Battered Hollywood Braces for New Strike (Dinosaur Media DeathWatch™)

Still reeling from a long strike by screenwriters this past winter, Hollywood is bracing for the possibility that the entertainment industry will grind to a halt again -- this time because of a dispute with actors.

The studios' contract with the Screen Actors Guild expires June 30, and talks are getting contentious. Already, film and television producers are holding back on new projects, fearing the talks will fail, even as they rush to complete existing projects before the end of the month.

The two sides have made little progress on key issues including compensation for actors when their work is used on DVD or new media such as the Internet. The actors guild says it's prepared to negotiate even after the contract expires. However, the studios may refuse to keep talking. So long as there is no contract, the de facto stoppage in new productions is likely to continue.

"Honestly, I think a lot of actors are kind of terrified," said Sandra Dee Ferguson, a 40-year-old television actress. "Last year was really difficult for a lot of people and I'm sensing overwhelming fear in the community."

Ms. Ferguson had recently bought a home with her husband when the writers struck. A month away from foreclosure, she approached the Actors Fund, a nonprofit organization that helps entertainers, and it paid her mortgage for a month.

The financial pressure on both sides means there's still a chance they'll reach a deal by June 30. Earlier this year, after the writers' strike ended, a group of influential actors, including Tom Hanks, took out advertisements in Hollywood trade papers imploring the Screen Actors Guild's leadership to quickly negotiate a new deal.

Another wild card is that a smaller actors' union is voting on its already-agreed contract with the industry.

GOOD NEWS! The money appears to be drying up for the overpaid talent.

http://www.variety.com/article/VR1117987471.html?categoryid=13&cs=1

Hollywood all grossed out
Studios trim superstars’ lucrative deals
By MICHAEL FLEMING
This season, with each successful launch of a summer tentpole, whether it be “Iron Man” or “Kung Fu Panda,” comes a sigh of relief among the studios.

But it’s a mixed blessing for Hollywood’s top talent and the agents who represent them. Many of the hits this summer — and of recent years — have been driven not by stars but by superheroes, comic books and other concepts.

The diminished status for stars appears to be accelerating a trend that has been going on for some time: Stars with enough cachet to demand gross receipts on a movie are securing much less lucrative deals than in the past.

In deal-making parlance, it’s a shift to “cash break deals,” from the once-common practice of giving top talent as much as 20% of the first-dollar gross.

In other words, star actors — as well as big-name writers and directors — are being forced to wait until a movie recoups its costs, rather than enjoy a portion of the first dollar that a project takes in.

These types of deals have long been common in the specialty business, but now are being applied to pictures with much higher budgets.

“We are in a cycle where it is good to be the buyer, and unless you’ve got Will Smith or a handful of other stars in the project, every negotiation has become difficult,” says a top agent.

“The world has become all about now. The result of your last movie determines all of your leverage. Past quotes are only being used by studios as a mark to cut from.

“There are only five or six studios now, and even the biggest stars are facing the fact that if they really like a script, they’d better be flexible or they might not see a good one for months.”

One recent example is the Warner Bros. comedy “Yes Man,” which stars Jim Carrey and opens Dec. 19. It was made possible only after Carrey waived his $25 million fee, and agreed to a gross payday to be collected when the film recoups its costs. After that, he would receive 33% of all revenue, and a one-third split of 100% of DVD revenue.

Had Carrey not agreed to the deal, the $50 million film may have hovered around $80 million.

With homevideo revenue flat, rising gas prices and a shaky economy, studios are under increasing pressure from corporate parents to trim costs — and they find themselves able to do so with production scarce because of the one-two punch of a writers strike and a de-facto actors strike.

They have leverage to make deals that lessen their risk and get their money back faster in a project’s revenue stream.

With production and marketing costs climbing, talent compensation is one of the few variables. It’s not just top talent. Third- and fourth- leads who once made $1 million for a project have had to settle for $100,000.

Rest assured, no one will be facing foreclosure, at least if they managed their money wisely. Star actors and directors are still getting hefty upfront payments. It’s just the backend where they will have to wait to reap coin.

M. Night Shyamalan, for example, got an eight-figure upfront salary for “The Happening,” released on June 13. He also has a 25% ownership stake in the film, but won’t reap dividends until co-financiers Fox and UTV recoup their $60 million budget, along with P&A and interest. At that point, Shyamalan will get 50% of the film’s revenue stream.

Paramount’s deal on “Indiana Jones and the Kingdom of the Crystal Skull” allows the studio to recoup production costs, and a 12.5% distribution fee, before giving 87.5 cents on each dollar to profit participants George Lucas, Steven Spielberg, Harrison Ford and David Koepp. They agreed to get a windfall only after the film hit $400 million worldwide, according to a report in the Los Angeles Times. (The film is closer to $500 million at this point.)

Talent may not like the deals, but the alternative is that the project might not be made. Sources say Warner Bros.’ upcoming “Body of Lies” came about after stars Leonardo DiCaprio and Russell Crowe, director Ridley Scott and producer Donald DeLine agreed to split 40 cents of each dollar, but only after the studio recoups its costs.

Warner Bros. is working on a deal that would reteam Larry and Andy Wachowski and producer Joel Silver, but in different terms than the $180 million “Speed Racer,” which lost a fortune at the box office.

The trio will produce “Ninja Assassin,” a $50 million action pic directed by James McTeigue, but will collect a share of the gross when the film breaks even. And the studio is likely to revisit a gross deal it made a long time ago for director George Miller to direct “Justice League,” expected to go into production soon.

Several studio executives say conversations about summer tentpoles routinely start with demands that talent accept such break-even deals. And it’s not difficult for studios to make the case that what they are demanding is all that onerous.

Disney and Jerry Bruckheimer routinely use them on mega-budget films with gross talent on films like “Pirates” and “National Treasure” films. The same will go for the next “Transformers.” In those films, the studios recouped, and the gross participants profited handsomely, even if they had to share more of the risk.

Studios started to gain an upper hand before Hollywood’s labor problems and the economy got shaky. The change came after several studios were ready to cancel projects if talent didn’t re-draw signed deals. Tom Cruise at one point controlled more than 30% of the first-dollar gross on a “Mission: Impossible” film, with the understanding that any gross points for a director or other stars would come out of that pot. So it was telling when J.J. Abrams got no gross deal for “Mission: Impossible 3.” Paramount was ready to scrap the project until the terms were redefined.

Fox put its foot down with the movie “Used Guys,” which was to have been directed by Jay Roach and to have starred Ben Stiller and Jim Carrey. The studio scrapped the project when the creatives declined further cuts in their gross deals.

Universal and Fox backed out of a feature version of the Microsoft vidgame “Halo,” which was to be a multi-step deal that included gross payouts of more than 20% to the tech giant and the film’s producers.

Another defining moment came when Sony got Nancy Meyers and the cast of “The Holiday” to agree, retroactively, to move out of their first-dollar gross deals and into break-even arrangements.

“The idea that talent eats while studios bleed is something everybody got used to, but that didn’t make it right,” says one exec. “In what other business would the first money out go to the partner who put up no money?”

The system only works sometimes. After “The Da Vinci Code” grossed a fortune, Sony was in no bargaining position to get the principals to return in a sequel in a “cash break” deal. And after Universal saved “State of Play” by getting Russell Crowe to replace Brad Pitt just before start of production, the studio was in no position to ask the star to take less than first-dollar gross.

Studios pitch the deals as good for talent in the long run. No studio will greenlight a film any more that gives away more than 25% of first-dollar gross, so if a film has two stars, and a director and producer who earn gross points, they have to cut creatives inevitably cut their gross percentages to fit the 25% cap.

Studios say that, even though “cash break” deals don’t offer a guarantee of “first-dollar” gross, there is potential for talent to make more money should a film become a hit. And studios have been known to throw in some “box office bonuses,” which are that are essentially advances.

It’s worth it to studio bean-counters who want to mitigate risk and find cash break far more reliable than when talent waives upfront salaries but keeps first-dollar gross.

Relativity Media’s Ryan Kavanaugh said talent and dealmakers are finally coming around to seeing the benefits of cash break. Most of the nine pics he is financing aren’t paying gross, and he is making headway in doing the same with the studio slates he is involved in.

“The concept is simple,” he said. “If I spend fifty million, let me make that back and I will give fifty cents on the dollar to the creative talent and make them true partners. Agents, managers and lawyers don’t like it, but talent is incentivized. People shouldn’t be bonused in failure, which is the gross business. There is more profit, more pictures and risky films will get made and the business will be healthier if talent profits in sucess.”

While that makes sense, even to talent willing to share more of the risk, the bigger worry is that they will be able to discern just how much they should be paid. That’s a much more elaborate prospect when the threshold is a studio’s break-even point.

The anecdotes about accounting practices are legendary: a studio charging interest on money that was borrowed internally, or another studio posting a standard $200,000 charge for videotapes used for dailies, many years after they had moved such methods to the Web. Studios have to prove that their accounting is on the up and up, some agents say.

“In my naive belief, if studios spend the next three years being more honest about bookkeeping practices, and if they can demonstrate a real ‘cash break’ system, this could overcome the skepticism about accounting practices, and run-up of overhead on every film, that made first dollar gross deal-making a necessity in the first place,” said one top agent.

“The system is broken right now, that ‘cash break’ is the new reality,” the tenpercenter continues. “Mind you, if you have a giant star and can make a first-dollar gross deal where they own 25% of the movie for no financial investment, there will never be a better deal than that. That’s better than being a rock star. But the current system had to change, and it might not be that bad.”

http://www.variety.com/article/VR1117987490.html?categoryid=13&cs=1

SAG stands firm on key issues
Guild remains committed to major priorities
By DAVE MCNARY
A day after the majors blasted the Screen Actors Guild for stalling at negotiations, SAG hasn’t backed off any of its key stances.

The announcement Friday SAG’s negotiating committee underlines the growing concerns that SAG and the Alliance of Motion Picture & Television Producers will reach a deal soon — and probably not before the June 30 expiration of the feature-primetime contract. SAG issued the statement with negotiations concluding for the 30th day with talks set to resume Monday.

SAG said its feature-TV negotiating committee had unanimously endorsed its commitment to eight priorities — gains in middle-class actor compensation, pension and health contributions from employers, DVD residuals, protection from product integration abuse, preservation of force majeure protections, new-media clip consent and new-media jurisdiction and residuals.

None of the issues are a surprise. SAG’s leaders have described those areas as crucial over the past week as part of SAG’s campaign to persuade its 44,000 members who also belong to AFTRA to vote down AFTRA’s ratification of its primetime deal.

“We are united and committed to working together in achieving the best possible contract for the benefit of all actors,” the SAG committee said. “We pledge to stand together, united, not allowing ourselves to be distracted from our crucial and singular mission by anyone. No matter what the distraction or from where it may come, this committee will continue to stand firm to achieve the best contract possible. We are standing up for you and ask you to stand strong with us.”

The “unity statement” was issued a day after SAG leaders from New York and the regional branches blasted the Hollywood leaders for the anti-AFTRA campaign.

The AMPTP had no response to the new statement. However, AFTRA kept up the battle with SAG on Friday, issuing an extensive announcement defending its new deal and blasting SAG on half a dozen points.

For example, AFTRA contended that SAG’s criticism over AFTRA giving up significant jurisdiction in New Media is bogus.

“Under the existing AFTRA and SAG contracts, it’s completely up to the producer to decide whether or not a New Media program will be a union show,” it said. “Under the new AFTRA agreement, all derivative productions and all original productions over certain budget thresholds ($15,000/minute or $300,000/program or $500,000/series, whichever is lowest) must be union shows. Moreover, original productions with budgets below the threshold fall under union jurisdiction any time there is a ‘covered performer’ employed in the production.”

AFTRA also blistered SAG for still insisting on a gain in DVDs when no other union’s been able to do so.

“In their negotiations earlier this year with both the WGA and the DGA, the studios made it clear that the proposal to increase DVD compensation rates was a non-starter,” AFTRA said. “Against this backdrop, AFTRA felt it made sense to focus its energies on issues where progress could be made.”

The AMPTP had issued its blast on Thursday after guild president Alan Rosenberg asserted that he was skeptical that SAG would reach an agreement before June 30. SAG fired back by asserting that it is “possible” to make a deal by June 30 — but only if the AMPTP will relent on its positions with SAG insisting the guild’s made all the concessions so far.

Hollywood remains uncertain whether SAG will strike, which would require backing in authorization vote by 75% of members voting. Rosenberg’s said recently that no decision’s been made on seeking a strike authorization from the guild’s 120,000 members.

The AMPTP accused SAG of being selfish for not considering how its go-slow approach has affected the biz.

“Any effort by SAG to drag out these negotiations past June 30 would be a disservice to the people in this industry whose livelihoods are being put on hold,” the AMPTP said. “SAG’s inability to close this deal has already put the industry into another de facto strike, limiting the greenlighting of features and disrupting pilot production.

http://www.variety.com/article/VR1117987473.html?categoryid=2821&cs=1

Writers feel pinch in post-strike sales
Studios are taking a hard line on deals
By DIANE GARRETT
Scribes fought long and hard for their future during the WGA strike. Little did they know how tough negotiations would get once the strike ended.

Already flush with projects that could fill their film pipeline through 2010, studios are taking a hard line on deals, refusing to pay most writers above their quotes, if that. The market has gotten so competitive — and jobs so hard to come by — that established scribes in recent months have been reduced to assignments one-half or one-third their going rate.

At this point, “there are 50 to 100 writers that are still getting the deals they were always getting,” says J.C. Spink of Benderspink management-production firm. “For everyone else, it is getting harder, harder, harder.”

A top manager-producer says studios invoke every reason except the recent strike for their tough negotiating stance. “They say things like, ‘It’s a new environment.’ Or ‘The landscape’s different,’ “ he says.

Whatever the reason, midlevel scribes repped by his firm have been especially hard hit.

“The middle guys are getting killed,” he says. “I had one guy who makes $800,000 —an established guy — and they wouldn’t go above $250,000 for him.”

Worried about paying his mortgage and the prospect of another stoppage, the scribe took the deal, accepting a fee he hadn’t taken in 10 years.

Helmers have also been affected, although because they tend to be involved in fewer projects, the clampdown isn’t quite as noticeable.

Scripters can still get a nice payday from original material — especially if there are multiple bidders — but even the most in-demand writers are having a tough time setting up deals in this environment.

It’s even more of a buyer’s market on the TV side, where the curtailed pilot season has translated into fewer gigs for even the most sought-after scribes.

“It all comes down to competition in the marketplace,” says Paul Young of Principato-Young, who notes the market for specs has remained strong — one of his clients recently sold a spec for $1.2 million — but on the TV side, “there is downward pressure across the board.

“Even with in-demand writers, you’re having trouble making deals.”

No one knows when, or if, the belt-tightening will end. The pre-strike buying frenzy surely contributed to the current environment, but there are a number of other factors that have helped create the buyer’s market. Among them: the growing number of nonstudio productions, wobbly economy and flattening DVD sales. Drawn-out actor negotiations are contributing to the cautious mood around town.

“Everybody is in a terrible funk,” admits one top production exec at a major. “Agencies, studio execs, we’re like a parent with kids who want to spend something and we say, ‘Do we have to? Do we need this?’ “

Every decision is subject to more scrutiny than before, he says. “There’s no luxury. We’re saving our money for the big movies.”

A tenpercenter says writers have to be willing to walk away in order to get any raise in pay these days. He says a writing duo who created a major tentpole comedy franchise had to threaten to quit before the studio granted them a pay bump for the sequel.

“It used to be a lot easier to do these negotiations,” the agent sighs. “Now it’s much tougher, even for established writers. The studios insist that they’re only giving 10% raises, maximum.”

“There are a lot less jobs now,” moans one high-profile scribe, who says everyone is still feeling effects of the November-February work stoppage. “All the high-ticket $650,000-plus writers are competing more,” he says, “and everyone else is pushed down one tier.”

One scribe compared the downsizing to the aftermath of the last writers’ strike 20 years ago, when there was a culling of the herd.

Indeed, there has been consolidation throughout the industry in recent months, with New Line shrinking and Picturehouse and Warner Independent shuttering. Ramped up buys by CBS Films and MGM have helped mitigate those losses, but there might be future cutbacks on the way: Mouse House and Time Warner brass have been beating the drum for reduced film output.

“Everybody, even the top A-list people, are stressing over whether people will give them their quotes, because every time they have a chance to knock them down, they do it,” says another tentpole scribe, who attributes the lower prices to the fact “there are less jobs to go around” rather than the strike.

It’s harder to set up projects with top film scribes as well. “The purse strings are being tightened and studio execs aren’t saying ‘yes’ as much as they were,” one manager for a much-in-demand scribe says.

To cope with the market pressures, some scribes and their managers are taking a page out of the congloms’ books: They’re diversifying.

“People are starting to look at alternate ways to earn a living as a writer, whether it’s the Web, TV or direct-to-DVD,” says Alison Rosenzweig, a producer-manager. “I’m not alarmist. To me, there are a lot of ways to make money in this business.”

Anne Thompson, Tatiana Siegel, Dave McNary and Marc Graser contributed to this report.

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