Frame Game

Hollywood Squares Off 

When labor and management gear up to negotiate a new contract, everyone’s an actor. Union bosses bemoan the suffering of exploited workers. Corporate chieftains plead poverty and prophesy devastation at the hands of greedy strikers. But in this week’s labor-management drama, the acting is distinctly professional. The Writers Guild of America is taking on the Alliance of Motion Picture and Television Producers over how well Hollywood writers should be paid and treated. It’s often said that Hollywood is unlike any other part of the country. But the debate between the writers and producers is easier to understand once you recognize the parallels to issues beyond the studio gates.

1. Fairness vs. freedom. As in most economic debates, one side of the Hollywood battle (the writers) demands fairness, while the other (the producers) demands freedom. And as in most economic debates, each side is hypocritical. The WGA demands higher minimum payments to all writers. The AMPTP downplays the importance of minimum payments, arguing that reward should be contingent on risk and that individual writers can and do negotiate up from the minimum. The writers look backward, arguing that because the industry has made a lot of money in recent years, it should share more with its writers. The producers look forward, arguing that because the industry faces new perils, it can’t afford to commit more money to the people who draft scripts.

In truth, both sides want reward without risk. The writers want employee-style security (a higher guaranteed minimum payment) but also entrepreneur-style freedom (a bigger cut of the profits). The producers, while pretending to absorb all of the financial risk, try to pass off that risk to the writers. The writers demand higher “residual” payments, i.e., a bigger cut of the fees producers get for the reuse of scripted productions. The writers portray these payments as a kind of unemployment insurance, allowing poor scribes to make ends meet when fresh work is scarce. But residuals, like all percentage-based compensation, offer the unlimited upside more commonly associated with investment, and they have to be paid even if the production ends up in the red. The producers, on the other hand, want to carve out new exemptions to the residual payment system on the grounds that future profits are in doubt. They’re happy to absorb the consequences if the risk pays off, but not if it doesn’t.

2. Professional sports. Blue-collar strikers get public sympathy because they’re paid roughly the same modest income. But the bigger the range of incomes in a profession, and the higher the average, the less a strike appeals to our sense of fairness. This is what happened in recent strikes by pro football, baseball, and basketball players. Team owners undermine public support for the players by pointing out that most players are rich and that a pro athlete, unlike a miner or a garbage worker, can leverage his talents individually to negotiate a better income for himself. Owners pitted star players against role players, arguing that stars would comfortably endure months of work stoppage and would still have job security after the sport’s fan base was depleted but role players wouldn’t.

In the same way, movie and TV producers are trying to embarrass Hollywood writers and sow envious divisions among them by reporting that the average such writer makes $200,000 a year and that the minimum writer’s fee for a one-hour TV drama episode—before residuals—is $26,710. If a strike depletes movie and TV viewership, the producers suggest—or if higher residual payments force companies to reduce production—struggling writers and actors will be out of work, along with many of the industry’s blue-collar workers, while star writers and actors will continue to prosper.

When sports team owners used this tactic against pro athletes, the athletes fell back on complicated explanations as to why they needed high incomes. They pointed out that their careers were short and that many of them were often unemployed. The writers make the same arguments: The reason you need a high minimum fee for each TV episode you write is that there’s a good chance the series will soon be canceled, and next year you might not get any work. And average incomes don’t tell the whole story. According to the writers, 25 percent of WGA members who worked in 1999 made less than $30,000. But like pro athletes, Hollywood writers are stuck with a mixed message. While posing as exploited workers, they sometimes suggest that their distinctive talents are the source of the industry’s profits—an argument that appeals to raw capitalism, not fairness.

3. Global trade. From labor’s point of view, the global economic pie has expanded, so workers deserve a bigger slice. From management’s point of view, the equation is more complicated: First, global buying is up because competition has squeezed down the profits in each transaction; and second, if wage demands drive up the cost of making goods in the United States, then lower costs abroad will draw away business and jobs.

The Hollywood debate follows the same logic. Writers point out that movies and TV are expanding into new media such as cable, DVD, and the Internet. They want more of the profits from these media. Producers reply that the growing array of media choices is splintering rather than simply expanding the market. Smaller audiences for network TV shows mean lower ad rates. More movies means fewer tickets sold per movie. Like free-trade economists, producers argue that there will be lots of profitable transactions for everyone, but only if there isn’t lots of profit in each transaction. Like employers who threaten to move jobs overseas, producers warn that if script writers demand too much money and refuse to give up some of their rights to be paid for reruns, the industry will shift to “non-scripted” programs such as newsmagazines and reality-TV shows.

Writers fall back on the arguments made by fair-trade advocates. If they let the industry move into areas where labor rights are unprotected, writers who are currently protected will lose their leverage in a race to the bottom. To forestall this scenario, they’re hustling to unionize writers in animation, demanding payments to writers for the use of their work on the Internet, and blasting the producers for resisting these changes. As for the producers’ proposal that writers give up some rights to be paid for reruns, the writers point out since networks can air reruns instead of first-run scripted programs, writers would in effect be lowering the cost of their competition.

4. The federal budget. In Washington, when tax rates hold steady but revenues rise, Republicans wail that taxes have gone up. When Republicans try to curtail the rate of spending growth, Democrats wail that the GOP is “cutting” crucial programs. Likewise, in the Hollywood debate, the writers call every cost-containment proposal by the producers a “rollback.” Every revenue opportunity writers might forego becomes a “cost.” The producers, on the other hand, inflate the writers’ demands using the same tactics Democrats employ to inflate the Bush tax cut. They add up the entire cost over three years, make that total look big by expressing it as a percentage of writers’ current annual income, and then inflate it further by assuming that other guilds and unions will get similar concessions.

Which side will win over the public? It’s hard to say. Hollywood writers are good at crafting words that tug the viewer’s heartstrings. Hollywood producers are good at recognizing a good story and clarifying the bottom line. Which of these skills is more valuable? The debate over how much money each side should get will answer that question in more ways than one.