WGA Strike: Breaking Down The Revenue Issues
The writers strike all comes down to money, but how much is really at stake? Right now the writers get 4 cents for every DVD sold and they want to increase that to 8 cents. The 4 cents formula is old, based on VHS, which used to be very expensive to produce. So back in the mid 80s the writers and producers agreed to give writers 1.5% of 20% of DVD revenues (assuming production costs were about 80%).
Needless to say the writers want to update that.
So how much of digital distribution revenues will the writers get? They're asking for 2.5% of all digital revenues, whether from ads or downloads. The studios want to pay 0.3%. It might sound crazy, but if they meet in the middle (which would make sense), they'll land at 1.2%, a number which there's precedent for. Another problem: the producers want be able to call some streaming web video "promotional," based on the idea that its purpose is to drive eyeballs to the TV.
But writers say, if there's any ad revenue we want a piece of it. The current rule for iTunes gives writers .3% of the studios share. Not much for the writers, but the studios aren't making much from either. However, digital revenues will only increase, so this negotiation is clearly necessary.
I just wonder how long it'll take both sides to average their target numbers. I just saw some snacks being hauled into the WGA headquarters, so they may be in there figuring out strike details for a while.
Questions? Comments? MediaMoney@cnbc.com