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November 7, 2007
The Hollywood wars
Things are escalating in the Hollywood wars, raising tension between studios and their writers. As the Los Angeles Times reports, the studios appear to be using the writers strike to clean house:
A day after Hollywood's writers went out on strike, the major studios are hitting back with plans to suspend scores of long-term deals with television production companies, jeopardizing the jobs of hundreds of rank-and-file employees whose names never appear in the credits.
. . .
These suspensions stop payments to production companies that are largely bankrolled by studios, which count on them to come up with the next "Grey's Anatomy" or "House." Under multi-year deals, studios such as Warner Bros., Walt Disney Co., and 20th Century Fox pay for the salaries, the office space, the project development costs, even the utilities whether these entities generate hits or not. Producers and writers typically serve as creative heads of these companies, which vary in size from a handful of employees to hundreds, most of whom do not belong to the WGA.
The major studios that have issued or are planning suspensions include Fox, CBS Paramount, Disney, Warner Bros. and NBC Universal. Sony has yet to act, two people familiar with the issue said. Not all production companies financed by the studios will be cut off. The most prolific ones, run by such high-profile figures as David E. Kelley ("Boston Legal," "The Practice") and John Wells ("ER"), are unlikely to be touched, according to studio executives.
If the strike continues for long, some studios are expected to follow suit with their less fruitful movie production deals, using the same escape clause.
The employment contracts that studios have with talent contain a provision known as force majeure that allows them in a crisis situation such as a strike to suspend and terminate deals. Before a deal can be ended, a studio must first suspend it for a period of time, typically for four to eight weeks.
Some studios are using this clause to purge expensive and unproductive arrangements, according to industry executives.
"It's so sick," said one television writer worried about getting a suspension letter who asked not to be named for fear of losing his job. "The studios are using the strike to clean their books, getting rid of the writers they don't want and keeping the ones they do."
Dana Gould, a former writer on "The Simpsons," described the studios' tactic as a "controlled burn" strategy that would save these giant companies millions of dollars. He said the timing couldn't be better, amid television's recent poor ratings.
"It's a reboot. They want to hit Control-Alt-Delete on the fall season," Gould said.
This is a risky tactic -- profitable in the short run but dangerous in the long run. As one leader of the Writers Guild is quoted in the in LA Times story, "This is an industry based on talent, and to break relations with the most talented people in town is not a very good business plan." Hollywood is one of the most intangible intensive industries in the world. Those intangibles are not just the talent, but the set of relationships. To the extent that those intangible assets flow elsewhere or are irreparably damaged, the industry is vulnerable.
We will see how this develops. It may be a case of the bean counters looking for a short term gain by dumping unprofitable arrangements. It might also be a highly strategic move to rearrange the organizational power structure in the industry. In either case, the studios and the writers have tossed the dice.
Posted by Ken Jarboe at November 7, 2007 8:48 AM
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