Writers strike is a go

[Mistwell]

This is incorrect. That's the lowest DVD price Wal-Mart offers, and only they sell some titles for that price. If you look at their top sellers page, for instance, there are only a few titles there selling for $14.87.

It's what they sell new bigger movies for. So unless you are claiming they sell them for less than they buy them for, the numbers are not adding up.

Indeed, I checked some wholesale prices through my business contacts, and they look to be around $10.90. You can believe that or not. But that seems to be the real number. And the wholesale number of course does not account for marketing or shipping or packing or manufacturing. So the real profit margin on DVDs is likely around $6.00 or so to the Producers. At least, that is my estimate.

But, in any case, whether the studio profit is $12 per DVD or $10.50 doesn't really make a substantial difference for the purpose of this discussion.

Indeed. Let's leave it at "Producers make much more on DVDs than writers. They will make much more on DVDs than writer's even if the Producer's entirely gave in to the demands of the writers." The question is whether the Producer claim that they are taking massive losses on theatrical releases and use the profits from DVDs to compensate for those losses just to be able to inch towards breaking even, on most projects. That point remains disputed.

 

[Mistwell]

Thanks for that last post Grog. My wife and I were just wondering about this last night. We assumed there must be some entity representing the studios, but were trying to figure out how the individual producers fit into this. We have heard that there are several producers honoring the strike, which didn't make any sense if they were on the opposite side of the table.

For the most part, Producers who are honoring the strike are Writer-Producers (which is common - so common there are a set of rules covering just them).

 

[Mistwell]

It doesn't matter how much their net is in this case. The studios appear to gross about $12 million on that million unit delivery. The writers currently get paid about 0.005% of that. Note that this is not 5%, or even 0.5%, this is five thousandths of one percent. Whether or not the studios net a ton or not on a DVD sale, the fact that the writers get five thousands of one percent simply makes the studios look bad. Worse even that saying the writer gets 4 cents per DVD.

I think if you think the net doesn't matter, then we are not communicating.

Let's say a film costs $63M to produce, and $37M to promote, so it costs $100M to make. It makes $100M in theater sales, $50M of which goes to the theaters and $50M of which goes to the studio. So the studio is currently down $50M. The movie then goes to DVD, and costs $2M to produce and $2M to promote. It sells 1M copies, with 5% returns, so sells a total of 950K at $10.88 profit each (according to the WGA that is the correct number), for a total profit of $10.3M. The studio is now down $39.7M on the project, and still owes the writer $64,800 beyond their initial compensation. The writers are arguing they should instead be paid $129,600 instead at this stage.

So yes, it is highly relevant what the net is in this case. The DVDs are not looked at in a vacuum. They are part of the entire project, and their profits are a critical element of the entire project. You cannot just consider the DVDs profit margins without looking at the cost of the movie that is on that DVD. If you do, you're not getting the full picture.

They don't have to pay an actor $20 million or do a full blown $40 million advertising campaign if they do not want to.

Yeah, and they don't have to be in business either. Paying those fees is what employs those writers. I assure you, the writers do not want to see a reduction in those costs - indeed they have said they are in solidarity with the actors and want to see the actors paid more as well. This is a business, and it is driven by market forces. Market forces dictate those fees, not the studios. There really isn't a choice about it. That is the cost of doing business in this industry right now.

Lots of movies are made for well under $100 million, and most of those appear to actually make money.

The numbers hold true generally speaking below $100M we were just using that as an example. But you are wrong - small movies are not doing well right now. Indeed, that is a big complain in Hollywood right now - they are being drowned out by the big movies such that small movies are no longer profitable.

The decision to lay out huge amounts of money on a particular movie is entirely within the perview of the studios.

This is not a realistic position. It's no more the decision of the studios than any other industry that is strapped by high costs due to competition. The studios are not an exception to capitalism - indeed as publicly traded companies they are MORE beholden to market forces than most companies.

They make the decisions concerning how much money to budget and can figure out a way to stay within that budget. If they are losing money by being profligate, that is their problem alone.

It is everyone's problem in that industry. It is the writers problem, and the directors problem, and the actors problem, and everyones problem. You're view that Producers are just crazy lunatics burning money because they feel like it is really not realistic. They are all in it together, and all reacting to the same market forces anybody else is reacting to. It's just people in business.

Once again, you seem to be mistaking "opportunism" or "set in stone reality". The costs of these productions have grown, not because of some law mandating that they do so,

The law of supply and demand actually is the cause.

but rather because studios decided they could get the additional funds from DVD sales and other aftermarkets. Costs have grown to encompass expected revenue. The problem is that the studios have decided that this additional revenue belongs entirely and exclusively to them - and that they don't have to bother to share it with anyone else. That is poor planning on the part of the studios, but not an immutable fact of life.

Not really...this was planning done by the Producers along with the Writers and Actors and Directors as well. They ALL agreed to lump the aftermarket in with the initial showing to assess the value of the project. If you want to change it to look at DVDs in a vacuum and theatrical releases in a vacuum, I assure you the writer's will be rapidly unemployed and out of business. They don't want the thing you seem to be advocating. It is not in anybody's best interest. They just want more fees on the DVDs - not to separate the DVDs from the theatrical numbers.

No. I looked at your stuff intiially thinking "hey, the studios might have a point", but things like 5 thousandths of a percent, and the fact that you seem not to understand why costs have grown, getting the cause and effect exactly backwards has convinced me that the stuidos not only don't have any very good arguments, but if this is the best they can come up with, they have no arguments.

I'm sorry you feel that way. If you have some proof that my cause and effect is backwards, please link to it. I'd love to see something that says that market forces were not the cause of increased production and advertising costs on movies.

 

[Felon]

Again, it was a response to people saying that the Producer's are evil wealthy corporations. If the wealth of the Producer's is not relevant to you, then I can see why the wealth of the Writer's is not relevant to you. But, it seems to be relevant to some people, and those people may find that information useful. If a wealthy writer striking for even more money puts a poor grip or gaffer out on the streets to lose his house because he cannot pay his mortgage, for some that is meaningful. I agree with you that it shouldn't necessarily be important, but for some it is.

It should not be news for anyone when I say that many folks have very childish, simplistic modes of thinking. They want to split the sides up into "bully" versus "underdog"---mainly because WGA-penned fiction has ingrained that scenario into our minds in thousands and thousands of movies and TV shows. We think we have to find someone to root for.

The first big reality check is that it's all about money, regardless of the side. The writers are looking out for their welfare, and to blazes with the gaffers and grips and us, the viewers.

The second big reality check is that unions have a nasty habit of taking for granted the members they are supposed to represent. It is usually not a big love-in where every little guy gets his say in matters. It's usually a minority of major players making all the decisions for everybody else, and unleashing holy hell on any dissatisfied members that don't step in line with their leaders' will. Point of fact: you may or may not want to join a union, but usually you wind up doing so because you have to, and this is the case with the WGA.

 

[Mistwell]

By the way, in 2006, the average movie cost $65.8 million to make according to the MPAA.

I don't think that is correct. It cost $65.8 million to produce, which is what that article says. Production costs do not usually include marketing costs. Marketing costs tend to be about 50% of production costs. So the total to make was probably $98.7M, which is pretty darn close to my example $100M (and $100M was a lot easier to calculate).

But really, the numbers hold true for smaller productions as well. Let's take for example the movie 30 Days of Night, which did reasonably well. It cost $30M to produce, and $15M to market, for a total cost of $45M. It made $48.7M domestically and internationally, for a total of $24.35 to the studio, for a current loss of $20.65M. Lets say it sells 1M DVDs as standard, gets the 5% returns, gets the standard $10.88 profit per DVD sold, for a total of $10.33M. The film is now at a loss of $10.32M (and that is for a movie that did relatively well). They are going to hope that the DVDs sell better than the 1M, and that they get additional aftermarket money to make up the loss. It's going to be rough, but if they can get 2M DVDs sold, they will squeak out a profit and probably get a sequel.

Studios pay for almost all of their movies from a handful of success stories. They were hoping for a SAW II type movie. "Saw II," cost just $4 million to produce, $2M to market, and earned $87 million in theaters for $43.5M to the studio, which is a massive profit (not including the DVDs). That money went to make up for many movies that had losses for the studio.

 

[Storm Raven]

I think if you think the net doesn't matter, then we are not communicating.

The net doesn't matter ever in Hollywood. The net is an illusionary number. The only thing that matters is the gross - and the question is "how much of the gross should writers get from DVD sales". Whether the studios make money or not is not the writer's concern - it is up to the studios to control their own costs to a degree where they can make a profit. The question is "how much of this giant revenue stream should the writer get".

Saying they should get six one thousands of a percent just makes the studios look bad.

Let's say a film costs $63M to produce, and $37M to promote, so it costs $100M to make. It makes $100M in theater sales, $50M of which goes to the theaters and $50M of which goes to the studio. So the studio is currently down $50M. The movie then goes to DVD, and costs $2M to produce and $2M to promote. It sells 1M copies, with 5% returns, so sells a total of 950K at $10.88 profit each (according to the WGA that is the correct number), for a total profit of $10.3M. The studio is now down $39.7M on the project, and still owes the writer $64,800 beyond their initial compensation. The writers are arguing they should instead be paid $129,600 instead at this stage.

And once again you act like it is set in stone that movies cost this much to make and market. It clearly does not. Like I pointed out before, for every Spiderman 3 which costs $258 million to make, you have to have five movies that only cost $20 million to make. The studios have only themselves to blame for being unable to engage in cost control. It is up to the studios to control their own costs to be able to make a profit within the expected range of their revenues, and it is not the writers' responsibility to help them out. When you cut up the pie so that one side gets six thousadns of a percent of the revenue, there isn't much call to be sympathetic when the other side cries poor.

So yes, it is highly relevant what the net is in this case. The DVDs are not looked at in a vacuum. They are part of the entire project, and their profits are a critical element of the entire project. You cannot just consider the DVDs profit margins without looking at the cost of the movie that is on that DVD. If you do, you're not getting the full picture.

And once again, you get cause and effect backwards. Studios could make movies in a manner that they would turn a profit on the theatrical release. They don't because they have come to expect that the DVD sales and other secondary markets will be entirely theirs and make otherwise unprofitable pictures break even. It is not that the secondary markets are necessary to make the movies profitable, it is that the revenue from the secondary markets has caused studios to increase the amounts they spend up front. The writers are merely saying that more of that huge additional revenue stream should be theirs. And the studios are whining because they have developed a sense of entitlement that they never should have had in the first place.

Until you figure out that it is the added revenue that drives the increase in amount spent, and not the other way around, your arguments will not make any sense.

 

[Grog]

The first big reality check is that it's all about money, regardless of the side. The writers are looking out for their welfare, and to blazes with the gaffers and grips

Actually, the gaffers and grips and other production crew members have a lot at stake here, too. While they don't get residual payments directly, residual money does get contributed to form their pension and health insurance plans. If the studios succeed in cutting off (or greatly reducing) residuals for material shown on the internet, then as more and more stuff moves online, those pension and health insurance funds are going to disappear.

So while the writers are unquestionably looking out for themselves (a fact which I don't think anyone here has tried to deny), if they can force the studios to make a fair deal for residuals for online content, the gaffers and grips and everyone else will benefit, too.

The second big reality check is that unions have a nasty habit of taking for granted the members they are supposed to represent. It is usually not a big love-in where every little guy gets his say in matters. It's usually a minority of major players making all the decisions for everybody else, and unleashing holy hell on any dissatisfied members that don't step in line with their leaders' will.

Well, in this case at least, that isn't true. The contract negotiations are about setting minimum payments for a writer's work, and the major players in the WGA don't work for minimums, so that has no effect on them. The major players already get sweet residual deals that make them millions of dollars, and they aren't going to be getting any more after the strike is over, regardless of what happens with the contract. The strike is about making a deal for the rank and file.

And, the WGA put the question of a strike up for a vote before all its members, and the members voted over 90% in favor of striking, so there you go.

 

[warlord]

So Fox is making new episodes of Family Guy without MacFarlane because he's busy striking. Can you say dick move?

 

[Mistwell]

The net doesn't matter ever in Hollywood. The net is an illusionary number. The only thing that matters is the gross - and the question is "how much of the gross should writers get from DVD sales". Whether the studios make money or not is not the writer's concern - it is up to the studios to control their own costs to a degree where they can make a profit. The question is "how much of this giant revenue stream should the writer get".

Saying they should get six one thousands of a percent just makes the studios look bad.

It's not six one thousands of a percent. It's actually MUCH more, when you look at the percent of PROFIT. Which is what payments after the initial payment to work are supposed to be based on.

Net matters. Of course it matters. Writers are paid to write stories that make money. Like I said, your analysis is NOT the analysis supported by the writers or their union. They do not want to pretend that DVDs are looked at in a vacuum and the net for the movie that the writer wrote is not relevant. They would all be out of business if the industry did what you seem to be advocating. You really do stand entirely alone in the opinion that "making a profit for a project" is not a concern for all the parties involved, including the writers. I mean, what kind of business do you think it is where profit would not be relevant?

And once again you act like it is set in stone that movies cost this much to make and market. It clearly does not.

It does. I don't know how much more evidence you need than the entire capitalist system! Show me (and them) evidence that they are burning money for no good reason. We would all like to see it. Every player in Hollywood would love to see it.

Like I pointed out before, for every Spiderman 3 which costs $258 million to make, you have to have five movies that only cost $20 million to make. The studios have only themselves to blame for being unable to engage in cost control.

What makes you feel that those 5 movies would have done better than the one movie? I just showed you an example of a $30M movie that results in the same kind of failure. It doesn't seem productive for you to ignore the example based on your own description.

It is up to the studios to control their own costs to be able to make a profit within the expected range of their revenues, and it is not the writers' responsibility to help them out.

They are doing their best, and part of that, by agreement of the writers as well, is to consider the theatrical release, the DVDs, and all other aftermarket sales as part of the whole package and not distinct parts that should be looked at out of context in a vacuum. You are the only one claiming each portion should make a profit on it's own - which would result in the writer's being fired en mass.

When you cut up the pie so that one side gets six thousadns of a percent of the revenue, there isn't much call to be sympathetic when the other side cries poor.

Again, it's a percent of profit, not of gross, and as a percent of profit it is MUCH larger. You're playing to a false talking point meant to manipulate you emotionally, and not a logical calculation based on the actual facts. If it costs me $10 to make a T-shirt, and I sell the T-shirt for $11, and I give you $.50 as the artist who made the image on the shirt, you have not received 4.5%. You received 50%. That is reality. That is how business works. You get a piece of the profit of the work you contributed to, not a piece of the total sale amount.

And once again, you get cause and effect backwards. Studios could make movies in a manner that they would turn a profit on the theatrical release.

How. Spell it out. They want to know. I want to know. Writers want to know. EVERYONE wants to know how to make the market change based on studio decision-making alone.

They don't because they have come to expect that the DVD sales and other secondary markets will be entirely theirs and make otherwise unprofitable pictures break even.

Indeed because the market changed such that people like to watch movies from home more often, and the writers and producers and all other major players got together and they all agreed to accept that change and go with it.

It is not that the secondary markets are necessary to make the movies profitable, it is that the revenue from the secondary markets has caused studios to increase the amounts they spend up front.

Prove it. If it's not necessary, then prove to me how it is done. I have given you numerous examples to show why it works that way. Your turn. Give me a link at least to anyone who agrees with your position that all theatrical releases should be profitable in and of themselves without any DVDs or other after-market stuff. If you are right, there should be hundreds of articles on the subject.

The writers are merely saying that more of that huge additional revenue stream should be theirs. And the studios are whining because they have developed a sense of entitlement that they never should have had in the first place.

I think that is a mischaracterization of what is going on. While I agree the writers deserve more, it is not because studios are whining based on a sense of entitlement. They are whinning because they are facing a massive loss of profit in recent years, with an upcoming actors and directors negotiation coming up, and a rapidly changing market based on the internet and DVRs and other new media that they don't understand yet. They look at the audio recording industry, and TIVOs, and illegal ripping and downloads, and free media, and declining box office sales, and angry investors, and they are panicking over what could happen. And let me tell you, most of the writers are thinking the exact same thing. This really is a family fight.

Until you figure out that it is the added revenue that drives the increase in amount spent, and not the other way around, your arguments will not make any sense.

Well, they won't make sense to you, but I suspect at least that part makes sense to everyone else. I think everyone else understands that this about shares of profit, and not about shares of gross revenue, even if they disagree with the Producer's across the board. Gross revenue is not really relevant to the debate. when people say "Their fair share slice of the pie" the "pie" is profits, not all the money that goes back and forth in the entire industry. Arguing that the writers deserve more of the profit for movies and TV shows they write makes sense. Arguing that writers deserve more money if they write stuff that bombs, because profit doesn't matter, does not make sense. It's a capitalist business, not a collective redistribution of wealth.

 

[Mistwell]

So Fox is making new episodes of Family Guy without MacFarlane because he's busy striking. Can you say dick move?

If you are looking for sympathy for MacFarlane, you won't find it from me at least. My animator friend worked for him for many years, and left for the Simpsons because MacFarlane was over the top [that word you just used that starts with a D]