that do not recognize the changing economic climate of the entertainment industry.

It is our responsibility as leaders to make sure there is a fair deal without a disruption of the industry. Those who lead the companies have the same responsibility. We remain hopeful that the Alliance of Motion Picture and Television Producers (AMPTP) will acknowledge the need to fairly compensate the artistic talent upon which the studio and network's profits depend. We are equally hopeful that the studio and network heads are able to explain to those to whom they report that the DGA is very determined to resolve the residuals issues in a manner that is fair to our members. And last, but certainly not least, we encourage our sister Guilds to put aside issues that might divide us as we enter into what the ancient Chinese proverb would undoubtedly refer to as "interesting times."