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The Shutdown Has Had A Lot Riding On It…for Everyone

Content Insider #824 – New Hollywood

By Andy Marken – andy@markencom.com

“The Beast is a sentient creature who represents the highest form of humans’ evolution. He believes the time of ordinary humanity is over. I hope this makes you feel calm. You will be in the presence of something greater.” Dennis, “Split,” Universal Pictures, 2017

Right about now, both sides of the first joint WGA/SAG-AFTRA (writers/actors) walkout in more than 60 years and their adversaries, AMPTP (studios, networks, streamers), have finally found one thing … this would be a great business if it weren’t for the people.

Even the simplest of issues – pay increases and streaming residuals – have “yes but” and “how about” problems that can be worked out so that neither side is happy with it but that’s what makes a good agreement.

And when you have about 20,000 writers and 160,000 entertainment professionals involved, there will be a lot of questions and issues that go unanswered or aren’t addressed.

The biggest challenge is that the two unions are different from most unions.

Consider the UAW, the UPS drivers union, hotel staff unions or teachers unions.  The pay, challenges, pain points are similar if you’ve been a member for one year, 10 years or …

With the WGA/SAG-AFTRA, there are perhaps 10 percent of these folks (A-listers) that AMPTP members actively solicit for specific projects, and they usually negotiate their specific contracts.  

Most are folks you may kinda recognize from something you don’t really recall, someone who has been diligently/effectively doing their job for years or newer members who want to perfect/refine their expertise and work in a business they like/love.

On the other side of the table are the 350+ AMPTP members, many of whom took a “much needed” break in mid-July to take their private planes to the annual Allen & Co Sun Valley Conference where the who’s who of the financial, media, technology world get together to unwind, network, golf and occasionally do deals.  

Deal House – Every mid-July, Allen & Co turns the Sun Valley Lodge into a cool respite for studio, tech and other executives to get together and talk about their problems/issues and perhaps along the way make a deal or two but that’s later.  Right then, it’s about escaping with your peers.  

Better known as the “Summer Camp for Billionaires,” they needed the break because many – WBD’s Zaslav, Netflix’ Sarandos, Amazon’s Jassey, Disney’s Iger, Meta’s Zuckerberg, Google’s  Pichai and others – have had a tough year paring staffs (firings), tearing up/reassembling their organizations and figuring out how they can use the new tech toy – unmonitored AI – to their advantage.

Studio and tech executives have been under hellacious pressure from Wall Street analysts and stockholders to make positive changes that will improve their organization’s free cash flow during a period of unprecedented industry transformation as the industry and world changes all around them and under their feet.

Disney’s overhaul (eliminating 7,000+ positions) produced cost savings of $5.5B.  WBD’s “pockets of improvement” produced similar staffing reductions and savings.  Paramount reduced its staffing by 25 percent.  Other networks/studios made similar improvements.

At the Allen retreat, Bob Iger – with a two-year contract extension in his pocket – said that his team had identified certain “no-growth businesses” and was focusing on repairing/improving the company’s creative engines.   

The entertainment and media industry has changed significantly since 2019 and the usual guidelines and checkpoints that studios/networks previously used don’t exist today.

They’re working/dealing in new/unfamiliar territories.  

John Landgraf’s (FX Networks’ CEO) Peak TV which he coined to describe broadcast, cable pay TV continues to shrivel as original scripted programming gets replaced by unscripted game, reality and non-fiction shows that are easier/cheaper to produce for the rapidly dwindling day/date viewer base.

At the same time, network’s/studio’s rapid leap into the ultra-promising direct-to-consumer streaming content environment that Netflix and Amazon pioneered (along with YouTube, Hulu) back in 2007 hasn’t gone as smoothly – or as rapidly – as Wall Street analysts projected.

Who knew the fickle subscribers wanted/expected a steady stream of new, unique scripted movies/shows to watch when, where and how they wanted or would resort to what MediaPost’s Wayne Freeman called Peak Churn – the rapid/continuous hopscotch of streaming subscription?

Buddy Talk – With a new 2-year contract extension, Disney’s CEO Bob Iger (l) and Apple’s CEO Tim Cook (center) enjoy a quiet discussion with Eddy Cue, Apple’s SVP of Internet & services, about who knows what.  

As a result, the “new” streamers have been consistently bleeding 100s of millions of dollars which has only been exacerbated by the joint strike for higher wages, benefits and more that can only impact their organizations’ bottom line, further endangering their $10-50 million salaries.

Initial pain points such as increased pay, protections around the audition process, writing room size, pre-/post production TV series writing compensation, more favorable terms for pension and health contributions, on-camera rate for dancers’ rehearsal days and redefinition/increases in residuals have been major issues for a large portion of the 180,000 individuals who want to make a decent living in the largely freelance industry.  

Granted, it’s a well-defined freelance industry but they still move from one movie/show project to another, always working to keep their work calendar filled.

During the early stages of the work stoppage, the largely US-based networks and studios have been able to do a little housecleaning by cutting costs/projects in a number of areas and realigning/streamlining a number of programs and activities to produce major saving. 

Physical and fiscal issues and details will be slowly – sometimes painfully – resolved to the point where neither side is 100 percent satisfied but each can show they were capable/willing to negotiate in good faith.

But it has taken the one percenters – Tom Cruise, Christopher Nolan and other A-list actors/producers – to maximize focus and attention on the menacing ghost in the corner – generative AI.

Star power even influences studio/network heads.

Cruise, the most outspoken supporter of movie theaters, expressed his disappointment in actors not being able to promote their films in theaters during the strike.

Awkward Discussion – Tom Cruise would much prefer to be globe hopping promoting theater attendance for the latest chapter of MI instead of talking about holding back the encroachment of AI on writers/actors careers but he needed a little help with his script.

While his message probably didn’t go as planned (it felt a little self-serving as Mission: Impossible – Dead Reckoning), he knows star power dramatically increases movie house attendance.

Ironically, the film deals with a rogue form of AI determined to manipulate/manage … everything.

But he also voiced strong support for the physical and financial issues stunt performers, coordinators and background actors need to have addressed and also asked for more robust guardrails on the use of generative AI in entertainment.

He emphasized the importance of ensuring that performers give consent and are appropriately compensated when their performances are ingested/used by the technology.

Nolan, fresh from spotlighting another technological advance/disaster with Oppenheimer, emphasized the “terrifying possibility” without accountability in the use of artificial intelligence.  

Family Ties – Acclaimed director Christopher Nolan wants his latest project to be a standout at the theaters but also wants to added protection for the entertainment industry’s creative talent like his WGA writer/brother Jonathan.  

“When I talk to the leading researchers in the field of AI, they literally refer to this right now as their Oppenheimer moment,” Nolan said during a July interview. “They’re looking to his story to say what are the responsibilities for scientists developing new technologies that may have unintended consequences.”

We admit that we’re one of those people who walk cautiously toward the next big thing – like bitcoin – but the potential for good/evil makes us perhaps overly cautious.

However, we don’t believe a stand-alone brain that was “born” and lives as a brain knows a f**in thing about feelings, empathy, love/rejection, real happiness/sadness, or can really tell the difference between truth, BS or an outright lie.

That’s not something a writer, actor, thing can really do that will resonate with an audience or gawd forbid an awards judge.

But then too, maybe we’ve seen too many movies and most of them don’t end good.

Studio executives have privately said they made a mistake by ignoring writers and actors demands for AI guardrails.

Even AI’s biggest proponents have sounded the alarm as to how dangerous and world-shifting the technologies they’re developing could be.

In the film/show industry, it can be used to negatively affect the incomes of writers, actors (at all levels) and support/production personnel.

AI such as ChatGPT doesn’t really create articles, story lines or scripts.  It merely searches/scrapes libraries of scripts and associated materials (IP) to generate a new storyline/script, imitating its training material.  

The tantalizing pitch to studio/network executives is that writers will never be limited by their imagination.

Intellectual, emotional rewrite could mean fewer but more advanced/seasoned writers doing their work better and faster with junior writers trained in the nuances of the technical and creative processes.

The second major use of AI seems simple enough–scanning and using the faces and images of background actors, the volume of lower-paid actors who fill the screen that the audience sees/doesn’t see.

The Unseen – A major stumbling block in the SAG-AFTRA/AMPTP negotiations is the proposal of digital capture and AI use of background actors anytime/anywhere in a film with little/no added payment.  It would “only” affect the income of 20-50,000 plus actors.  

The coliseum in the first Gladiator movie or the landing scenes in Dunkirk films and budgets were filled with hundreds of the lower-paid actors who would be paid for the day’s work and would be scanned with the residual images to become the property of the studio/network and used later in the project without residual compensation.  

Taken to the next level, the images (and AI-generated voices) could be extended to more of the project’s actors but the higher paid professionals probably have financial safeguards built into their contracts.  

Right now the potential for using an actor’s image/voice holds a lot of promise but also presents a lot of  issues and problems that production company executives and creative professionals need to address.

It’s going to be a work-in-progress for a long time to come.

The AI issues can/will have ramifications across the industry that can’t even be imagined or envisioned now which is why both WGA and SAG-AFTRA are cautiously concerned.

Can’t Control – Generative AI could be a lot like mercury in the film/show industry … difficult to define, difficult to control and perhaps even deadly to the touch.  

While AI is a lot like Mercury, visible but constantly changing, residuals are more easily defined as the industry so rapidly transitioned from theater to traditional TV to streaming.   

Striking a more union/talent friendly tone during his recent earnings call, Netflix’ co-CEO Ted Sarandos said there were a handful of complicated issues that need to be equitably resolved so the industry can move forward.

Prior to the latest round of negotiations, the company had previously signed agreements with SAG-AFTRA covering scripted, dramatic episodic and feature productions.  

One of the few streamers that isn’t bleeding cash, Netflix has maintained a steady/growing global subscriber base by timing their production starts, free cash flow (funds for developing new/future projects) and carefully managing/controlling the introduction/removal of films/shows to maintain optimum viewership/subscriber retention.  

Low residual payments could have been quickly resolved if WGA and SAG-AFTA had accepted an agreement AMPTP made with DGA for a 21percent increase over a weekend.

To accelerate and maintain growth, Netflix is driven by a steady stream of new films/series while closely monitoring viewership/engagement in minutes and other criteria that aren’t available to or from measurement services such as Nielsen … or other studios/networks. 

Measurement Standards – Netflix’s Ted Sarandos has encouraged the fledgling film/show streamers to take a hint from the company’s 16 years of experience in streaming to develop industry-wide viewership standards and all become more transparent in their reporting.  

Transparency of analytics such as these are important to the unions to monitor and project writer/actor potential residuals but understanding and analyzing is extremely difficult and far from universally understood.

The other issue is the lack of certainty on how long a project is going to run. There is no common understanding if a project is going to have a six, eight or 10 week series or if here’s a likelihood of future episodes and/or
spin-offs/franchise extensions being considered.

The streaming industry has all but eliminated the fall TV season with shows added and dropped/replaced virtually all of the time.  

Acknowledging the confusion of the new content creation/delivery arena, Sarandos used his earnings report to talk to the WGA/SAG-AFTRA members and his AMPTP streaming beginners, saying they need to develop better standards and understanding of the data development/analysis process and what it says/means to help talent and the broader industry.

The pros vs. network/studio/streamer stand-off is different from the 1960 dual strike, the SAG strike in 1980 and the 2007 writers strike in 2007.   

Technology is now an integral part of the entertainment industry, and it affects/influences the total creative content industry … including cash flow.  

Of course, there is also the issue of 350+ cash collectors vs. 180,000 cash/content creators.

After all, content is still king and for streamers to capture/retain subscribers, they need a steady flow of new movies/shows which requires a team of experienced, dedicated creative professionals to deliver regardless of what code writers say.

When it comes to the details of the agreements, we can only repeat what Casey Cooke in Split said, “I’ll let you know when I hear something that makes sense. We don’t even know what this is yet.”

When the agreements are finally signed and both sides celebrate their win, we can assure you of one indisputable fact … viewing content will cost more.  

Oh, and for clarity, we wrote this entire Insider without a ghostly assistant.  It was difficult but was fun!

Andy Markenandy@markencom.com – is an author of more than 800 articles on management, marketing, communications, industry trends in media & entertainment, consumer electronics, software, and applications. An internationally recognized marketing/communications consultant with a broad range of technical and industry expertise especially in storage, storage management and film/video production fields; he has an extended range of relationships with business, industry trade press, online media, and industry analysts/consultants.

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