This week, actors, writers and directors are expected to start receiving residuals they hadn't even dreamed of a just a few months ago. But instead of bringing smiles, the checks might be bringing further tensions to the intersection of technology and Hollywood's top unions.
Without a formal deal with the guilds, networks have been putting their shows on new delivery systems such as iPods.
Nobody is divulging figures yet, but the resids are expected to be minimal, since payment is based on the number of downloads, and the technology is too new to be widespread.
But there's another factor that's worrying the Writers Guild, Directors Guild and Screen Actors Guild. Members will almost certainly be paid at homevid-residual rates -- i.e., one-quarter the rate of pay TV residuals.
Not even the networks are expecting a windfall from these deals yet, but media execs expect digital distribution to be a big part of their businesses in the near future.
Rather than wait to see what develops, the Guilds want to work out advantageous terms now. They're worried that if they wait, they'll get a raw deal akin to the one they agreed to in the early 1980s on homevideo -- before that market took off.
Publicly, the Guilds will only say they're in the process of negotiations. "We've agreed not to negotiate in press," says SAG spokesman Seth Oster.
But some in Hollywood fret that the already-angry leaders of the WGA and SAG may use this as another rallying cry -- along with such hot-button topics as product placement and perennial concerns like health benefits -- for a push to strike when contracts run out in 2007 and 2008.
The first batch of residuals checks are expected around March 1 in Guild offices. They come from Disney, the first conglom to start selling TV shows via Apple's iTunes Music Store, whose customers can download "Desperate Housewives," "Lost" and other TV shows.
NBC U, Showtime, Comedy Central and others have since signed on with iTunes. None of them has yet indicated the rates they will pay on resids.
Other offerings -- including Google's video store and Starz' Internet subscription movie service Vongo -- are still nascent, while TV and movies on cell phones aren't yet a reality in the U.S.
Guilds require that payment be made within 60 days of the end of the quarter in which the net received a licensing fee -- meaning Disney's rates will be known this week.
The lack of a formal pact with the guilds hasn't stopped the nets from signing a plethora of new content deals as they scramble to find new ways to monetize their programming investment.
The guilds haven't been able to move quickly enough to negotiate specific agreements on the Internet, multimedia cell phones and videogames.
"The delivery systems are changing on a day-to-day basis," says entertainment biz attorney Jay Cooper, head of entertainment practice at Greenberg Traurig in Los Angeles. "If the guilds are confused, so is everyone else."
Of course, digital distribution deals are still small potatoes compared to the behemoth film and TV industries.
Apple has sold about 15 million pieces of video content from its iTunes Music Store. Generously assuming that more than 12 million were TV shows -- as opposed to musicvideos or animated shorts -- that's just $25 million in gross revenue, or less than Fox makes in two "American Idol" commercial breaks.
Networks have contended that such newfangled video-on-demand qualifies as home entertainment rather than pay TV. That's the rate they already receive for Internet film rental services Movielink and CinemaNow.
In the case of the iPod downloads, the four major showbiz labor unions (SAG, WGA, DGA and AFTRA) demanded an answer on Oct. 12. More than four months later, they're still without an official response.
"We don't know the rate at which we'll be compensated," says WGA West president Patric Verrone. "If it's the lesser formula, we would have to go into arbitration and organizing."
But going those routes is a time-consuming strategy at best, and one unlikely to yield any specific agreements this year.
What's most likely is that the issue of residuals for downloads would likely be part of the WGA's negotiations next year for its contract, which expires in October 2007. SAG, AFTRA and the DGA would likely start bargaining in late 2007 or early 2008 in the face of a July 2008 expiration.
Nets and production companies appear to have outmaneuvered SAG and AFTRA during casting for the current pilot season. Their newest versions of so-called test-option agreements signed by actors being auditioned for pilots include provisions for rights to material produced for new digital media.
Agents are perturbed over the new test-option language, as there's little time for reps to negotiate before actors are scheduled to read.
Concerns about the new deals -- coupled with the absence of any agreements from the Guilds -- were strong enough that the Assn. of Talent Agents, which reps Hollywood's major tenpercenteries, sent out a Feb. 14 memo warning members that the new agreements should be treated as not containing precedent.
"This exploding area of new delivery systems presents both challenges and opportunities," the ATA wrote.
SAG's Oster is far more explicit about how the guild views the new language in test-option agreements.
"We are incredibly concerned about our members being forced to relinquish their rights," he asserts. "We'd like to see that stopped immediately."
The WGA attempted to clarify at its 2004 negotiations on its basic contract exactly what its members would receive from downloads via the Internet. But all it got was an agreement from studios and nets to discuss how the 1.2% payout for writers in Internet-download sales would apply to download rentals..
The DGA -- perceived as the least likely of the guilds to stage a strike -- is playing it typically close to the vest.
"We are closely monitoring new media developments and are participating in ongoing discussions regarding the production and distribution of content through emerging platforms," the guild says in a statement. "Whatever the platform, we will see that our members are covered by our agreements, properly compensated for the exploitation of their work and that their creative rights are protected."
"In a practical business sense, no one's going to say, 'We have to do this for the guilds' if they don't have to," Cooper says. "So the sooner the guilds can make deals, the better off they'll be."
Contact Dave McNary at
dave.mcnary@variety.com