Writer's Guild Going on Strike

[ahalpert]

I'd like to understand how revenue is shared between shows on a streaming channel. They make a bunch of shows and they have a number of subscribers. So do they simply give a percentage of the revenue and assign it to a show based on how many views it has? What would the definition be of a 'profitable' vs a non-profitable' show be? Not that it matters if we are talking gross. But it certainly would matter to the producers who would have to give 2% to SAG.

I think it's a very thorny subject. From the article I posted before:

Parrot Analytics uses Google searches, social media mentions, and other data sources to measure demand for each show. The metric is not trying to determine viewership, but rather the impact of each show on a company’s revenue. To estimate that, it uses quarterly earnings data and apportions revenue — including subscriptions and ads — to each show on the platform.

Here's the Parrot Analytics website: https://www.parrotanalytics.com/products/content-valuation

If the proposal is accepted, I'm sure that furious negotiations over the convent valuation formula would ensue.

 

[ahalpert]

The problem I see with this model isn't really with that working, it's assuming that everyone creative doesn't also have the kind of one-percenter mentality that this is supposed to circumvent. Having never made a dime of back end from the projects that I had agreements in place stretching back several dozen years, I'm apprehensive that the "everyone shares in the profits, down to the last PA" model wouldn't get co-opted by greed.

Probably. I have no idea. But I think it's sort of like "good fences make good neighbors" -- "good contracts make good collaborators." Better get the lawyers to find a foolproof formula for this type of contract. Maybe it comes back to talking about gross revenue rather than profits which can be manipulated via accounting.

 

[Paul F]

That's a problem with a union/management model. It is adversarial by nature; us vs them on both sides. Referring back to the tech startup model, there is no adversarial relationship. The founders set up a percentage of stock options to give to the employees and the employees are happy to get them. Oddly enough, in that model, most times, there is no payout as most startups fail. So the long hours and lost weekends are for nought. So the employees share in the profits, but also take the risk if there is a loss.

Would it be fair for SAG to participate in gross profits if there is no net profit? It hardly seems fair for the producers to take an extra 2% loss. If one participates in the profits shouldn't one also bear the risk?

 

[cpreston]

I don't think it's likely that we'll see an independent production pipeline rise to rival the corporate behemoths. But crazier things have happened. Revolutions are often sparked by unbearable circumstances. If it becomes impossible for actors to make a living as corporate servants, it becomes more attractive to embrace a quasi-socialist model of production.

Looking at the demands of SAG/AFTRA and the writers, I don't see much pointing in the way of requests for a "quasi-socialist model of production". My point is that the quasi socialist model of production is the basis of the no budget film scene and the unions are specifically fighting against that model. The unions want want wages protected from the general market forces of new technology and independent contracts. To have union members waxing poetic about how great it would be to have profit sharing and shared risk just shows that they live in a bubble with no idea what is occurring outside of the studio system.

 

[Paul F]

2022:
Netflix revenue - $31.6B
global box office - $26B

Disney+ is now making over $8B/yr revenue. Plus other streamers. So, it looks to me like scripted narrative revenue for combined theatrical/streaming is stable or growing. Cable/broadcast TV is contracting but they show more than just scripted narrative.

Revenue is not as meaningful as net income. It doesn't matter how much money a company brings in if they are losing money. Netflix is..... wow, they are rolling in it. Disney, not so much.

Disney
Revenue 74B
Net Income 3B
Profit 4%

Netflix
Revenue 29B
Net Income 5B
Profit 17%

 

[Doug Bee]

I'd like to understand how revenue is shared between shows on a streaming channel. They make a bunch of shows and they have a number of subscribers. So do they simply give a percentage of the revenue and assign it to a show based on how many views it has? What would the definition be of a 'profitable' vs a non-profitable' show be? Not that it matters if we are talking gross. But it certainly would matter to the producers who would have to give 2% to SAG.

That is the exact million dollar question.

Right now they don not revenue share really. They do a full buy out.

The streamers have created the problem. Instead of back end deals tied to box office like films used to do, or residuals based on ratings (a flawed system, but one everyone agreed to) the streamers, mostly Netflix started a different BUYOUT model. Pay a huge upfront fee and buyout the back end. High profile actors, directors and show runners / writers love this model. They get paid a LOT before they have even done the job. It used to be the Studio would front the cost of production with a modest salary for talent and then above the line profit shared based on the success. Sure some had better percentage deals than others but it was basically work for points, plus a basic smaller fee, and hope you made something that was a smash and then you made a lot of money.

I was on an action film that was going to shoot in November before the strike for a streamer. Oscar winning talent. 80 million dollar budget. The lead actor was 20 million and he had a 6 million dollar perk package(his chef and personal trainer and private jet). The second lead is almost the same. The producer told me there was 10 million for VFX as it was a VFX heavy film. The producer and directors fees meant it was up to 75 million. Leaving 5 million and rebate to make the movie. Most states do something like a 30 per cent rebate. Meaning they are using the state based incentive to fund the actual production.

Netflix et al created this problem.

And now the problem is that you no longer have an incentivised way of making something GOOD. I mean good in terms of audience engagement. Not critical success. The numbers are different for streamers too. The do not measure the same and they do not share.

And if you are Apple or Amazon then you do not really care what the numbers are anyway because it is about creating an eco system. They just want you to stay in the OS that you are in and the more ways you subscribe to services the more likely you are to upgrade to the same OS platform every two years. They think of it as a loss leader to make sure you keep buying iPhones.

*EDIT

And a lot of streamers just buy a show from a studio. So Warner brothers sell a show to Apple for 100 million. They make it for 50 million. The show went over for a few reasons beyond anyones control and it cost closer to 60 million to make. WB sent execs to us to try and screw down the out of control costs. But they still made 40 million for not a lot effort on their own behalf. Based on actual numbers for a show I worked on. No more revenue sharing after that.

 

[Doug Bee]

Revenue is not as meaningful as net income. It doesn't matter how much money a company brings in if they are losing money. Netflix is..... wow, they are rolling in it. Disney, not so much.

Disney
Revenue 74B
Net Income 3B
Profit 4%

Netflix
Revenue 29B
Net Income 5B
Profit 17%

And they did say in their guidance call, that the net income of 5B was helped by NOT having to pay for content because of the strike to the tune of 1.5 billion so really the more realistic number is 3.5B

 

[ahalpert]

Revenue is relevant to the original question of is tiktok killing scripted dramas. Revenue is a measure of customer base and whether it's growing or shrinking. Healthy revenue suggests that demand is still there. That's why I brought it up.

If we want to discuss profitability, we should compare the profit margin of Netflix to the box office, where you have to factor in production and marketing costs as well as write-offs on money-losing pictures

2 other things to keep in mind about Netflix. I'd have to double check, but I think they tend to pay more money up front and less on the back end, which would reduce their profit now and increase it later. (*EDIT - ah, I just read Doug Bee's post above where he explains this in detail.) Also, their whole strategy seems like dumping tons of money into production as a sort of loss leader. Drive the competition out of business, and then exploit their market power to goose profits. Indeed, Disney and Paramount stock is way down since the strikes started and Netflix is way up.

 

[ahalpert]

That's a problem with a union/management model. It is adversarial by nature; us vs them on both sides. Referring back to the tech startup model, there is no adversarial relationship.

I'm pretty sure that the producers would be trying to screw the actors and crew even if they didn't have a union. And literally every time I read about a wave of lay-offs in the tech world, the employees get screwed out of benefits and bonuses their companies owed them and they're always quoted saying, "gee, we ought to have a union so they couldn't screw us like this." Every time.

Would it be fair for SAG to participate in gross profits if there is no net profit? It hardly seems fair for the producers to take an extra 2% loss. If one participates in the profits shouldn't one also bear the risk?

is it fair for the producers to use accounting tricks to disappear the profits the actors would see? They can't be trusted, but the revenues have to be reported publicly I believe.

Also, it's not an extra 2% loss. $60M movie makes only $30M. Thats $600k for the actors. Adds 1% to total budget. Less if the movie makes less. The risk for the actors is they don't get much of a payout for a flop once it's shared between them. And presumably if they get revenue share, their upfront pay may be negotiated down which leaves them more exposed to risk.

 

[ahalpert]

Looking at the demands of SAG/AFTRA and the writers, I don't see much pointing in the way of requests for a "quasi-socialist model of production". My point is that the quasi socialist model of production is the basis of the no budget film scene and the unions are specifically fighting against that model. The unions want want wages protected from the general market forces of new technology and independent contracts. To have union members waxing poetic about how great it would be to have profit sharing and shared risk just shows that they live in a bubble with no idea what is occurring outside of the studio system.

What Ruffalo is talking about -- making indies where everyone shares in the back-end.

New technology and independent contracts... I don't think these innovations are as disruptive to the union model as you suggest. Netflix alone has revenues rivaling the global box office now and 10 years ago. The problem with Netflix is that their financials are opaque and they have tremendous market power. Having a union is important to counterbalance that so they can't just divide and conquer.

Big tech tends towards concentration of wealth and power. But that's not new. That's why we have antitrust laws. Because ultimately monopolies or any companies with tremendous market influence are detrimental to the functioning of a free market.

 

[Paul F]

.

I'm pretty sure that the producers would be trying to screw the actors and crew even if they didn't have a union. And literally every time I read about a wave of lay-offs in the tech world, the employees get screwed out of benefits and bonuses their companies owed them and they're always quoted saying, "gee, we ought to have a union so they couldn't screw us like this." Every time.

Here comes a long rant.

If someone gets layed off they lose their benefits and bonuses. What is the injustice of that? That's what happens when a person gets layed off. It's understood when a person takes the job. There's no surprise in that. I always had at least 6 months to 1 year's worth of cash on hand for that eventuality. It never happened to me. I was in tech my whole working life. I was closely involved in the biggest start-up boom (the dot-com boom). We all made our choices to work here or there. To take risks or not take risks. That's part of the fun of it all. I think I understand it pretty well. I've told this story before, but just to let you know how well I understand the tech industry and the startup environment, I'll repeat it.

Two guys I worked with started a company. Now, it takes a lot of nerve and fortitude to walk away from a job, sit in an empty office building with no employees, no desks, no copy machines, no IT, ..... nothing..... and figure out all the steps it takes to get an office running, staffed, and most of all, funded. A tiny fraction of the world can pull that off. Then an even smaller fraction of the world can make it a success. These two guys offered me a job. They offered me to be the head of operations (manufacturing). I would have had a significant piece of the pie. It was a tremendous opportunity and a big risk. I'm not a risk taker. So I stayed where I was. They did pretty well. They sold the company just two years later for $6.9 Billion. I can't even guess how much I would have made had I take their offer. Me, the non-risk taker, worked for another 18 years until retirement.

Now, are they evil 1%s? Did they tromp on the little guy when they had to lay off people? They were nobodys full of brass and entrepreneurship. They were risk takers that won. How does that make them the bad guy because they became filthy rich? They are two of the nicest guys you will ever meet. One of them to this day still does his own plumbing and DIY around the house. He still pushes the cart in the grocery store and he has funded independent films (Standing in the Shadows of Motown) and local music venues. Oh sure, there are evil greedy rich people. They are the ones that make the headlines. It's the quiet, charitable, kind ones that we never hear of because they don't make for clicks. There are evil people at every level and I suspect the percentage of bad persons are equal among all levels of income. Is George Lucas evil? He's a billionaire. You know how evil he was? I'll tell you. He had my coffee cup taken from my desk, washed, and put away in the kitchen cupboard ready for me each morning. He had top artworks in our meeting rooms. He gave me a turkey every Thanksgiving and a really nice package of Christmas gifts every year. He set up an educational foundation. He built an art museum. He built the Letterman center for ILM. He made an annual yearbook for us all as a keepsake. He had us all go to a big Christmas party and company picnic. He held charity events for employees in need. He let me make fun of his architecture in from of the whole company during the annual meeting. He adopted children who are a very dear part of his life. Oh, what an evil billionaire he was.

My point is that there is some need by some people to think the 1%s are awful people. It's a ridiculous notion. We can all sight examples of evil 1%s, but we can also sight and equal number of bad people at any financial level.

In all the startups and tech companies I know or worked for, no one ever got ripped off in any way. Oh sure, many a tear was shed when people were layed off. Many a career was broken. There are tremendous ups and downs in the 40 or so years we all work. I'd say I was in fear of my job at least 30% of my 40 years of work. That's how it goes. You should know that better than anyone being a freelancer. Now if you think losing benefits and bonuses because you're layed off is some sort of ripoff, well, you view the world quite differently than me.

But for the decision I made to stay where I was, would I have become an evil rich person just because I took a job offered to me? See, it makes no sense.

This could have been me but for my lack of risk-taking. Them's the breaks. https://www.wsj.com/articles/SB935625277526496066

 

[ahalpert]

Here comes a long rant.

If someone gets layed off they lose their benefits and bonuses. What is the injustice of that? That's what happens when a person gets layed off. ]

To clarify, I'm speaking specifically about benefits that have already been earned but not claimed, such as unused paid vacation days. So, let's say you work there for 5 years and never took a vacation. They fire you and now those vacation days evaporate. It's debatable whether or not they still owe them to you, but that's the point of having a union -- a collective-bargaining entity that can secure a better deal for the workers than they can attain individually. Everything's great when your relationship with the company is good and you don't have to pay union dues, but when they want to do you dirty and no longer care how you feel about them then you're on your own. And these are not start-ups, these are blue-chip corporations, some of the wealthiest in the world.

I don't think that rich people are NECESSARILY evil, BUT:

1) Scruples can get in the way of making money so there is a higher probability that people who have more money will have fewer scruples. It's not a foregone conclusion, but controlling for other variables (like work ethic or ingenuity), you would expect that to be true.

2) I see that unscrupulousness on display constantly. Elon Musk buys Twitter and instantly stops paying its bills, forcing his creditors to sue him. Trump was infamous for doing the same thing. These men have no honor. I would never stiff a contractor or renegotiate a contract after the fact.

Bezos bought Whole Foods and immediately terminated health benefits for the employees. They were maybe the only grocer offering them to part-time employees, but it was very useful to the people who needed it. Some people asked why a man so rich would need to realize those savings. But that's the mentality that made him rich in the first place. That's why his warehouse workers don't have time to pee and why they're made to keep working around the corpse of a coworker if someone drops dead on the job. (I'm sure that doesn't happen often, but it has happened just like that.)

I read an article about how Warren Buffett, self-styled friendly billionaire, used his power utility monopoly in a Western state to prevent renewables there from entering the market. (Sorry, the details are fuzzy for me.)

I've never read anything bad about Lucas. But just because he was nice to YOU doesn't mean he or anyone else is behaving well towards the general public or their faceless employees.

3) Finally, the movement to tax the rich at equal or higher rates as the poor (or for movie employees to earn living wages) isn't really rooted in antipathy for the rich but in financial calculations, standards of living, and a general sense of fairness. It's not fundamentally punitive.

 

[drboffa]

We can all sight examples of evil 1%s, but we can also sight and equal number of bad people at any financial level.

Why the **** would we want a society where 99% of people are subject to the whims of the *potential* benevolence of 1% of them?

 

[Paul F]

I've never read anything bad about Lucas. But just because he was nice to YOU doesn't mean he or anyone else is behaving well towards the general public or their faceless employees.
.

I'm trying to figure out what this means Abe. "I've never read anything bad about Lucas. BUT...." So if you do read something bad about three rich people as you noted above, that proves a point. But if you don't read ANYTHING bad about a rich person, that also proves the same point. Note that we only read about the bad guys. That's my point. No one is going to write an article about all the philanthropic, kind, gentle, thoughtful rich people. No one cares. After what I said about the two mega-millionaires I know and my story about Mr. Lucas; his charity, his dedication to education, his family life, his treatment of his employees, you still are looking for the bad apple. I was a nobody at Lucasfilm. I wasn't treated any better or worse than anyone else.

So at what point in a person's business life do they become evil? Is a mom and pop ok? How big does a business have to be before it is evil? What is the tipping point? When do employees become faceless? I've never understood this thing about small ok.... but don't get too big or you are evil. That's what I was trying to say about me. Had I become a mega-millionaire at Cerent, would I have automatically become an evil 1%er? Would you hate me now (well, maybe you already do) or look at me in disgust because I ran the manufacturing department full of faceless employees? It seems so arbitrary.

 

[ahalpert]

I'm trying to figure out what this means Abe. "I've never read anything bad about Lucas. BUT...." So if you do read something bad about three rich people as you noted above, that proves a point. But if you don't read ANYTHING bad about a rich person, that also proves the same point.

I think this is a bit of a straw man argument. You seemed to rebut me by saying that hey, not all billionaires are bad. But i don't think that all billionaires are bad and I don't think I ever said that. I think they have a lot of power and it's important to counterbalance their influence with strong public institutions. The current debate about Hollywood pay is a bit more specific and really just about bean-counting.

I have no reason to believe that Lucas is a bad guy and so i don't think that he is. But:

1. He got rich more as an artist/inventor who successfully retained ownership of some of his IP rather than as a bareknuckled businessman/capitalist.

2. If someone said they met Hitler at a party and he seemed like a nice guy in person, it wouldn't change my assessment of him.

3. If Lucas hires sweatshop or slave labor in the 3rd world to make merchandise, I don't think that's a good thing. But of course, they all do it and I buy it so I'm culpable too.

4. What you said about Lucas directly reminded me, in a triggering way, of my wife's experience in college. She's half-West African which is, i believe, the reason she often received inferior treatment from administrators and professors. (I doubt they were ideologically committed racists. I think it's more accurate to say that status-conscious people will correctly perceive that she is lower on the totem pole and treat her accordingly.) And when she complained about these slights to her white male friends, they would always say, "I like that guy. He's always been nice to me."

Note that we only read about the bad guys. That's my point. No one is going to write an article about all the philanthropic, kind, gentle, thoughtful rich people.

Actually, the overwhelming majority of articles that I read about billionaires are positive, although the favorability of the coverage depends on the partisan affiliations of the newspaper and the billionaire in question.

So at what point in a person's business life do they become evil? Is a mom and pop ok? How big does a business have to be before it is evil? What is the tipping point? When do employees become faceless? I've never understood this thing about small ok.... but don't get too big or you are evil. That's what I was trying to say about me. Had I become a mega-millionaire at Cerent, would I have automatically become an evil 1%er? Would you hate me now (well, maybe you already do) or look at me in disgust because I ran the manufacturing department full of faceless employees? It seems so arbitrary.

Why on earth would I hate you? I like you. I think that businessmen and businesses pursue their self-interest and it becomes necessary for society to restrain them if they are powerful enough to have a net negative impact. I also believe that the winner in a high-stakes no-holds-barred winner-take-all contest usually has no problem breaking rules and violating norms.

A while back, Doug Jensen gave an accounting of how he conducted his business, how he paid people well and on time, and how he supported the career advancement of his underlings. He took personal responsibility for comporting himself honorably and then stood before his peers to defend his record (not that it was under attack).

By the time you're in the s&p 500 and activist investors are forcing you to screw everyone in your path... it's a different ballgame.

 

[Paul F]

By the time you're in the s&p 500 and activist investors are forcing you to screw everyone in your path... it's a different ballgame.

Ok, here's where we meet and have a common understanding. I think that statement would have saved us a few hundred words. Your last post was clarifying and made a lot of sense.

 

[Paul F]

SAG expects a long strike. Nothing is happening right now. There are no talks and each side is waiting for the other side to blink. They are on a 'Call me, and then we will talk' hiatus. The producers have stated that the gross profit revenue sharing is the roadblock for them; it's a 'non-starter'. You can see why. It's a commitment no one can make because no one can share profit if there isn't a profit. So giving away gross-profit points doesn't compute to a producer. But then, we understand the other side as well; there are never any net profits, so that won't work for the actors.

Here's the other thing I think the producers are concerned with. Residuals are a model that works for them. They can share profits as they are made and the profits are clearly there. But if they give away profit points, it opens up a box they don't want to open...... If they give points to SAG then of course, the WGA and DGA are going to say "Where's ours?" and they are off to the races giving away more and more of the pot. That's just not something that works for them. If they give 2 points away to the three unions, hey, suddenly 6 points are gone. And then each union will want another point at every new contract negotiation.

It's an interesting conundrum. Maybe the 2% share is a 'we know we can't get it, but it will make alternatives look a lot better' negotiating point from SAG's side.

 

[Doug Jensen]

The producers have stated that the gross profit revenue sharing is the roadblock for them; it's a 'non-starter'. You can see why. It's a commitment no one can make because no one can share profit if there isn't a profit. So giving away gross-profit points doesn't compute to a producer. But then, we understand the other side as well; there are never any net profits, so that won't work for the actors.

Hey, here's a revolutionary idea: You show up . . . do your job . . . collect a check . . . and move on to the next project. Simple as that.

 

[Tom Roper]

SAG expects a long strike. Nothing is happening right now. There are no talks and each side is waiting for the other side to blink. They are on a 'Call me, and then we will talk' hiatus. The producers have stated that the gross profit revenue sharing is the roadblock for them; it's a 'non-starter'. You can see why. It's a commitment no one can make because no one can share profit if there isn't a profit. So giving away gross-profit points doesn't compute to a producer. But then, we understand the other side as well; there are never any net profits, so that won't work for the actors.

Here's the other thing I think the producers are concerned with. Residuals are a model that works for them. They can share profits as they are made and the profits are clearly there. But if they give away profit points, it opens up a box they don't want to open...... If they give points to SAG then of course, the WGA and DGA are going to say "Where's ours?" and they are off to the races giving away more and more of the pot. That's just not something that works for them. If they give 2 points away to the three unions, hey, suddenly 6 points are gone. And then each union will want another point at every new contract negotiation.

It's an interesting conundrum. Maybe the 2% share is a 'we know we can't get it, but it will make alternatives look a lot better' negotiating point from SAG's side.

If the contract is up and the two sides cannot agree, why don't the producers hire non-union? If it is impossible to staff with non-union workers, and the demands from the union can't be met, the enterprise can't go on and shouldn't go on. I would think the sides could agree to operate under the old contract terms they already had. Why are they unreasonable now if they worked before? One thing obvious to me, gross profit sharing if that is the demand should be a non-starter. The union should be negotiating wages, vacation, time off etc.. If the union workers really feel entitled to profits they should fund their own productions.

 

[drboffa]

I understand there are fundamental differences of opinion here, but somebody's time and labor is the most valuable part of the equation, and—unlike money—these things are finite.

Thus, in my view, it only stands to reason that the people doing the actual work—writers, actors, directors, crew, etc.—are the ones who are most deserving of the profits. This goes for every industry.

Also: does anyone else see any irony in how the industry that railed against media piracy on the grounds of it being theft from workers has been, in truth, stealing from workers the whole time through tricky accounting practices?