By Dom Serafini
In the 1967 Mel Brooks’ movie, The Producers, a Broadway show producer explores ways in which he might lose money so that he won’t have to repay his investors. In 2023, some 56 years later, Hollywood producers have driven the artist community to strike in order to pay their investors more.
We know who the producers were in Mel Brooks’ movie, but who are those that are driving the writers’ and actors’ strikes?
We also know that producers are in the business of producing, and no production means no income! So why then are they insisting on not producing at the risk of going out of business?
These producers negotiating with the guilds are represented by the Alliance of Motion Picture and Television Producers (AMPTP), an association based in Sherman Oaks, California, representing 350 U.S. film and TV production companies. It has negotiated all trade agreements with guilds and unions since 1982.
What is interesting about the topic is that a VideoAge inquiry sent to 60 industry veterans resulted in just six replies, two of which were very cryptic, as if the subject was obscure, or, as the Wall Street Journal editorialized, “nobody cares.” (Water Cooler, August 3, 2023)
Now, the strikes have resulted in a windfall for some AMPTP members (mainly the major studios), some of whom have recorded increased cash flow resulting from saving on new productions. But the opposite is presumably true for those AMPTP members who are in the business of producing and are not generating income. Soon enough, some production companies’ staffers will lose their jobs, and when productions eventually do resume, those companies will need time to fill the vacancies, adding idle operation costs.
For this very VideoAge Water Cooler, we have analyzed the reasons behind the decision to let the strikes continue.
The first explanation was that the biggest percentage of content funding is not coming from producers but investors. Investors believe that too much content is currently in production with too many high budgets, so they decided to pull the emergency brake on funding and even call back some of the principal on past loans.
But most productions are commissioned, and investors cannot recoup their (gap/bridge) money if producers go out of business.
Another reason given is that the old production models skew the formulas towards an unacceptable (i.e., not rewarding) financial return and have too many risks involved. In effect, producers would prefer less risk, and a better return on investment rather than continue to produce in the current environment.
On the other hand, the “current environment” is what has made Hollywood the world’s entertainment capital, and delaying production means changing the game and making social media platforms and videogames the top entertainment alternatives to filmed entertainment. And, added The Wall Street Journal in a recent article, “Chinese audiences are gravitating toward movies made at home, rather than in Hollywood.”
A third explanation comes courtesy of a WSJ podcast: “Why can’t the studios give them what they want? Well, some of the things that the talent is asking for are actually really hard to do. One of the asks is, ‘We want a percentage of revenue from all your streaming,’ but it’s just not that simple.”
But it is simple if the battle cry would be “Let’s return to production!” If residuals (and not AI) is the problem, let’s find a solution. Perhaps, after an initial flat-fee season, residuals should be introduced for subsequent seasons. A recent article in the WSJ reported that Netflix knows exactly how long they’re planning to keep a show running. Plus, producers could negotiate a three-year window with streamers (or even streaming deals that include licensing to non-streaming entities).
Another argument is that the issue of library content not performing as it once did is also a significant part of the disconnect between the guilds and AMPTP members around residuals. But the “non-performing” was caused by the decision to keep content exclusive to their streaming services rather than licensing it to third parties. After realizing that it was a bad decision, studios scrapped this restriction.
In an editorial for the U.S. monthly business publication Fast Company, American novelist Michael Grothaus gives this advice: “How can Hollywood studios avert their obsolescence in an AI-driven culture? I don’t know if they can completely, but if they have any hope of surviving the AI onslaught, they need… to start embracing writers’ and actors’ demands regarding the use of AI… Hollywood needs to start today with a campaign conveying to audiences that human stories –– that is, stories created by human beings –– are the only stories worth telling, and especially worth paying for.”
In conclusion, and in the words of one of the 60 industry veterans reached by VideoAge, “the case of the Hollywood shutdown is still a Hollywood mystery. We’re just surveying the damages.”
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