Analysis: DGA deal to keep Hollywood busy

LOS ANGELES, Sept. 24 (UPI) -- The new three-year contract agreement between directors and producers not only reduces the likelihood of an entertainment industry strike in 2005, it also suggests that Hollywood may have found a way to resolve a difficult issue of contention -- how best to divide the proceeds from DVD sales.

The major Hollywood unions have made it clear in public statements for several years that they expect their members to draw a greater share of the revenues from home-video sales, particularly as DVD revenues have become arguably the most significant part of Hollywood's overall revenue stream. However, when the Directors Guild of America and the Alliance of Motion Picture and Television Producers announced agreement on the deal Thursday, DGA president Michael Apted said guild negotiators decided not to bargain hard for a change in the decades-old formula that is still used to determine residuals for home-video sales.

"After careful consideration and intensive research, our view is that this is the wrong issue at the wrong time for our guild," said Apted. "The reality is that our members are earning unprecedented residuals."

According to DGA figures, residuals for guild directors have grown from $36 million in 1984 to $225 million in 2003. The guild said that home-video residuals for its members increased 54 percent between 2000 and 2003 and grew by 35 percent just in the last year.

"When we looked further, we saw a residual system that paid our members without regard to the performance of their films," said Apted. "Directors have continued to receive substantial residuals payments whether or not their pictures are profitable."

Gil Cates, head of the DGA negotiating committee, said his side focused instead on healthcare benefits.

The DGA health plan was projecting annual double-digit cost increases and seemed likely to run out of funds by 2008. Cates said the new deal with producers will result in a reserve of more than $40 million instead.

Overall, Cates said, the deal provides the DGA with the largest package of economic benefits in its history, including increases in wages and residual payments.

According to a report in Daily Variety, the agreement diminishes the prospect of a Hollywood strike next year by eliminating the possibility of a strike by all three major guilds -- the DGA, the Screen Actors Guild and the Writers Guild of America.

Apted said that was the main idea behind concluding negotiations early on a contract to replace the one that is scheduled to expire next June 30.

"This deal not only resulted in significant gains for our members," said Apted, "it also reaffirms that good deals can be made early between labor and employers -- keeping our members and the industry working."

AMPTP President Nick Counter concurred.

"We commend the DGA leadership for their commitment and thoughtful approach to what are complex and crucial issues," said Counter. "Early negotiations allowed us to reach a fair and equitable deal while preserving the stability of the industry."

SAG is expected to commence negotiations with producers as early as next month. SAG spokesman Seth Oster issued a statement suggesting that the actors' union will negotiate aggressively to change the DVD residual formula.

"SAG has committed to begin negotiations with producers this fall, and we've been very clear in stating the priorities for our working members," said Oster, "an increase in contributions to our pension and health plans, a greater share of the residuals pie and stronger protections for background and stunt performers. We will aggressively bargain those issues."

The WGA, which has been working without a contract since May, has not yet set a date to begin negotiations on a new contract with producers.

WGA officials had said that their strategy in going slow on talks was intended to give the DGA extra leverage on issues including the DVD revenue-splitting formula. Given the manner in which the directors' guild resolved that issue, it remains to be seen how hard the WGA and SAG will be able to push on it during their contract talks.

In any event, the DGA deal -- which will be submitted to the guild's national officers on Oct. 2 before it is put before the membership for a vote -- seems to hold out the promise of several more years of labor peace in Hollywood.

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