On Greed and “Now Media”: An exchange with Agent Stuart Miller

Vallywood received a very thoughtful email this week in response to our recent post on the new media debate inside SAG. The author, Stuart Miller of the Stuart Miller Agency in southern California, gave us permission to publish it and we do so here followed by my comments in response below.

Dear Professor Diamond:   

I’m responding to part of your interesting blog on the subject of SAG’s position re “NowMedia”, from my own perspective, which is that of a talent agent with more than 40 years of direct industry experience (as well as being the son of a former Teamster’s Union business agent, albeit not in a field related to the entertainment business, so I’ve been a “union brat” for more than 60 years). First, let me say that I have no respect for the way Doug Allen conducts himself; he’d have been an excellent Teamster’s rep back in the day, though, given his M.O. of a **** **** [ed.] with essentially no finesse.  That said, however, I have complete sympathy with SAG’s position vis-a-vis “the greed of employers”.  

With all respect to your impressive credentials, which I reviewed on the Santa Clara website, I don’t think you truly understand “how the industry really works”, certainly not like someone who’s negotiated hundreds, maybe thousands, of deals with employers over the years. Notwithstanding the self-serving declarations of Nick Counter and other company reps about how much they respect talent and how fair and generous they’ve been to them, in historical fact, they’ve used every ounce of their considerable leverage to gain unfair advantage in their labor relations, and they don’t draw the line at illegal behavior when they think they can get away with it, which they often do. There are plenty of court cases on the point.  

Among the most egregious examples are the deals the companies made with each of the guilds at the beginning of the home video age.  I happen to have negotiated some of the first such deals in behalf of clients at the time, notably, but not exclusively, with Paramount. Those deals were on transparently awful “take it or leave” terms which were clearly going to yield little or nothing in the way of revenue to the clients because the company position was “this is a new business; we don’t know what kind of revenue it will yield; our cost of product packaging and distribution is huge but, trust us, these terms are only temporary. Once we see if there’s any real money to be made, we’ll renegotiate and give talent its fair share.”  Need I tell you, talent, and its representatives, are still waiting for an adjustment more than 20 years later.

In the face of having screwed them, collectively, out of several billion dollars, the companies are now crying poor yet again, taking no responsibility for their largely inept management of what used to be a recession-proof business and, in the process, cheating their own customers out of quality product at a fair price.  This is in the face of record-busting revenue year after year by the majors and astonishing compensation packages for senior executives and the few star players who command the best deals.  The simple fact is, a fair percentage of the adjusted gross revenue stream (assuming a fair and reasonable definition of adjusted gross that allows legitimate recoupment but no “monkey points” accounting) would only cost the companies anything if they actually generate meaningful revenue, which gives them all the time they need to succeed in their business plans before sharing the wealth. Instead, their attitude, as usual, is “give us terms that allow us to continue to screw you now and, later, you can try to play catch-up with us.” Good luck with that.

This potential new revenue stream (the operative word here being “potential”) is nothing at all like new media start-ups, with which I also have considerable experience having been among the first established Hollywood agents to be involved in New Media initiatives dating back to around 1990. First of all, those businesses were largely populated by youngsters with good tech skills, but little or no business experience; as I used to declare publicly at the many conferences at which I appeared on panels and in other gatherings, sooner or later, the techies were going to have to deal with agents and other interested entertainment industry parties because the day would come when the geek talent would no longer be willing to work for nothing just for the sheer pleasure of being involved.  That isn’t the case with working industry guild members, who are largely more mature, more experienced and more sophisticated about the realities of the business world than those kids were.  Second, as I’m sure you know, the companies have rarely, if ever, offered stock options to anyone but their own insiders and they’re hardly likely to start now. Third, with the M & A action over the past couple of decades leaving the industry under the control of a few mega-corporations run by people who have little interest in “show” and near total interest in “business”, there’s no reason to believe they won’t continue to undermine the interests of the very people they need to create their core products. How dumb is that?

But, speaking of dumb, the guilds in general, and SAG in particular, have nobody to blame but their members. Each time they might have done something to change the game, including hitting the bricks for as long as it took to force the companies to back off and deal fairly, they failed to muster the collective courage to do it. Their consistent short view in favor of working now and letting the future take care of itself has come back to put them in a negotiating position so weak they might as well say to the companies, “just send over the contract you like and we’ll sign it”.  It appears that SAG, with its sordid, storied history of dysfunction, backstabbing, insider deals (see Ronald Reagan and the sweetheart deal he made with Lew Wasserman that effectively gave MCA its long run as both agent and employer of guild members, for the explicit benefit of the company) and a legend of bumbling that would be comic if it wasn’t so destructive to so many innocent people, is possibly on its way to busting its own union. And if they fall, the other guilds won’t be far behind in the ensuing domino effect.    

There’s a way to negotiate tough and smart with employers, especially when you have what they need to viably stay in business. The DGA has often demonstrated that in its own unique style. But I fear it’s too late for SAG, one significant reason being they’ve allowed their strength to be diluted by giving equal voting rights to the tens of thousands of their members who have worked only enough to qualify for a guild card but are, by no reasonable test, genuine working members with a vested interest in the guild’s needs and goals. Like I said, dumb.   

Too bad; in spite of everything, it really was a nice business.

Sincerely,

Stu Miller
The Stuart M. Miller Co.
Studio City, CA 91604

—————————
Dear Stu:
Thank you for reading Vallywood and taking the time to comment.
Where I think our perspectives differ is that my career over the past few decades has been in the labor movement directly where the central institution is “collective” rather than individual bargaining. In these situations, whether in the public or private sector, the auto industry or the power industry, entertainment or education, leverage at the bargaining table is rarely created by trying to outsmart “greedy” employers. Certainly greed can be a factor but it’s really taken as a given.
The real action, first, is the dynamic inside the union and, second, the industrial environment in which the employer is functioning, rather than the personal attributes of the employers. For some of the reasons you indicate, SAG has not yet been able to develop the internal unity needed to confront the rapidly changing industrial environment.
At the heart of that environment is not (just) greed – which, as I say, is at work as a matter of course in our capitalistic society (see what it’s like, for example, as I have, to represent investment bankers in a billion dollar acquisition in Silicon Valley, when millions of dollars in fees are at stake). Rather, the challenge is to a long-established business model from new technologies. 
An arms race of a sort is underway among entertainment conglomerates, telecommunications and cable companies and Valley technology companies for control over a highly lucrative and explosively growing global entertainment market. 
It’s not much different than the Cold War where the US, Russia and China faced off.  Do you recall the fight for the “hearts and minds” of the billions in the developing world? Now multi billion dollar conglomerates face off against venture capital backed startups for “mind share” and “eyeballs” in a, what, trillion dollar media and entertainment market?
SAG has to sort out where it fits in this setting and how it can gain leverage. Worrying about whether the other side is going to pull a fast one or not largely misses the forest for the trees.
Thus, my point when I say “how the industry works” is that News Corp. and NBC expect to lose money – lots of it – over the next few years as they compete against other companies that also expect to lose money.  By losing money, I mean they are investing every penny they earn and then some (for example, steering free cash flow from DVD revenues to help fund the new media environment) with no expectation of profits for some years. That is the way capitalism works and always has – there is no other way to steer money into new industrial sectors when others begin to mature and die off.
Thus, a review of News Corp’s recent 10-K indicates that they have lost hundreds of millions of dollars in their internet-related business segment over the last three years.  Merrill Lynch predicts that they will continue to do so for the next couple of years. And that’s ok with Merrill because they think there is a chance News Corp will win market control away from competitors like Google (YouTube) or Disney or Apple.
The rapid and complex technological changes driven by research and development teams change the picture in this setting almost daily. A billion dollars placed on a bet on one “solution” to digital distribution can disappear overnight if a new competing technology wins out. In this setting, yesterday’s Betamax/VCR war looks like the War of the Roses would compared to today’s wars filled with “smart bombs” and “unmanned drones.”
Collective bargaining must establish a foothold in this setting so that actors, writers, directors and crew can maintain stable and productive careers while sharing appropriately in the gains that are likely to be made as the wars resolve themselves.
Thus, a strategy built around an argument that lots of money is already being made in this environment, or very soon will be, is misplaced. It undermines the union’s credibility because it is not true (as in the case of Hulu, which, 1) does not report publicly its earnings, if any; and 2) is widely understood to be losing money for the time being); and it prevents the union from thinking about bargaining demands that can work in a world of startup businesses and shifting technology.
In such a setting internal divisions in a collective entity like the Guilds are inevitable. Those who say they want to be “tough” reflect the natural uncertainty and mistrust that is likely inherent in entertainment for many of the reasons you suggest aggravated by the feeling that the ground is shifting under the very feet of actors as they attempt to survive.  Those who appear to be more moderate reflect the view that absent real leverage it makes no sense to engage in empty militant talk.  Both sides are constrained by the fact that unions cannot threaten the destruction of the very industry that provides their livelihood.
I assume that as an agent who represents individual talent you recognize and understand how valuable the collective power of the Guilds is to the success of your clients. The Guilds can open new avenues and methods of protecting talent, making it easier for you to negotiate better deals for your clients. It is unfortunate that SAG went into this battle with the AMPTP without a resolution of their relationship with the ATA.
If there is a major shift in leadership next week at the Guild, then I think we can both agree that the new team will have a very full plate.
Thank you again for your remarks,
Best,
Steve Diamond