AMPTP offers new formula on residuals

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Management pulled back the wraps a bit farther Thursday on its dramatic proposal for revamping guild residuals.

Such payments to writers and other talent still would be revenue-based but would kick in only after certain basic costs are recouped on film and TV projects under a proposal by the Alliance of Motion Picture & Television Producers. The clarification, circulated by AMPTP communications staff, came a day after a spate of news reports suggested that studios execs want to move from revenue-based residuals to a profit-based model (HR 7/12).

The AMPTP starts negotiations Monday on a new collective-bargaining agreement with the WGA, which has a film and TV pact set to expire Oct. 31. The studio group held a pre-negotiations news briefing Wednesday, with top execs repeatedly citing a need to replace current residual formulas with a thinly described new arrangement.

As it turns out, the proposal looks a lot like the current residuals scheme — perhaps with a higher percentage participation for the writers — but it would only kick in once producers recoup development, production and distribution costs. Studios also would first recoup marketing costs on film projects, though perhaps not on TV shows, AMPTP spokeswoman Barbara Brogliatti said.

"The definition would probably be slightly different for television because the producer doesn't necessarily pay for marketing," Brogliatti said. "But it would basically be the same."

The proposal would not demand that producers first recoup revenue representing project interest payments or sundry other costs that go into the infamously complicated bottom line of most Hollywood projects, the spokeswoman emphasized. Thus, it is not a demand for project "profitability," nor any sort of net profits arrangement, she said.

"Every movie contract has many exceptions and definitions as to what goes into net points," Harold Vogel of Vogel Capital Management said. "But they all do it slightly differently, and that's a problem."

Even agreeing on total production costs or other basic expenses on film and TV projects could prove difficult, he added.

"The devil is in the details," Vogel said. "But I don't think the studios are wrong in wanting to have some different sort of approach for residuals."

Whether the proposal ever gets much traction once negotiations get going is another matter, the analyst said. "Both sides obviously are doing some political posturing right now," Vogel said.

Similarly, it was unclear if a second controversial proposal aired at this week's AMPTP briefing will be discussed seriously next week.

The studio execs said they will propose delaying any expansion of Internet compensation so the matter can be studied first. But the WGA has put boosted pay for new-media content at the top of its negotiating demands.

AMPTP president Nick Counter said the cost-recoupment and Internet-study proposals are genuine, but he also expressed some flexibility on the latter issue.

Said Brogliatti: "The original premise of residuals was that in success we all share. All we are saying is that we think we need to get back to that premise."

Hollywood's use of the term residuals dates to the 1960s, when studios began paying talent additionally if movies were aired on television. The concept was expanded in the 1970s, after pay TV came into vogue, and a decade later it was extended to tap into home video revenue.

Guild contracts with producer groups use complicated formulas stipulating how residuals are paid to members and are generally stated as a set percentage of various revenue streams.
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