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Paul Sweeting

Paul Sweeting is the editor of ContentAgenda.com and a columnist for Video Business. He has covered the home entertainment industries since 1985 for Billboard, Variety, Publishers Weekly and other leading business publications. He is based in Washington, DC.


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Paul Sweeting

Paul Sweeting, Media Wonk
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Writers, producers strike an old pose - November 1, 2007

The Wall Street Journal has a good analysis [$$] this morning of the digital issues at the heart of the looming writers strike in Hollywood. But when talks broke down last night, it was over the decades-old formula for calculating revenues on DVDs.

In a statement addressed to the Writers Guild of America after talks were broken off, Assn. of Motion Picture & Television Producers president Nick Counter said, "The companies believe that movement is possible on other issues, but they cannot make any movement when confronted with your continuing efforts to increase the DVD formula, including the formula for electronic sell-through. The magnitude of that proposal alone is blocking us from making any further progress. We cannot move further as long as that issue remains on the table."

The formula at issue dates to 1985, when the home video business was barely out of its infancy, and calculates residuals based on only 20% of the wholesale revenue. At the time, it was seen as a way to nurture a new business, but writers have regretted it ever since as they watched VHS and later DVD sales grow into the studios' largest revenue stream. The issue has come up in every contract negotiation since, but producers have always held firm.

Why would it trigger a strike this time, jeopardizing discussions toward the seemingly more pressing goal of establishing a fair residuals formula for digital platforms?

Precisely because neither side knows at this point what the business models for digital distribution will ultimately look like, they are fighting over the one island of certainty--DVDs--amid a sea of uncertainty. Thus, the battle over the DVD residuals formula has become a proxy for the anxiety both sides feel over the future of the business.

Ironically, if digital distribution platforms succeed, it will be to some extent at the expense of DVD sales. So, if not quite a case of fighting on a burning ship, it certainly can't accomplish much more than to postpone the reckoning.
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