Strike Settlement: The Writers Cave

The NYTimes says talks between the writers and the studio heads have "eliminated major roadblocks to a new contract." There's not a lot of detail available, but from what we can see, it looks like the writers are about to cave.

The writers appear willing to give up their most crucial demand -- the right to keep a of percentage of revenue from Web video. Instead, it looks like they'll settle for a flat fee. That could earn them some near-term dollars but ultimately cost them dearly down the road -- much like the lousy DVD deal they agreed to some 20 years ago.

Before the writers walked out last fall, they were demanding 2.5% of revenue Hollywood generated from streaming Web video. Given the tiny revenue pie that exists today, we estimate that deal would have been worth a mere $6 million in 2007. What was important to the writers, we were told, was the ability to stake a claim now, so when  Web video exploded, they'd get a piece of it.

Last fall, Hollywood was offering the writers a 1.2% rate for shows streamed on the Internet, and the writers have recently agreed that they would settle for that. But in the deal negotiated by the Directors Guild of America last month, considered a possible template for the writers, the studios are now just paying a flat license fee -- $1,200 for the right to stream an hour-long show for one year.

Near-term, that sum probably means more money for the writers, as advertisers are still trying to get their heads around Web video, so the money isn't pouring in yet. But it will. And when it does, the writers will have a much harder time getting a piece of this stream. The writers knew that before they went on strike--and that's why they went on strike. But that knowledge doesn't appear to have helped them get what they want.