Media Talks Driven by Streaming Growth, Part 2

December 5, 2017

Ray Hair  -  AFM International President

This is the second of two articles on the continued rise of streaming and its effect on Federation media industry negotiations. Read the first here. 

Last month, we discussed the Federation’s January 2017 deal with the sound recording industry, where major record labels agreed to earmark a percentage of domestic and foreign streaming revenue toward the American Federation of Musicians & Employers’ Pension Fund (AFM-EPF), Music Performance Trust Fund (MPTF), and the Sound Recording Special Payments Fund (SPF). We also discussed the skyrocketing growth of streaming revenue from recorded music, which now accounts for 62% of total record industry income.

Having successfully negotiated a portion of record company streaming revenue for AFM-EPF, MPTF, and SPF, we now examine our deals in live television and motion picture-TV film with a view toward how the streaming of digital content has disrupted traditional consumption models in those industries, and further, how entertainment guilds responded to the fast and furious changes in the television, motion picture, and TV-film landscape.

Ten years ago, the Writers Guild of America (WGA) engaged in a 100-day strike in order to obtain a share of revenue generated by movies and TV shows when distributed over the Internet—streamed on smart TVs, computers, or on mobile devices. In doing so, the writers forced the media industry to address how the creative community would be paid in the digital future. Earlier this year, WGA came within hours of another strike, pushing the Alliance of Motion Picture and Television Producers (AMPTP) to grapple with complicated issues like the rise of on-demand binge-watching, reductions in seasonal episodes, and serious competition from Netflix and Amazon.

In television, the term “peak TV” refers to the rapid increase in original scripted shows on broadcast, cable, and digital platforms. There is more work than ever for creators—actors, writers, directors, and also musical staff—but overall income is falling due to diminishing residuals. The broadcast networks no longer program reruns of most shows, because viewers have more options to time-shift and catch shows later, via on-demand platforms. Newer generations of viewers have been attracted to original, on-demand hit series from Amazon and Netflix that run without commercials. Older seasons of hit shows originally shown on broadcast networks are now binge-watched by viewers on their own schedules, ad-free, weaning them away from live TV.

For the WGA, broadcast network residual fees sank more than 20% from 2010 through 2016, but residuals from TV reruns made available on digital platforms were up by 896% over the same period—a vivid illustration of the rapid consumer trend toward digital.

One effort by local TV channels and broadcast networks to compete with on-demand streaming of legacy hit content has been the use of digital subchannels, known as diginet. The CBS oldies library from the 1950s through the 1980s, which includes such popular shows as Happy Days and Star Trek, and 100 other iconic series, is now packaged together and available over the air from CBS outlets on digital subchannels, and also available on cable and satellite.

The entertainment guilds have aggressively bargained new media compensation patterns through the door that was courageously opened by WGA 10 years ago. The patterns have evolved through subsequent rounds of collective bargaining with the corporately aligned broadcast networks and film studios, whose interests converge because they produce much of the scripted programming for Amazon and Netflix. Consequently, the push toward coverage of original on-demand programming, and for residual payments when broadcast TV programming is distributed digitally, has been exceedingly slow and difficult.

Progressive negotiations for AFM coverage of television shows and films distributed digitally are concentrated in three main areas.

First, there is the question of whether the content is made originally for Internet distribution in the first place. On this point, despite the uncertain economic nature of new media production, all of the entertainment guilds have fought hard to obtain fair compensation from producers in the production of original series made for online, on-demand consumption.

House of Cards, Mozart in the Jungle, Transparent, and Master of None are a few examples of dozens of popular episodic series available from subscription video on-demand (SVOD) services, all scored under acceptable conditions, under appropriate AFM contracts.

Then there is the question of residual payment patterns, which fall into two categories. The first is how musicians get paid when traditional TV shows and films, or excerpts from shows and films (clips), are made available on advertiser-supported free streaming sites, such as broadcast network or affiliated sites, YouTube, or any other free advertiser-based video on-demand services (AVOD). The second category is how musicians get paid when the consumer pays a fee to view content, either from an SVOD service like Amazon or Netflix or as an electronic sell-through (EST) or rental from a multi-channel video programming distributor (MVPD) like Direct TV or a cable TV service.

The Federation’s negotiating team will meet with representatives of the broadcast networks in Los Angeles, December 11-15, to continue our discussions toward fairness in the production of live television and the digital distribution of programs. I will update you on the process of those discussions next month.

In the meantime, please accept my best wishes for a happy and healthy holiday season and a productive New Year.

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