DVD sales collapse highlights failed Hollywood labor strategy

This year’s bargaining round for the major unions in Hollywood was all about quickie deals. SAG and AFTRA joined hands this year and set the pace by starting negotiations in late 2010 months before the June 2011 contract expiration date they had said in 2009 was so important to them. They had fought for the June date to set up the chance of a coordinated stance with the Writers Guild.

But after fighting to get that date they then ignored it and hammered out an agreement in six weeks, leaving the WGA at the altar, alone. Sure enough the WGA knew they had no choice and closed their negotiations in only two weeks. This led recently to a severe criticism of the SAG/AFTRA maneuver on Nikke Finke’s Deadline Hollywood blog by unnamed WGA activists who were a part of the negotiations.

Now it seems there is a new twist.

The other key piece of the 2008-09 contract round for the guilds was a commitment to a “reopener” on new media. That was put in place by the SAG moderates who took control of the Guild in late 2008 after the failure of the leadership team of the more militant Membership First group to reach a deal with the Producers.

The reopener was sold to SAG members by the moderates and their new NED David White because the Guild said it could not continue to fight for any gains in new media in the wake of the delays caused by Membership First. Instead, the battle would be delayed until this contract round.

But that was a dog that never barked. SAG made no appreciable gains in income for actors with respect to new media such as electronic downloads and streaming.

As Jonathan Handel of The Hollywood Reporter wrote when the deal was announced late last year:

“The unions did seek a few, more minor changes in new media. The AMPTP successfully resisted those points. Despite the presence of a “sunset clause” in the existing contract, which theoretically opened the entire area up for renegotiation, neither party wanted a substantial reopening – particularly since new media revenue is still much lower than receipts from traditional media.”

That failure now appears to be a real problem because according to the Financial Times over the last year DVD sales by the studios, a major cash cow for many years, fell by 20%. This is an earthquake rattling the business models of the big studios. The FT said:

“[T]he scale of the decline will cause anxiety in Hollywood, where technology continues to wreak havoc on established business models and revenue streams. The DEG figures suggest consumers are shifting their spending away from buying films in favour of streaming them online or watching them via film subscription services such as, Netflix.”

SAG and AFTRA did nothing in response to this dramatic shift in their industry. The WGA said they wanted to but found themselves hung out to dry by SAG and AFTRA. So just as the SAG leaders had told their members they would be able to use the contract expiration date to work closely with the WGA this year for a better outcome than their political opposition in the union but failed to do so, they also failed to take advantage of the very device they said was so critical to allow them to respond to the impact of changing technology: the commitment they won to a “reopener” on new media.

The only defense that seems possible in light of this shocking failure to confront a dramatic change in their industry – particularly when they convinced members only two years ago to accept a contract because of the promise to respond to that change – is that SAG and AFTRA wanted to move quickly to their plans for a merger. But members will certainly have to question the value of a merger of two organizations that cannot respond to such an important development impacting the lives of their own members and the revenue models of their employers.