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Agents Tangled in Media Web

Jun 5, 2006  •  Post A Comment

Making deals for television shows used to be fairly simple. People from all sides of the negotiating table agree on that.

A year ago, when agents, studios and networks negotiated deals for a stand-up comedian’s new special or a producer’s procedural drama, the contractual issues were apparent to all involved. Agents certainly held out at times for larger paychecks for their clients. But basic parameters of the deal-what was appropriate for each side to request-were clear.

Not anymore.

The Walt Disney Co.’s groundbreaking deal last October to make some of its shows available on iTunes fired the starter pistol on a slew of new-media dealmaking. Hollywood players are now devising pacts for short Web episodes, exclusive content for mobile phones and for repeating television episodes on the Internet and mobile video players.

As a result, television dealmakers have become submerged in a new world of technological issues. Several agents and business affairs executives said that on many deals they spend about half their time haggling over the new media elements.

Simple talent deals are no longer possible, one top television packaging agent said. Deals actually fall through over things as seemingly trivial as mobile phone rights, according to the agent, who described negotiations these days as “a not-good conversation.”

The issue, curiously, is not money. At least, not today’s money. For all its trade press popularity, there’s very little actual revenue involved in new media deals, sources interviewed for this story said.

Sell a show on iTunes and Apple keeps about 30 percent. Get a Web episode greenlighted and the production budget runs less than $5,000. If Web episodes cost more than $3,000 a minute to produce, the producers do not make money, one studio chief said.

The issue is tomorrow’s money.

Dealmakers worry that if they relinquish too much ground on any one aspect of any one contract, they’ll set a precedent that could haunt them in future negotiations once new media revenue models are firmly in place.

“Agents want to be very careful they don’t give away the store,” said Karen Stuart, executive director of the Association of Talent Agents. “You have all these major players cutting deals yet we don’t know what these models will look like yet.”



All in the Definitions

A Web episode is a television episode streamed on the Internet. While it may sound simple, compensating talent for such a program remains a difficult proposition.

Some networks are classifying Web episodes as promotional, a way to drive viewers to the programs in their primary television runs and part of the original deal for working on a show.

For example, NBC announced exclusive Web episodes for “The Office” at its recent annual upfront presentation to advertisers. Though the content is designed as ad-supported, NBC considers the work promotional.

Other networks consider Web episodes more like home video when it comes to compensation. The home video revenue model calls for relatively meager payment to talent. Writers, for example, earn three-tenths of 1 percent of the licensing fee for home video.

Or ask the guilds. They say Web episodes are more like pay-per-view, which requires a 1.2 percent fee.

All of which gives dealmakers a real headache, because, as the business affairs executive put it, none of the people involved know what they’re doing.

A consensus is growing for compensation for some new media.

For selling to iTunes, for instance, there’s agreement among many in the industry that the format is equivalent to home video. Still, this concept is far from contractual and more like a gentleman’s agreement.

For instance, ABC has quickly moved to release Touchstone content on iTunes, partly because it can (both companies share the same Disney ownership).

But when NBC wanted to put Warner Bros.’ “ER” alongside “The Office” on iTunes, it ran into a snag: NBC cannot argue iTunes equals home video to the guilds and others without giving Warner Bros., which owns the home video rights to “ER,” veto power over putting the series on the service.

For newer shows, there’s another wrinkle: Networks typically have exclusive use of any program for four years. “ER” is well beyond that. But for Aaron Sorkin’s upcoming NBC drama “Studio 60 on the Sunset Strip,” Warner Bros. may own the home video rights, but it cannot put the show on iTunes without NBC’s permission.

NBC is not about to agree to Warner Bros. putting “Studio 60” on iTunes unless the network gets a cut of the revenue, an NBC source told TelevisionWeek.

But what about the guilds? Don’t they have a formula for all this?

Nope.

The Union Jacked

When ABC announced its iTunes deal, guilds scrambled to tell the press that such new media aspects were covered. But “covered” is in the eye of the beholder. As with the Warner Bros. and NBC negotiations, what’s covered is what parties generally agree is covered. And one point of agreement among agents and networks is that, right now, the guilds don’t cover very much.

The existing Internet or new technology agreements are not very helpful, according to one agent. In theory, productions have to follow the working rules of how many hours per day and make pension and welfare contributions, but no minimums and no residuals have been established. The union basically blesses whatever fee is negotiated.

WGA West President Patric Verrone said some aspects are covered but ignored.

“Our contract covers ducks,” he said. “They’re creating stuff that walks like ducks, talks like ducks and saying they’re not ducks. They can’t just expect us to say it’s not covered, because it’s still our members creating a moving image on a screen.”

For instance, the reuse of existing material on handheld devices is a format that most agree is covered. But new material based on existing properties, such as webisodes and some mobile phone content, is another story.

Last month, the guilds announced a first-of-its-kind deal establishing minimums for mobisodes on ABC/Touchstone properties such as “Lost” and “Desperate Housewives.” Mr. Verrone said the deal was key to establishing precedent, even if some companies ignore it.

“Since the ‘Lost’ mobisode deal we’ve been getting a lot of calls from our members saying they’re being told to do [mobisodes] as part of their job, or for a very low amount of money,” he said. “But before that, the assumption was a network could do it nonunion. I think we’re past that stage.”

This raises an ther issue all parties agree on: If deals for individual shows seem like a headache, just wait until the guilds enter their next contract negotiations.

“We fully expect to make this a part of our discussions for next year’s negotiation,” Mr. Verrone said. “In the meantime, both sides are jockeying for position.”