Ostensibly, the crucial sticking point is the writers' demands for a bigger share of the burgeoning DVD market. But the larger issue is how to carve up the revenue pie when technology is changing so quickly that it's impossible to predict how big or even what shape that pie will be.
"So much is unknown about where distribution and entertainment is headed," says Roger Goff, principal of Goff Law Corp., an entertainment-law firm in Redondo Beach, Calif. "And everyone bandies about these huge hypothetical profits that nobody wants to be left out of. So it's making the negotiations even harder than usual."
....Producers know they must give the same concessions to the directors' and actors' guilds as the writers, which induces extreme caution in every agreement. The last strike lasted five months and cost the industry some $500 million.
....Over the years, writers have negotiated what many producers call more than a fair share of revenues, largely in the form of residual payments. Current Writers Guild of America (WGA) contracts provide for a sliding payment scale. A typical TV scribe might receive roughly $25,000 for a show that runs twice on a network (once as a first-run episode, then again as a rerun). The scale may go down quickly for subsequent airings in syndication, from $5,000 to $3,500. After it hits a certain point, say $300, that's where it will continue to pay the writer in perpetuity every time an episode airs. Many writers depend on these payments as a financial bridge between jobs.
But as programs move to new venues, such as the Internet and cellphones, nobody knows if revenues will follow.
....The last time writers went on strike, VHS videotape was all the rage. Today's DVD market, which generated more than $24 billion last year, has leveled off, [Jeff] Fishman [ president of JSF Financial] points out. "Who knows how much longer people are going to go into a store and rent a DVD to play at home?"
Writers want to double their residual payment — from about 4 cents to about 8 cents — for every DVD sold. But when tastes change, profits can evaporate, Fishman says. "Studios can't afford to lock themselves into doubling their cut of DVD sales," as the WGA is asking, because there are fixed costs in marketing and stocking DVDs. A formula for payments could hurt them if sales slump.
"Anyone who thinks they can put their arms around either the profits or the structure of the industry to come is just fooling themselves," Fishman adds.