Digital media to broadcast Hollywood's contract talks with film and TV writers

The Internet will provide the battlefield when studios start negotiating with film and TV writers in what could be the most contentious Hollywood contract talks in years.

The Writers Guild of America has said it wants a bigger slice of the revenue studios are seeing from distributing movies and TV shows online.

But studio executives said Wednesday they were not willing to simply extend decades-old payment models to the rapidly changing new media arena.

Instead, they plan to press for a study re-examining the piecemeal way writers, actors and directors are paid every time a TV program or film is shown.

"It's not business as usual anymore," Barry Meyer, chairman and chief executive of Warner Bros. said at a rare pre-negotiations press conference by studio executives. Warner Bros. is owned by media conglomerate Time Warner Inc.

The guild contract expires Oct. 31. Other pacts with actors and directors expire next June.

"I think we're headed for about three strikes in a row" if the unions opt to negotiate payment schedules now rather than defer talks until a study is complete, said Nicholas Counter, chief negotiator for the studios.

The situation could affect the upcoming fall TV schedule and next year's blockbuster movies, even though studios have been stockpiling scripts in anticipation of a strike and some TV shows have accelerated production.

TV viewers could also start seeing more unscripted reality and game shows on the airwaves.

"CBS is not going to go blank," CBS Corp. President and CEO Leslie Moonves said.

Writers have already said a study is not necessary. They want a percentage of revenue each time a TV show or movie is sold on Apple Inc.'s iTunes store or streamed with advertising on a network's Web site.

"We feel a study results in more of our digital stuff getting out there and we're not getting compensated," chief guild negotiator John Bowman said. "It's crazy rhetoric. It pretends this isn't an enormously profitable place for them to be doing business."

Studios claim observers have exaggerated profits from digital distribution of content.

Executives have long claimed that movies and TV shows no longer make money in first runs, and revenue from DVDs, video on demand and other sources is needed just to break even.

Executives presented charts Wednesday showing that in 2006, the major film studios on average failed to recoup their investments from worldwide box office receipts.

Studios produced 203 films at an average cost of $140.3 million (102 million EUR), including marketing and advertising costs. Revenue from domestic and foreign ticket sales only returned 45 percent of that investment, executives said.

They said actors, writers and directors should not expect a slice of DVD or other revenue until studios recoup their investments.

Profits from digital distribution are even more uncertain, executives said.

"These businesses are so new, we don't know if they are sustainable," Anne Sweeney, president of Walt Disney Co.-owned ABC Television Group said.

Existing payment methods in place for decades give talent a percentage of revenue each time a TV show or film is reused in a new media window.

A writer, for instance, gets paid a set fee for a screenplay, then receives additional payments, or residuals, when the film is sold as a DVD or shown on television.

Writers and actors want that formula extended to digital platforms as well, something the studios say is not warranted.

"It is outdated to talk about schedules that require payment for reuse of programming," Meyer said. "It's all one market now."

Writers have said they will insist on applying the residuals formula to new media.

"It's a system that has been working quite well," Bowman said. "When there is an experience the consumer pays money for, we get paid because we provided that."

Executives expect it will be tough to persuade writers to consider scrapping residuals for a new payment system.

"I don't suggest for a minute this is something that is going to go down easy with the writers, directors and actors," Meyer said. "That may be the understatement of the year."

But the executives insisted they will not agree to a new pact that constrains them from experimenting freely with emerging technology.

"You shouldn't underestimate our resolve to keep our business healthy," Sweeney said.