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The Math Behind the Hollywood Writers Strike

As the fight between the Writers Guild and the Alliance of Motion Picture & Television Producers intensifies, it’s looking more and more like the strike will drag on for some time. The big stumbling block: compensation for video available on the Web.

What's a stake? Plenty, if online video streaming continues to catch on ... not just for pay-per-view downloads, but ad-supported "free" video as well. And there's a lot of that out there.

Last month, for example, Viacom announced it had put 13,000 Daily Show segments — virtually every comedy moment since the show debuted in October 1999 — online at http://www.thedailyshow.com. Visitors to the site can watch and share the clips for free, but in the process of navigating the catalog, they are likely to launch an online ad for MasterCard or myriad other sponsors.

In short, Viacom stands to earn advertising dollars from a site that hosts videos with content written by members of the WGA. The writers who helped create those segments, on the other hand, get nothing (which is close to what these sites currently gross).

Online ads for a popular show can generate a $35 or more per 1,000 viewers. Even if a site for a popular program like “The Daily Show” gets 1 million page views per month, the total take is only $35,000. Still, the writers aren’t taking any chances, particularly after they frittered away an opportunity in 1985 to get a bigger chunk of VHS and DVD rentals.

The deal made back then gives writers a percentage of DVD/VHS sales, according to the WGA. The distribution is 0.3 percent of the distributors’ gross for the first $1 million and 0.36 percent thereafter. This amounts to less than 5 cents per unit for a typical videocassette or DVD, according to the WGA.

While the studio position is that content put online is promotional and should be free, the writers, naturally, have a different idea. “If they get paid,” says the WGA’s Gregg Mitchell, “we want to get paid.”

And getting paid more is of greater importance to some writers than others. Of the 12,000 members of the Writers Guild, a select few make upwards of $3 or $4 million a year. Many make $50,000 or less, which sounds like a lot to anyone not living in Hollywood or New York. About half the members of the West Coast branch are unemployed, according to the Guild. (The East Coast branch doesn’t track this number.)

For its part, the Alliance of Motion Picture & Television Producers (AMPTP), the group that negotiates most Guild and union contracts for the entertainment industry, calls the strike an “irresponsible action.” Writers currently get 1.2 percent residual payments from new media whenever the consumer pays to download or view a TV show or feature film online; 2 percent payments for TV shows created after 1984; and 2.5 percent for TV shows created before 1984, according to AMPTP. The studios refuse to pay writers for free video streams.

Perhaps the most ironic consequence of the strike is that with nothing new on TV, many consumers will head to the Web to find new content. And as the numbers increase, this issue will be worth millions to each side. In fact, research firm eMarketer estimates the market for online video advertising will approach $3 billion by 2010. Considering the money both sides are throwing away right now, they obviously feel it’s a battle worth waging.