DEPRESSING NEWS
Like many of you, I read the most recent ACTRA releases detailing the breakdown of latest negotiations with a very heavy heart. The numbers looked very bad and the gap seemed to be widening, not diminishing. The CFTPA was offering $5.65 per day for one year’s use in new media. ACTRA’s previous offer had amounted to $65.50 per day per year. How could they still be that far off, especially with a top notch mediator involved?
Rather than despair, I decided to take a closer look at these numbers and how they compare to the reality of the industry as it is today – not as it might be 10 years from now. Since the current producer’s proposals include a sunset clause (the entire new media issue is re-negotiated from scratch in 3 years) and will only have a short term effect (only for as long as the buyout period lasts – after that it’s all the standard 3.6% of revenue sharing), I thought it would be most reasonable to assess today’s numbers and consider how much they might change in the coming three years.
What I discovered is that internet distribution of film and television is not very profitable right now. It may be in the future. In fact, I have no doubt that digital distribution will replace DVDs (even BluRay & HD-DVDs at some point), but not until the technology is everywhere. VHS didn’t take off until a certain threshold of machines where sold – same with DVDs and the DVD player not to mention the Internet itself with PCs. So, until most households have Apple-TV’s or the HP Home Entertainment system or whatever the method may be, then there will not be a whole lot of money being made on the internet.
Will that happen in the next 3 years? Maybe, but I doubt it – we’ll probably go through a BluRay/HD-DVD phase before everything goes digital.
DISNEY’S INTERNET SALES REPRESENT LESS THAN 0.2% OF GROSS REVENUE
To put things into perspective consider this: iTunes sold about 1.3 million Disney movies in 3 months. At an average price of about $12, that’s about $15.6 million. That may seem like a lot of cash for 3 months (about $62.4 million per year), but considering that Disney’s gross revenue is somewhere around $34 billion, these sales represent less than 0.2% of that; so it’s not a big money maker for them at this point. Granted, iTunes only accounts for something like 67% of online movie sales, so that figure could rise to 0.27% – however other "online movie sales" are almost exclusively
DVDs, so those numbers don’t really figure into the new media issue to begin with. Another way to put this into perspective: in about 9 days of DVD rental, Disney’s "Pirate of the Caribbean" movie made the same amount that the entire Disney online catalogue made in 3 months. And all this is assuming that takes no cut whatsoever from those sales, and we know that’s not the case.
So it’s going to be a while before the digital revolution has a real impact. And when it does, we’ll be the better for it because the numbers on the table from both sides indicate that we’ll be getting 3.6% of the DGR from those sales (once the buyout is finished) and that’s a much better deal than the current DVD agreement that ACTRA so often bemoans.
BACK END VS. FRONT END
With all this in perspective, it now seems like a losing strategy to demand a big front end payment in return for the right to distribute in a medium that is not really profitable. ACTRA was asking for 42% increase in the buyout payment for television production (from 105% to 150%). This might seem reasonable if there was a comparable rise in revenues, but there simply isn’t.
Online TV shows are mostly offered for free, with the exception, once again, of iTunes.
A "TOKEN PAYMENT"
Like I said, I was quite despondent after reading what the producers offered by way of a "front end" payment for internet use. They offered 5% of the daily rate for 5 years use. Put into raw numbers, that’s $28.25 for 5 years use – that’s a far cry from the $262 ACTRA was asking for 4 years use.
Calculated on a yearly basis, the producers were offering $5.65 per day for 1 year of use while ACTRA had been asking for $65.50 per day per year.
Let’s look at the real impact of these numbers. For an actor working 60 days a year the difference would be about $14,000 per year. That’s quite a gap and that’s what made me so depressed on reading this news – the divide is so vast! So I asked myself how they could possibly be so far off – how do the numbers proposed match up to the reality of the industry? So I decided to look at the numbers myself and that brought me back to iTunes…
THE REAL NUMBERS (SO FAR AS I CAN FIGURE)
Apple recently announced that it has sold 50 million television episodes to date (since October 2005) and currently has 350 shows available. I visited the iTunes store to try and figure out exactly how much revenue that meant.
Calculated a few different ways, I estimated that there are approximately 3,500 episodes available that are non-reality/documentary shows, i.e. shows involving actors. That accounts for something between 60 and 75% of the content as best I can figure without counting each and every episode. For the sake of argument, let’s go with 70% – somewhere at the high end of that estimate. Working on averages, we can assume that the dramatic episode sales have generated about $70 million in a year and a half (that’s 35 million episodes at 2 bucks a pop). When launched, there weren’t as many shows available, so let’s generously call that $70 million per year. Ok, seems like
a lot. Now let’s estimate how many "actor days" were involved in generating that $70 million. I think a very conservative estimate would put each episode’s "actor days" at about 49 (an average of 7 days per episode X 7 actors per day). The real number is probably significantly higher, but I’d rather be cautious here. That would mean that a low estimate for 3,500 episodes would include about 171,500 actor days total. If the yearly revenue from all those episodes is $70 million, then the established actors cut at 3.6% would be just over $2.5 million dollars. Divided by the number of
"actor days", that would mean an extra income of something like $14.70 per year per day for each actor. Given the very conservative numbers I’ve used,
that’s probably the very high end of the range and when you factor in Apple’s cut, you’re probably looking at something well under $10 per "actor day" per year of usage. That may sound unbelievable, but all of you who’ve received those cheques for $2.46 for 3 years of that day you shot on Road to Avonlea should know that our cut of things can be pretty small.
When put into that context, the CFTPA offer of $5.65 per actor day per year of usage doesn’t look all that ridiculous. The ACTRA proposal of $65.50 per actor day per year looks far more out of touch. Again, these are today’s numbers which might change tomorrow, but history shows us that they will not change that much until the technology becomes ubiquitous.
WHO’S RUNNING THE SHOW?
So why won’t the CFTPA simply agree to revenue share from day 1? It would probably amount to what they’re offering by way of 1% of the daily fees per year anyway. I don’t know, perhaps they don’t want to set a precedent of abandoning prepayments, lest ACTRA try and do away with them outright (a result that would probably not be in our best interest in the long run anyway; the prepayment system is crucial to attracting business from the states) – but if the truth is, as Stephen Waddell claims, that the CFTPA is merely a puppet of American industry, then that might explain a lot. A BBC article from October, 2005 foresees this showdown, offering this observation: "A conflict could arise if studios decide to treat the internet downloads the same as they do a DVD sale, which might result in lower payments." That is to say that the American guilds want to ensure that the royalties from the internet are on par with tv & film royalties: i.e. 3.6%. Perhaps the producers don’t want to set those kinds of precedents here.
(Side note: if indeed the Americans are running the show, then our "strike" strategy is rendered pretty much impotent. The strike hurts ACTRA
members hardest, followed by Canadian producers. The Americans abandoned Toronto for most of 2006 because of labour disputes (an opinion endorsed by Stephen Waddell). There is no incentive whatsoever for them to seek a quick end to this. They can just pack up and leave just as they have before. It hurts them not one tiny bit. So why are we striking? It kind of feels like
smashing your own head against a wall in order to get someone to pay attention
– but that only works if the person who’s attention your trying to get gives a
damn about your head.)
THE "INTERNET FOR FREE" MYTH
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So let’s recap – despite the rhetoric, the CFTPA has never asked for "internet for free" even though that mantra continues to be used by ACTRA in all its communications. In fact, an ACTRA release described the CFTPA proposal as internet for "free, globally, indefinitely" which is an out and out fallacy; a 3.6% share of the DGR has always been on the table – payable in as soon as 6 months to a year for content produced for the internet. The "back catalogue" would be subject to this revenue sharing as well. The only issue has really been use fees. So this contract, which would be re-negotiated from scratch in 3 years, will only have an effect on prepayments made in the next couple of years. ACTRA’s initial proposal for an increase in prepayment is probably 6-10 times greater than the established 3.6% profit-sharing model. Producers do not want to pay much extra up-front for the right to distribute their material in a medium that doesn’t generate very much revenue right now (probably about $10,000 per episode per year – which would mean about $360 to be spread among all the actors for all the days worked in that episode). They also don’t want to pay extra for stuff that was shot years ago, and why should
they? There is no such thing as a "dormancy fee" for material redistributed in traditional media, so beyond the prepayment period, it follows that there shouldn’t be any for new media. Redistributing old material can only generate more cash for us.
I’d be thrilled if they started selling back episodes of Total Recall 2070, but for me to make $100 from one episode, they’d have to sell somewhere around 50,000 copies of that particular episode (assuming I’d worked for 4 days at scale and a bit). Given that the average yearly sales on iTunes is around 10,000 per dramatic episode, I’m not holding my breath.
ASK QUESTIONS, DEMAND ANSWERS
After looking at the real numbers, I didn’t feel so depressed. ACTRA’s latest proposal to abandon a prepayment and start revenue sharing at 3.6% of DGR is actually not that far off the CFTPA’s 5% buyout offer. The CFTPA 5% offer will probably generate more revenue (albeit tiny) for those of us who work on shows that won’t show up on iTunes anytime soon. There has never been a question of how much we receive after the buyout. The "back catalogue" is safe any way you slice it. The effects of the contract currently in negotiation would be strictly short term. The only thing that really worries me is that our leadership may have taken such a hard line that they will refuse to concede any of these points on principal. It’s my opinion that we shouldn’t be bargaining on principal, but we should be looking for the best possible deal we can get based on facts and figures – not the best possible deal we can dream up based on speculation and pride.
I might be wrong – my numbers might be way off – I would love to be corrected and to discover that this path we’re on is not stupid, futile and ill-conceived – but for now, they’re the best numbers I can come up with.
Unfortunately, ACTRA doesn’t provide us with the hard numbers they use to make their calculations. I’ve written several emails to ACTRA asking for specifics and clarification on a number of issues as well as offering my services in order to help better inform the membership. To date, I received one response
telling me that some information might be forthcoming in "the next few days".
That was a week ago. Another request for the facts and figures used to arrive at ACTRA’s bargaining position was met with the answer that the CFTPA refuses
to release their figures. I wrote back suggesting that surely the ACTRA negotiating team had done their own research and it would be great to see those numbers so that we can all understand the position we are being asked to support. I won’t be holding my breath. I would love to be shown with hard facts and figures exactly how the suffering we will experience this year will
benefit us in the long term – that’s it’s been worth it putting people’s livelihoods, savings, houses, cars, families at grave risk – then I could really get behind our team. But don’t trust me – look stuff up for yourself. Ask questions. Demand answers. Look at the actual offers – not the characterization of those offers by those who wish to discredit "the other side" and who want to shore up their membership’s support. Read the court ruling to find out who actually "won" and what it is that they "won". Our destiny is in our own hands. There is an ACTRA election in September. If you think this strike sucks, then educate yourself and make responsible decisions.
Then look at all the numbers and ask yourself, "Is this worth a strike? Is this worth not working for a year?"
TOKEN PAYMENTS
One last thought. Consider this: many ACTRA members have voiced doubt about the purpose of the "continuation letters" and the effect they have of watering down the strike. Many see them simply as an escape route that ACTRA has conveniently supplied for the producers. Consider also that if ACTRA hadn’t called a strike and the producers didn’t lock us out, then the old IPA would still be in effect and there would be no labour disruption – kind of like the UBCP did last year, helping them see a 50% increase in production since 2004. ACTRA officials offer two arguments asserting the success of the continuation letter scheme. 1) They keep the cameras rolling 2) They "win" a pay raise of 7% for performers and prove that the producers can afford this raise.
Let’s look at those arguments more closely.
1) According to the ACTRA Toronto website, there are currently 10 productions shooting in Toronto right now. Of those 10, 7 will wrap next month. Of the remaining 3, one is a reality show (Canadian Idol), one is a CBC
show which doesn’t fall under the IPA (Air Farce) and the other is an informational show (Scanning the Movies). ACTRA Montreal’s website shows nothing at all shooting or in pre-production. Nothing. The notion that continuation letters keeping the cameras rolling is a MYTH.
2) All continuation letters are not equal. Some productions have been
allowed to include only a 3% raise in daily fees as opposed the the 5% raise that ACTRA keeps on touting. 3% is what the CFTPA has had on the table since before the strike. So we’ve been deceived. Stephen Waddell cites the signing of continuation letters as proof that "they can afford to give actors a 7% raise (5% in wages plus 2% in benefits)" while neglecting to mention that, in fact, some producers aren’t required to give us a 7% raise at all. But even if that were the case, this great "victory" for ACTRA members – the difference between the producers’ proposed wage increase and ACTRA’s 5% "demand" – amounts to a whopping increase in our daily rate of $11.30. What a victory.
yours in solidarity,
Paulino Nunes
ACTRA member since 1993
