The coverage of the WGA versus AMPTP” negotiations has left me a bit wanting. My initial takeaway from 95% of the news coverage is that…
Nothing happened?
Not that nothing happened, per se, after the initial call to go on strike, there wasn’t really anything noteworthy. I mean, strike signs are funny, but they don’t really answer the burning questions I have about the strike. Aside from the WGA releasing their demands (which I liked) and the AMPTP responding to those demands a couple of days later, there was no new news.
Meanwhile, so much of the news coverage feels virtually identical:
Worse, though, has been the coverage of why the strike happened. As I read everywhere from the L.A. Times to the New Yorker to even Politico, the story is fairly simple, that writers have it worse than they ever have. (Something the numbers don’t quite agree with, as I showed two weeks back.)
Frankly this opens up an opportunity for yours truly. As a newsletter writer, I don’t really care about daily pageviews and I don’t really care about “virality” to boost ad sales. Instead, I try to offer differentiated articles. That differentiation means either topics no one else is writing about, or topics that everyone is writing about…but in the exact same way.
When I write about the WGA going forward, I want to write the types of articles I would want to read. Today, that means why I think the negotiations broke down from a strategic perspective. Later this week, I’ll try to visualize/quantify the demands from both sides. Later this month, I’ll dive deeper into the tactics of both sides, and whether any studios/streamers should change their strategy. Plus I’m thinking about writing about the economics of Hollywood, and of course, residuals, but it all depends on how long this strike lasts.
Today, I really want to explore why a strike happened for the first time in 15 years, beyond the obvious “the writers want more money than the studios/streamers want to pay”, which is basically the obvious answer. In today’s article, I’m going to talk about…
- How the micro perspective clashes with the macro viewpoint
- The three types of power imbalance the AMPTP holds over the WGA
- Why you need a “postcard strategy” in negotiations and why one side doesn’t have it
- And the issues that I would put on my hypothetical WGA “postcard”
Before We Get to the Article, A Reminder of My Journalism Philosophy
Before we get to the article, let’s get somethings out of the way. Not to repeat the overused rhetorical technique of “It was the best of times, it was the worst of times” but talking about the response to my last article on the WGA strike…it sort of was. That article was one of the most popular pieces I’ve ever written, but it also generated the most “hate mail” if you will. I got some writers who vehemently pushed back on my results, but also a surprising number of folks thanked me for putting out some actual numbers. (And I really don’t want to oversell how many folks sent hate mail; the vast majority of feedback was quite delightful and respectful.)
So let me make some clarifications/explain my thinking and approach.
First, strategically, I understand why the WGA went on strike. My job is to analyze strategy. Business decisions. As I write below, on the AI issue alone, the WGA probably should go on strike. It’s that important and that critical. Also improving the stability of writer’s pay make sense.
This isn’t to say that I’m “team WGA” as I’ve seen a lot of other pundits and analysts say. (Indeed, on Friday alone, I think I got four different newsletters declaring themselves “pro-writer”.) But I’m not “team AMPTP” either! I’m on no one’s “team” so to speak. (With many reporters, even if they don’t say they’re on a side, it’s obvious where their sympathies lie.)
Second, and related, I’m going to criticize some of the WGA’s tactics, rhetoric and demands when and where appropriate. Even though I understand why the WGA went on strike, I have serious questions about their strategy and some of their demands. Even if you support the writers, that doesn’t mean that you have to agree with everything they’re doing or that the screenwriters are saying. (This Emmy winning writer knows what I’m talking about!)
It’s okay to disagree with other people! If anything, I think it’s more helpful to the WGA.
(I’d note: no one cares if I criticize the AMPTP, which is why most journalists feel free to criticize them! But that makes for a skewed information ecosystem, which isn’t healthy.)
No person or organization is perfect of flawless. If you want one-sided, pro-WGA coverage saying everything they’re asking for is great, you’ve come to the wrong place. If you want nuanced, fair analysis, with criticism and praise, welcome!
Anticipating one final possible criticism, I could see some people saying, “Well, criticizing the WGA is okay, but not during a strike! You have to show maximal solidarity!” And I disagree. As a journalist, that’s not my job nor should it be for 90% of journalists out there.
Okay, enough throat-clearing. Let’s try to explain this thing. Starting with strategy thoughts, today.
Differing Perspectives: Micro vs Macro
The biggest reason there’s an impasse in the WGA-AMPTP negotiations—and yeah impasse is probably too casual—is that the studios and the writers are looking at the situation from different perspectives: either the micro or the macro lens.
By the macro, I mean zooming all the way out. (I’m using “micro” versus “macro” in the economics sense of the words.) This is the WGA’s perspective. As I wrote in my debunking the myths piece, the WGA’s latest set of demands added up a raise of about $50 million per major studio. Considering that, as the Guild points out, the studios had a combined $28 billion (with a b!) in operating profits in 2022, that doesn’t seem crazy? Right?
As I covered previously, total WGA earnings peaked at $1.75 billion in 2019, which dropped to $1.54 billion in 2021. (These are non-inflation adjusted terms.) Asking for a $400 million raise is only asking for 1.5% of the $28 billion in operating profits of the studios in 2022. (Though a $400 million raise is a legitimate 28% increase in total compensation.)
So why don’t the studios agree? Because they’re looking at this on the micro level. By “micro”, I mean the show-by-show numbers.
While entertainment is a portfolio game—talk about an explainer I need to write!—shows are still greenlit on their individual chances to make or lose money. Increasing writer costs means that the margin of error for profitability shrinks. I’d add, the studios are also worried that if they give the WGA an 28% bump, they’ll have to give the DGA and SAG that bump this year. Then they’ll pass a bigger increase along to IATSE too. Cutting operating profits by 4-5% is no small thing to a balance sheet, even though the numbers sound small.
The way the studios look at this, those micro increases add up to a lot of unprofitable shows. And they won’t greenlight shows if they don’t think they have a chance to make a profit.
Take, for example, the WGA proposal to keep half of the writing staff on during production. On a macro level, this isn’t a huge ask. But consider the impact on a typical, ten episode, one-hour streaming show. This new rule would hire four writers for 20 more weeks, paying writers for 80 more weeks even though there may not be 80 weeks worth of writing to do. That’s easily $730K more in salary. (Want to see these numbers in action? Wait until next issue.)
Of course, spread out over ten episodes that’s only $73K per episode! And many one-hour dramas easily cost $5 million or (much, much) more nowadays. Again, we’re only talking 1% of the budget.
Again, it’s the micro vs. the macro.
(One could flip this of course, and basically point out that both sides pick and choose their perspective. Writers point out that, on a micro level, they’re not getting paid enough, especially staff writers. Their pay is minuscule compared to total production budgets, especially compared to the importance of their work on the overall product. That’s a micro look. Studios would point out that streaming still loses money, so there’s no more money to give the writers. That’s a macro look.)
Power Asymmetry
The other big thing to note about this negotiation—and partly why the WGA went on strike—is that they know that the members of the AMPTP are basically much better positioned after the negotiations to adapt than the individual members of the WGA. And I’d chalk this up to three power imbalances:
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