< Strike Three

Transcript

Friday, January 04, 2008

BROOKE GLADSTONE:
This is On the Media. I'm Brooke Gladstone.
BOB GARFIELD:
And I'm Bob Garfield. Certain prognosticators – like me – have dined out for several years now predicting doom for broadcast television – in the indeterminate future. But with the Writers Guild of America striking into a third month, no one is quite certain what the small screen will look like in several months, never mind in the years to come.
[CLIP]
JAY LENO:
A Jew, a Christian and a Muslim walk into a bar.
[LAUGHTER] [DRUM BEAT]
The Jew says to the Muslim – see, I have no idea what they say 'cause there’s a writers' strike. We don't know what they say.
[LAUGHTER] [DRUM BEAT]
[END CLIP]
BOB GARFIELD:
There are, remember, three sides to the story – the Alliance of Motion Picture and Television Producers – in other words, the studios and networks - the writers, and then the advertisers and media buyers who are caught in the middle.

Jack Myers, publisher of The Jack Myers Media Business Report, an industry newsletter, has written that if the strike stretches into the summer, it may, quote, “destroy network television as advertisers know and love it.” He joins me now. Jack, welcome to On the Media.
JACK MYERS:
Thanks, Bob. Good to talk with you.
BOB GARFIELD:
So let's just say this strike extends into June. What happens then?
JACK MYERS:
Well, realistically, Bob, it doesn't even have to go until June. The development season for network television programming is typically, right now the networks would be making their selections from several hundred scripts to determine which they're going to move toward the pilot process.

So if it stretches much beyond the middle of January, we're looking at a very high degree of certainty that the traditional network television upfront period, which is May, June and July, when about 80 percent of the advertising dollars for primetime television in the 2008-2009 season would be spent, won't happen as it has for the last 60 years.
BOB GARFIELD:
In that upfront, as it’s called, the TV networks have these very elaborate and glitzy showcases. The advertising industry comes to take a look and also, at the same time, negotiates the biggest part of its buys for the subsequent year.

If the stakes are as high as you've described, I'm trying to understand why the studios and the producers are so reluctant to settle, because, at least on the face of it, the writers’ demand that they get a piece of the action for digital distribution of their work, you know, seems quite reasonable.
JACK MYERS:
It does seem reasonable and it does seem difficult to understand the networks’ and studios’ position. But it’s a fairly fundamental one. The writers are asking for a percentage of gross revenues, because in Hollywood the concept of net revenues has [BOB LAUGHS] become anathema. There are no net revenues.
BOB GARFIELD:
Because after the accountants get done with the -
JACK MYERS:
[LAUGHS]
BOB GARFIELD:
- income statement, every show, even the biggest hit, runs at a loss.
JACK MYERS:
Exactly. So the writers, correctly, are asking for a percentage of gross. Whatever deal that might get done by the writers will then be demanded by the Screen Actors Guild and by the Directors Guild when their contracts come up in June.

So you can multiply by three, and then, adding in other issues, probably by four. If the networks and studios were to give up 2.5 percent of gross revenues on digital rights, it would ultimately turn into somewhere between 7 ½ and 10 percent.

At this point in time, they don't know what their profits are going to be. They don't know what the incremental distribution costs are going to be. They don't know what their technology costs are going to be. They don't know what their development, sales and marketing costs are going to be, and they don't know what the revenues are going to be from advertisers.
Right now, Internet advertising inventory can be bought very, very cheaply.

So they're concerned about making a commitment to gross revenues when ultimately what they give up to the unions could conceivably be more than their total profitability.
BOB GARFIELD:
Now, I want to ask you for a moment about Sarah Fay, whom we both know, and she is the CEO of the media-buying firm Carat U.S. And she said that the press has not covered the writers’ side of these issues fairly. Do you think she’s right about that?
JACK MYERS:
Yes, I think she’s right. I think there’s a real reluctance on the part of the television writers and several of the business writers, whose lifeblood is dependent on the networks and studios, to be critical of them and be critical of their negotiating posture.

There really hasn't been, in my opinion, fair presentation of the fact that the alliance is simply not coming to the negotiating table. What they're doing is they're falling into their traditional pattern of essentially ignoring you and hoping you'll go away and assuming that the writers will experience more pain than they will, and that the writers won't have the stomach to last until the summer.
BOB GARFIELD:
Jack, thank you so much for joining us.
JACK MYERS:
Bob, it’s great to talk to you.
BOB GARFIELD:
Jack Myers publishes The Jack Myers Media Business Report. He is online at Jackmyers.com.