I was interviewed this morning on NPR regarding the impact of private equity on workers.
The LA-based film business and its affiliated unions appear to have badly miscalculated the lay of the land in Sacramento recently and according to this article in the LA Times lost more than $145 million in tax credits aimed at securing employment in the California film industry. Other states like New Mexico and New York have passed similar measures with wide support. What went wrong?
Late last year the S.A.G. made headlines by inviting the #2 AFL-CIO leader to address them in LA, hired a senior AFL-CIO union official as their new NED and joined a new AFL-CIO coordinating body in Washington with other EMI sector unions. Why do I mention this? Because according to the LA Times the people who killed the tax credits were some of the AFL-CIO’s closest political allies! Further, the California Labor Federation, which is the AFL-CIO’s entity in this state, has one of the most effective Sacramento lobbying organizations (something I witnessed first hand when I was part of the effort to restore Cal/OSHA back in the day), led for years by Tom Rankin, who recently retired (and presumably could have been asked to help out). Shouldn’t the EMI uions like S.A.G. have been able to count on the support of the AFL in this critical battle?
It may not have helped that the SEIU-affiliated and therefore non-AFL-CIO California State Employees Association (of which I was a member and officer for several years) was led to believe that these credits were for special interest groups, as the SF Chronicle reported here: Senate convenes to debate thorny budget bill CSEA/SEIU broke away from the AFL-CIO last year and that has allowed for some thorny conflicts to develop. CSEA represents state employees and of course supports greater tax revenue. Somehow they ignored the argument that properly targeted tax credits can create larger tax revenues. Either the argument was not made effectively or not enough political pressure was brought to bear so that the CSEA would see the light.
And to make this really sting, Democratic leader Sen. Don Perata (who is regularly endorsed by the AFL-CIO and other labor groups) is quoted in the Times as saying that the tax credits would have taken money out of the mouths of needy schoolchildren! For some reason the lobbying effort around this went the wrong way from the get go. Why can’t the EMI labor movement make a winning argument? After all, they represent a huge employer that can only grow tax revenues for the state if allowed to stay competitve. This should be a no-brainer. But a similar bill failed two years ago. Perhaps instead of paying so much attention to the capitol on the Potomac, the EMI unions need to pay more attention to the prosaic but critical capitol in the Valley.
WIth the abrupt move just reported in Variety, the Producers may have backed themselves into a corner. Federal labor law requires that parties bargain in good faith – which means that you cannot just put a single position on the table and stick to it come hell or high water. But with the choice of a new media study or the net profit approach gone, now all that is left is the proposal to completely toss the current residual based system. Unilateral demands to revamp entire compensation systems rarely succeed. Even the U.S. auto industry – far more troubled than the film business – has fought for decades about compensation structures without much change. One is tempted to imagine the discussions inside the AMPTP: tell me, Mr. Counter, you do have other arguments? (Yes, I admit it, I did recently watch a re-run of The Verdict.)
A key union demand in the negotiations between writers and producers now begun in Hollywood is to raise the percentage of DVD revenue that goes to labor. Since the days of videotape and betamax (!) only 20% of the total revenue generated by the distribution of DVDs is subject to collective bargaining. The Writers Guild is demanding that that amount be raised to 40%. While some have argued that DVD revenue is softening as internet based distribution systems come online, there is still a lot of life in the DVD environment as Lionsgate, for example, sees it. In fact, it could take a decade or more for the new online/mobile distribution world to take hold and in the meantime DVDs will still be a money maker for the industry. In 2000 for example Vodafone bragged that its 150 billion takeover of German giant Mannesmann was justified because of the impending roll out of 3G phones – but they are still not here!
Also note that the Lionsgate research report predicts an 8 fold increase in internet down load revenue (granted, from a relatively low starting point)! And yet the producers have proposed to “study” the issue for three years! This report indicates two things: there is money being made and to be made from digital downloads AND there is real data available now.
As labor negotiations get underway this week between the Writers Guild and Hollywood producers, this story points to the differentiation that is emerging in the online world. Sony is figuring out a way to discover marketable material in the mass of video that is now available online. As the story notes: “Online video is entering a new phase: The media companies that snapped up video start-ups over the last few years are now touting the possibility of the “big break” to attract more polished submissions than pratfalls and pet tricks.”
This may be a more viable strategy to develop profitable material online than the open source type sites like Facebook, MySpace and YouTube.
But will the guilds be able to get collective bargaining coverage for this upstart operation?
This video (cut and paste link below) gets to the heart of the matter. It is a debate that took place recently at a summit on copyright in Europe. Europe relies heavily on a taxation system that imposes charges on all levels and forms of the distribution of entertainment. Those taxes are then collected by private “Collective Rights Organizations” on behalf of writers, actors, directors, and producers. More than a billion dollars a year in collected in the EU this way. Some of it flows back to the US through the entertainment guilds to American performers.
Of course, in the US most entertainment is work for hire and so performers rely on collective bargaining via unions and guilds. But that has a significant disadvantage because the revenues generated by the distribution side of the EMI sector are largely left off the table in contract negotiations. In the world of New Media and digitalization that creates a huge opportunity for the employers to make billions for their investors, leaving performers in the cold. Perhaps the EU model is worthy of consideration.
He is facing a class action lawsuit over the misuse of tens of millions in revenue generated by player images –
Retired Players Class Action Lawsuit
– as well as allegations of denying retired NFL player access to their own pension and disability benefits –
Congress scolds NFL and Union – but instead of asking for his head the NFL Players Union rewarded its head, Gene Upshaw, with a new four year contract recently worth at least $6.7 million a year.
Upshaw is, by far, the highest paid union leader in the country (well, for that matter, in the entire world). It has only been a few months since I noted here that Upshaw was at the top of the union salary league tables at $3 million a year! But hold on, there is now more. Apparently (at least according to the small print found in the union’s Labor Department filings) that salary is now heavily augmented by bonuses linked to deals negotiated by Players Inc., the for-profit subsidiary of the non-profit football players union. Labor’s Richest Man. Actually, only 79% of Players Inc. is owned by the Union – the other 21% is owned by the union’s charitable arm (thanks to Dan Kaplan of Sports Business Journal for this information). Unfortunately, according to the retired players lawsuit, very little of the tens of millions in annual revenue from the licensing deals signed by Players Inc. reaches retired players themselves. The lion’s share seems to go to the union parent and to the union’s staff.
Last year, the then head of Players Inc. and Players Union #2, Doug Allen, now with the Screen Actors Guild, took home $1.9 million. Allen is scheduled to be a key witness in the class action lawsuit filed against the union set for trial in September 2008. Joining him on the stand to try to explain the behavior of Players Inc. will likely be his wife Pat, another former NFL Players Inc. official, as well as Howard Skall, the third (of four) Players Inc. officials to leave the NFLPA last year. (Like the Allens, Skall recently moved to LA, joining the Creative Artists Agency as head of their football division). In a federal court decision last month, an attempt by the union to move the lawsuit (which was filed in San Francisco) back east was denied given the location of these three officers in California. The union’s effort to dismiss the lawsuit also failed – indicating that it has merit and increasing pressure on the union to enter settlement negotiations with the suing retired players. A well known and respected law firm based in Palo Alto is representing the players.
Meanwhile, at the heart of Congress’ concern with the union are the paltry pension and disability payments to aging players. The tragic conditions facing such players are recounted here: NFL retirees feel forgotten as fight for benefits rages and here:
Super scars of the NFL borne on retirees’ knees. One sorry fact that comes out: the lawyers helping the NFL union block players access to their OWN pension and disability fund earned more than $8 million in fees last year.
Recently Hall of Fame player Jerry Kramer was so moved by the terrible conditions in which many retired and injured players are living that he decided to auction off his (replica) Super Bowl ring to raise money for the players. Kramer to establish fund for retired players in need.
In addition there were arguments made in a hearing late last month in front of the US House of Representatives that the process used by Upshaw and Allen to decide on disability payments were unfair. A video of the hearing can be seen here: Congressional hearing on football.
Upshaw contends he does not have an obligation to represent retired players yet he and Allen recruited those players to join the Players Inc. effort to license players images to big gaming companies like Electronic Arts. However, only a few hundred out of the more than three thousand retired players have received any revenue from the licensing effort. But the union itself, as well as its senior staff, received millions.
Upshaw seems in a feisty mood about these developments – he threatened to “break [the] damn neck” of one of the players complaining about the union’s practices. Now, that’s union democracy in action.
Nothing indicates the radical changes afoot in the entertainment industry than the drawing together of technology company leaders with the leading figures of Wall Street at this annual Sun Valley get together sponsored by the investment bank Allen and Co. If the Guilds haven’t been invited they should knock on the door and demand to be let in on the talks!