One statement in particular festers at me. It was from a posting at Blogcritics.org from Dan Uno. In an article titled The WGA Strike: Striking Back at Writers and Producers. The post claims not to be a union busting article, and to be fair he does make a couple of points about how the producers forced the strike and the need to pay the writers more. However, it is his fundamental lack of understanding of the residuals system that drives me to distraction. Here's what he wrote:
I agree that the writers should get paid a fair share, and perhaps even be given a bonus if the show is a hit, but demanding that this money come from DVD sales and Internet broadcasts doesn't jive with me. As an analog consider the following. An amusement park hires an engineering firm to build them a new roller coaster. They agree on a contract, sign off, and the coaster is built. Now, the ride becomes a success and millions of people are going to the amusement park for this particular coaster and buying pictures of the terrifying final dive as souvenirs. Does the amusement park owe the engineering firm a slice of admissions or picture sales generated because of their roller coaster? No, but maybe they do.
As analogies go this one couldn't be more wrong-headed. A roller coaster isn't a TV show and a DVD isn't a photograph of people on the ride.
Let's take a look at how a roller coaster is built and compare it to what happens with a movie or TV show. An amusement park – let's say Cedar Point in Sandusky Ohio because they have one of the greatest collections of roller coasters in North America if not the world – orders a new roller coaster. Call them the Studio or the Network (although that's a bit tortured – they could just as easily be the Theatre, but no theatre owner has ever been asked what movie he wants the movie makers to make). The order goes to one of the big companies like S&S Arrow or Intamin AG – Call them the Producers but again the analogy is tortured as we will see shortly. But Cedar Point has a lot of input into exactly what they want from the coaster before pen even touches paper at the roller coaster company. Is it going to be an adult coaster or a kids' coaster, steel or wood, looping, sit-down stand-up, abover the rails or suspended. That's all coming from the people commissioning the project.
With all that information in place the company can now get to work. The Designers come up with the design of the coaster, based on the parameters given by the company. They are, of course, the Writers. The Manufacturing Pant comes up with the individual structural elements and when the time comes, put the thing together. This is a bit less clear cut, but I suppose the Manufacturing process would fill the part of the Actors. The Engineers check the designs to make sure that there are no obvious ways to get people killed, either from structural defects shown in the plan or from stretching the laws of physics in such a way that everyone in the first car out dies from having their neck broken by excessive G-force. The Engineers then supervise production of the roller coaster. Clearly the Engineers are the Directors. Once everyone has done their jobs the company turns the roller coaster over to Cedar Point, which opens it with great hype and fanfare.
The process is a lot more amorphous in Television. The networks have a demand for a certain number of shows every year. The creators (who if they're lucky become Executive Producers) put ideas forward to the studios in the form of spec scripts and some of those are made into pilots and a fraction of those are actually bought by the networks and made into series. The Writers write the episodes; the Actors act in them and the directors direct them. I'm sure anyone reading this who is actually in the Industry of making movies or TV shows (and probably in the Roller Coaster business as well) will explain to me exactly how simplistic this explanation is, but while the process of creation is vital it isn't the key point in the analogy.
When Cedar Point buys a new roller coaster they know exactly what they're getting. It is going to be a specific size, use this much steel and wood and concrete; the cars will hit this speed on the first hill and the ride will take exactly this length of time from when the car leaves the entry station to the time when the last passenger gets out; the ride will be able to be capable of handling a specific maximum number of people per hour. The roller coaster company is paid a fixed amount based on this, and the company is able to pay the Designers and Engineers and manufacturing and construction works a fixed salary based on this knowledge. A Studio and a Network has no such guarantee. There are no guarantees that the movie they will make will be Night At The Museum (gross $250 million on a budget of $110 million) because it could turn out to be Evan Almighty (gross $100 million, budget $175 million) or Miss Potter (gross $2.9 million). A TV series could be CSI (in its 8th season with no end in sight) or it could be Emily's Reason Why Not (one episode). On the other hand Studios and Networks have something on their side that Cedar Point doesn't because a TV show or a Movie isn't a Roller Coaster.
Let's say that Cedar Fair Entertainment, which owns Cedar Point, decides that they love their new roller coaster so much that they decide that they want one in Canada's Wonderland in Vaughan Ontario and Carowinds Park in Charlotte North Carolina and Knott's Berry Farm in Buena Park California. They can't simply wave their arms or something and have copies of the coaster appear at each of their parks. No, they have to go back to the roller coaster manufacturer and pay to build new coasters that are going have some variance because each location is different. And the company gets paid each time that coaster is replicated. Cedar Valley's profits go up with each new coaster but the Designers and the Engineers and the guys working to manufacture and build it are all compensated as well. Each replication of that roller coaster is a separate production.
Now consider the Movie and Television Producers – the ones represented by AMPTP. A movie can be sold over and over again. First they sell it via Pay-Per-View, then to premium cable, then to either basic cable or to a broadcast network. Somewhere along the line DVD comes out, and maybe the mini-disc for the PSP, and even the legal iTunes download. A TV show can be sold in syndication to a broadcast network or a basic cable network, it can be put out on DVD and it can be sold online. And all of these things can be done at minimal cost, because unlike a roller coaster each replication of the movie or the TV show is not a separate production. So profits go up significantly while the cost of the TV show or movie either remains stable or increases only slightly.
Okay, so why not pay the Writers and the Directors and the Actors a fixed amount of money that covers everything? The answer is that you don't know how successful the movie or the TV show will be. Let's say that you pay two writers $50,000 to write 13 episodes of two different shows. Writer A writes for CSI while Writer B works on Emily's Reasons Why Not. Writer A's 13 episodes are seen on CBS the time they debut, and then are rerun several times on the network (because CSI has been one of CBS's "go to" shows when something gets cancelled). They are then included as part of the shows syndication package in the United States and worldwide. They then goes onto DVD in the United States and worldwide. The shows are also put onto iTunes in the US. All of which is revenue for the Production Company. On the other hand, Writer B`s 13 episodes of Emily`s Reasons Why Not turns out to be one episode, even though he`s probably paid for all 13 because he has a contract. Emily`s Reasons Why Not does not rerun even once; it is not syndicated everywhere; it does not go onto DVD and the people at Apple bust a gut laughing when the producer suggests putting episodes on iTunes. So do you pay – or worse accept – a flat salary based on the premise that the show is going to be CSI or based on the premise that it`s going to be Emily`s Reasons Why Not?
The system of royalties and residuals is based on the premise of rewarding success and it has worked for at least a century. When a writer sells a book he/she doesn't (in most cases) sell the book outright to the publishers for a one-time lump sum. Instead the writer is paid an advance and then gets paid a royalty once the writer's percentage of the sales exceeds the amount of the advance (did I get the basics of that right Bill Crider?), plus getting paid if his book is turned into a movie or a TV show. According to Wikipedia residuals are "a payment made to the creator of performance art (or the performer in the work) for subsequent showings or screenings of the (usually filmed) work." And that's what the strike is mostly about, increasing the payments to the creators for subsequent showings of the work based on the success of the format in which the work is being presented (which both costs less to manufacture than VHS tapes and costs more per unit).