Les Moonves Says CBS Doing 'Extremely Well' – But Will Unions Benefit?
The CEO’s remarks this weekend at the UCLA Entertainment Symposium may perk up some ears.
Hollywood unions and guilds often complain that members of the Alliance of Motion Picture and Television Producers plead poverty come negotiating season even as they rake in the cash. In the 2010-2011 above-the-line negotiations, the companies’ motto was “cost containment,” and the result was 2 percent annual wage increases – rather than the 3.5 percent that had become customary – and the loss of first-class air travel. What labor got in return was desperately needed increases in employer contributions to the union and guild pension and health plans.
That same dynamic will be on display in a few days, as ongoing negotiations with IATSE and the Teamsters shift from issues of concern to specific locals and pivot to the harder questions surrounding the Motion Picture Industry Pension & Health Plans, which estimates a $500 million funding shortfall in aggregate over the three year 2012-2015 contract cycle.
The inevitable outcome will be some combination of increased employer contributions, benefit cuts and tightened eligibility. That’s likely even though – ironically – the Plans’ participants include not just union members, but also the staff of the AMPTP itself.
But if the companies sing from the “cost containment” hymnal yet again, CBS negotiators may find it hard to stay on key.
That’s because, as CEO Les Moonves put it Saturday at the UCLA Entertainment Symposium, his company has been “very successful.”
Indeed it has. As previously reported, the company’s net income in 2011 Q4 rose 31 percent over the same frame a year earlier. And, as entertainment attorney Ken Ziffren noted at the symposium, the company’s stock recently hit a 52 week high ($30.99 on Friday, closing at $30.81).
Moonves outlined a wide range of corporate assets, including Showtime, CBS Films, CBS Radio, CBS Outdoor (billboards, bus shelters and more), CNET, Simon & Schuster, the jointly-owned CW – and of course, the company’s signature broadcast network.
Although Moonves didn’t break out the CBS network’s revenue figures, he did list the operation’s diverse revenue streams, which include retransmission fees (payments from cable system operators), reverse compensation (payments to the network from non-owned affiliates), syndication revenues and – of particular interest to the unions and guilds – license fees from Netflix and Amazon.
In union parlance, those license fees are “distributor’s gross.” Residuals when a network show is released to consumer-paid new media are calculated as a percentage of distributor’s gross, so the fact that Moonves pointed to those deals as a noteworthy revenue stream for CBS suggests that new media license fees are growing.
That may prompt eagle-eyed guild staff to keep an eye out for the residuals checks that should follow. It will take sharp eyesight, though, because the checks are barely discernable. As an example, the WGA’s 2011 annual report indicates that new media reuse accounted for only about one percent of total residuals in 2010 ($3.85 million of $315.81 million). Although those residuals grew at a rate much higher than did residuals overall, the numbers are likely to remain small for quite some time.
SAG’s earnings report doesn’t break out new media, and the other unions don’t provide comparable reports.
Also on the new media front, Moonves noted that – as previously reported – CBS is in talks with Netflix about producing an original show for the latter to stream to its subscribers. This will generate initial compensation (upfront payments) and residuals, if the deal materializes, and would join House of Cards, a 26-episode original that Netflix ordered from MRC last May for $100 million.
Hollywood has flirted with made-for-new-media content, but the total value of that business to guild members is small. All of the new media earnings and residuals pale in comparison to the income that writers, actors, directors and crew lost during the 2007-2008 WGA strike and 2008-2009 SAG contract stalemate.
The premise of those labor actions was that factors such as the 25-year persistence of a “hated” home video residuals formula meant that it was important to set the best precedent possible at the dawn of a new medium – but as the guild earnings reports suggest, it may take a long time to see how that strategy plays out.
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