Does the Surprise Writers Guild Deal Mean Labor Peace in Hollywood?

0:04This episode of The Town is presented to you by AMC Networks. Billy Magnuson and Zach Galifianakis star in the new series The Audacity on AMC and AMC+. Influence rises, people unravel, and CEO meltdowns are business as usual among Silicon Valley elite. Executive produced by Jonathan Glatzer, a writer-producer of Succession and Better Call Saul. The Audacity premieres April 12th only on AMC and AMC+. This episode is brought to you by LinkedIn Ads. Ever invest in something that seemed incredible at first but didn't live up to the hype? Marketers know that feeling. They optimize for the numbers that look great, impressions, reach, and reacts.

0:45But when they don't show revenue, well, that's a not-so-great conversation with the CFO. LinkedIn has a word for that, bull spend. Instead, why not invest in what looks good to your CFO? LinkedIn ads generates the highest ROAS of all major ad networks. Reach the right buyers with LinkedIn ads. You can target by company, industry, job title, and more. So cut the bull spend. Advertise on LinkedIn, the network that works for you. Spend$250 on your first campaign on LinkedIn ads and get a$250 credit for the next one. Just go to linkedin.com slash the town. That's linkedin.com slash the town. Terms and conditions apply.

1:27It is Monday, April 6th. Quite a shocker over the holiday weekend. I reported on Saturday morning that the writer's guild, typically the most aggressive of the Hollywood unions and one of the two that went on strike about three years ago and shut the industry down, they reached a surprise deal with the studios. That's after only a few weeks of negotiations and well before the end of the negotiation window. The deal must still be ratified by the membership, but that's expected to happen, and the WGA put out a statement saying the deal, quote, protects our health plan and puts it on a sustainable path.

2:00And it, quote, builds on the gains from 2023 and helps address free work challenges. That health care issue was the big one, given how underwater the Guild's health plan was. And I'm told there are the usual increases in minimums, particularly for streaming video series and movies, as well as AI protections when the studios want to use scripts to train AI models. On the studio side, the big get was that this is a four-year deal that's a year longer than usual and a big concession for the writers. That's what they had to give to get the big health plan bailout. Overall, this is great news for Hollywood in general at a time when another writer's strike would have been disastrous, but it also raises many questions.

2:39Our normal Monday guy, Lucas Shaw, is traveling today, so I brought in a Hollywood union expert, Jonathan Handel. Jonathan is an experienced labor lawyer and writer. He's written for me at Puck, and he came on the show during the strike. We're going to dive into this WGA deal, what they got, what they gave up, the four-year question, and whether this is the first domino that will lead to overall labor peace in Hollywood at a crucial time. Remember SAG-AFTRA, the Actors' Union, they started negotiating earlier this year, but they couldn't reach a deal. So they're scheduled to bargain more ahead of the June 30th expiration.

3:10Today, it's the Writers Guild deal, the shocking end to these negotiations, and what it all means. From The Ringer and Puck, I'm Matt Bellany, and this is The Town.

3:24Okay, we are here with Jonathan Handel, Senior Counsel at Faiq Finkel in Los Angeles, Hollywood labor expert, author, journalist, etc., etc. Welcome back, Jonathan. It's great to be back with you, Matt. Okay, so I got to admit, I was a little surprised when a source called me on Saturday morning and said, you're not going to believe this. The writers did their deal first before the other guilds, and it's a four-year deal. So I want to get into the why of it all, but let's first get into the what. What is this tentative deal? What did they get? What did they give up, to the extent we know? To the extent we know, which is fairly little.

4:05They got wage increases, of course. They got improvements in residuals. We don't know what level of improvements. they got very critically an infusion into their health fund. Yeah, we'll get to that. We'll get to that. That was teetering. And finally, they got, quote unquote, protections related to use of scripts as training data in AI. Yeah, that was in my original report about the AI element. The reason that this is interesting is because the Writers Guild typically is the most aggressive of all the guilds. they were a big reason that the industry went on strike three years ago. Why do you think they did this deal so quickly this time?

4:48Well, really three reasons. One, number one, strike fatigue from three years ago. It was historic dual actors and writers strikes. Hadn't seen that in over 60 years. Number two. And just, just, sorry, just to put a button on that. Yeah. You believe that the militant wing of the guild, which has been driving the bus for many years and which has been pushing, pushing, pushing on these issues, that they were overruled or that the rank and file was not as motivated for a strike or that the high earners, the people, the showrunners that have typically been kind of beaten down in these situations, that they had a little bit more power to say, listen, guys, what are we doing here?

5:32The health plan is tens of millions of dollars underwater here. The wages and the guild's own data says that in 2024, writer employment was down 9.4 % from the previous year. And the year before that, it's down 24 % compared with 2022. so just the state of the business and the bad place that the writers guild itself was in was a big factor here that's exactly right that's my that's part of my number two the other side of it is that that of these studios themselves were also vulnerable because of the state of the industry the dire straits the industry is in uh consolidation cost cutting all of that and finally number three the presence of a new head of the AMPTP studio and streamer alliance, the umbrella group that they negotiate as, Greg Hessinger, who has a background actually on the labor side.

6:31He was an executive director of AFTRA some years ago and briefly executive director of SAG. And he was quite clear that he wanted to reset the labor relations, the management labor relations in this industry compared to, frankly, the last 45 years. It was 45 years ago that the current version of the AMPTP was founded. Nick Counter was the executive director of the president for many years, and then Carol Lombardini is number two. And that was all marked by a very hostile and confrontational relationship. And Hessinger wanted to reset that. I'm going to miss the Carol Lombardini, California Pizza Kitchen, Cheesecake Factory tweets that we saw during the strike i really i miss those i i wish there was more villainizing uh on the writer side i know i don't want to take a side here but objectively those were funny tweets they were they were funny tweets so you think that because greg hessinger comes in here he's the new guy he's able to say to the writers forget about all that past stuff i'm here to create a new relationship.

7:37And do you think that he may have given a little in areas that Carol wouldn't have? Possibly. And he certainly, you know, did not want to come in the same way Carol went out, which is on a strike. And, you know, that's got to be weighing in the balance. And, you know, they asked for a five-year contract. These contracts have been three years for at least the last half century and the four-year compromise is the sort of thing that you know sort of just makes sense split the baby uh they may have to do reopeners related to ai if ai evolves really quickly that's the downside of a four-year you can do more labor will they have the ability to do that uh if both sides agree they they can't for the writers won't be able to force it but uh they could push for it and what do you mean by that like all of a sudden within two years ai has completely taken over the industry and the revenues are cratering and everybody's scripts are being stolen online, they will do something to remedy or to update the terms?

8:40Right. They'll reopen that limited aspect of the collective bargaining agreement for renegotiation. Okay. So let's talk about the four-year aspect here, because that really was the shocking element. I interviewed Duncan Crabtree Ireland at CES in January, and I asked him straight up if the five years that was then on the table was something that was realistic. And he was very skeptical. And my understanding is that SAG-AFTRA, one of the reasons why they did not get a deal in the first round of negotiations was because of that extra year. And there were some other things that are more actor-specific.

9:16They have different tiers of members and they had some other issues that are still outstanding. But adding an extra year and breaking precedent and giving up the leverage that you get with the studios having to come back to you every three years, that is a pretty significant concession. And to me, it signaled just how bad a place the WGA was in going into this negotiation, that that's kind of all they had. If they wanted to shore up a$122 million deficit in their health plan, they're going to have to give something and that's where it is in the year. Well, that's exactly right. And that leverage, if you think about it, when we say the studios come back every three years, in fact, it's every, the negotiation takes a period of time.

10:05It's really every, you know, as soon as you get a deal done, it's really another two years, two and a half, two and a quarter years. Well, especially this last time with the strike, it was basically two years. Right, right. And that just creates a constant drum of labor uncertainty that the studios have finally said, look, this is our opportunity to change that. Now, whether SAG-AFTRA or the Directors Guild will agree to synchronize with the Writers Guild on that, SAG-AFTRA, one of the things they want is the so-called Tilly tax. In other words, if you use completely synthetic avatar rather than an actor, they want what they got in the commercials contract, which is to have the studios make a payment as though they were paying an actor, but pay it into the pension and health fund.

10:51That's a heavy lift for the studios. And to get that, they may have to agree to four years. Yeah, that will be interesting. And the upside there for the writers is that they do lock in these protections against the AI evolution and coming from at least a place of somewhat power here. Who knows what this is going to look like in a couple of years. It could be a free-for-all online. I talked to an agent who is in the writer-actor world, and he was also saying that stability means something. In a world where the cable bundle continues to melt away, and salaries for on-air broadcasters and writers in the news and information world, those are all under pressure due to the declining economics of the cable bundle.

11:49And if they can lock this in for four years now, it actually might be a benefit to the members to get that rather than sitting on it for having to go back in a couple of years when the cable bundle is even further deteriorated. That's certainly part of the sell, I think. I mean, historically, we haven't seen a lot of retrenchment in these contracts, interestingly, things that get taken away, but that's always a potential threat. And so, yeah, to lock that in for four years. And of course, what management gets, let's remember, is that during that four-year period, the writers can't strike. The key get that any management gets in a labor agreement is a no-strike clause, that during the duration, as long as a company adheres to the contract, the company can't be struck against.

12:42And of course, the industry can't be struck against. The ironic thing here is that the WGA came to a deal with the studios faster than they came to a deal with their own staff who are still striking against the Guild. It is ironic, and it has an effect not just on the leadership of the Guild within their headquarters building, but members of the Guild are very split. And it has created divisions among members of the Guild, is what I'm hearing, as to the behavior of their own leadership and how can we make this happen. It also helped to undermine the Guild's leverage in the negotiations with the studios, because if they had wanted to call a strike vote, let alone actually strike, they would have needed the labor, the effort of those staffers who are in fact around on the sidewalk picnic it's just a terrible message as well if you're going in there guns blazing say saying pay us we deserve a fair wage they could say well what about your own staff i mean i've had a number of i mean this is like third rail stuff within the industry is that half the people on the studio side and a lot of the own their own agents for these writers are like what are you guys doing you guys ran the entire industry off a cliff in 2023 and now you're having a strike by your own people against you?

14:03Yeah, it's, you know, and contrast that with SAG-AFTRA, which is, I don't believe they have unionized workers as well, and I don't believe that they've ever struck. In fact, SAG-AFTRA just recognized an additional bargaining unit among its employees. It's kind of unbelievable. And where do you fall in the camp of the writers did this to themselves versus the industry is doing this to the writers and they are putting up a valiant fight to fight back because there is this big chasm in the industry. Many people blame the Writers Guild for the state of the industry right now, saying that if the industry had not gone on strike in 2023, things would be better.

14:48And they just took a slightly worsening situation and put gasoline all over it and burned up the industry. I don't fall in that camp. I think the economic indicators of where the industry was going were there before the strike. The end of peak TV was going to be very difficult and disastrous for a lot of people. The strike certainly didn't help, but the writers were grasping at the edge of the ledge at that point and had to do something in their mind. So I sort of, I guess I'm in the middle on this, where I think that the writers didn't help the situation, but they are certainly not to blame for where the industry is right now.

15:32I am actually exactly where you are on this. The people that I blame are the industry leaders 15 years ago who created their own competitor by feeding Netflix studio content and letting it bulk up and watching Netflix do in plain sight, you know, sort of what HBO did, leveraging from one step to another until it became a competitor. I had a conversation with someone, one of the presidents of Universal about 15 years ago. And I said, you know, Netflix knows what I like. Amazon knows what I like. You guys don't even know if I've watched your movie, let alone what I like. Yeah. You have no relationship with me.

16:08You have no relationship with me whatsoever. Doesn't that bother you at all? And I got a condescending, oh, pet, pet, you don't understand how the industry works. Well, fine. And, you know, and how is Peacock doing? Yeah. Well, don't get me wrong. I don't think the writers are blameless here. And I've gotten some shit from writers for saying that. And I would love to see a full economic analysis of where the writers were pre-strike in their demands and the negotiation, what they ultimately got, and the economic impact of that three-month strike. And I bet if we did that analysis, it would not be favorable to the Guild.

16:46the trouble for labor is that they're all their only real weapon the biggest weapon is is to withhold their labor and go on strike and it's it's a it's a knife without a without a handle it cuts you as well as your opponent i know god that was terrible time and i think just people think back to that and where everybody is today and all the challenges the industry has and they were just like no thank you yeah yeah but what was their alternative no then i'm saying the alternative now is give up four years and get your health plan shored up right the reason the health plan is in such a bad place is in part because of all those new writers that came into the guild during peak tv i mean the guild expanded significantly to accommodate all the writers that were working on all of these streaming series and then all of a sudden that goes away by a quarter.

17:39And these people are still members. These people still have health care needs. The plan couldn't sustain that. Right. I mean, this is what it looks like. You mentioned down by a quarter. This industry production, depending on what metric you use, is down by 25, even 35 % compared to four or five years ago, 2019, pre-COVID. And this is what it looks like when things contract so dramatically and so quickly. And it's not a pretty picture. Yeah. Well, hopefully now they have a little bit of a restart on that. And honestly, I hate to say this, but maybe there shouldn't be so many members of the Writers Guild.

18:22Well, the Writers Guild, unlike SAG-AFTRA, if you haven't done a certain amount of work in a four-year period, you drop down to associate membership. yeah uh so i'm not i'm not sure that that's exactly the the issue but uh well four years i mean we're coming up on that for a lot of these people right you know after the correction so i think we maybe we'll see a a culling of the herd i i think that's true and economically of course we already are seeing that we're seeing just lots of people saying i i can't find work so what does happen if SAG or the DGA doesn't agree to the four years? Chris Nolan, who is the president of the Directors Guild, he has been very skeptical that a four-year deal would happen.

19:06Obviously, now going into their negotiation, there may be added pressure to concede that. But let's say the directors and the actors stick to three years. How does that change the dynamic of Hollywood labor negotiations? Well, it would give management more power because it would be hard. For example, you certainly wouldn't see a dual strike. Well, you could directors and actors, but the DGA rarely is that aggressive. The DGA struck once in its 80-year or 90-year history, and that was for 15 minutes. So, yeah, they're definitely much less aggressive. And, you know, you also would, as a practical matter, behind the scenes, the guilds coordinate to some degree on the positions they take on issues that have a commonality, certainly residuals, for example, this would make it harder for them to do that, harder to set a pattern that can't be broken by the studios.

20:02It gives the studios more leverage. It definitely does. And that's, I mean, if you think about it, labor would be happier if these are one-year contracts. And every year the studios have to come back begging for labor peace. Well, what's the origin of the three years? How did they originally end up on that? Well, I've actually done a bit of study on that because I'm doing some historical work on the guilds. And these contracts started in the 50s and late 40s, and there was no particular pattern, and there was a lot of fighting over residuals, and are we going to pay residuals at all, and all that kind of thing.

20:37It wasn't really until the late 60s and really early 70s that a three-year pattern got established. And it seems to have held pretty much into the 80s. And then from the 80s on, as I say, with the founding of the AMPTP in its current incarnation, you really did have a pattern bargaining, unions on a three-year cycle, that sort of thing. Exactly how that number got chosen is sort of in the midst of time and history right now. It's probably like Lou Wasserman or someone just saying, we decree three years, every three years, and it just happened. Yeah, I mean, you mentioned Lou Wasserman. It was a very strong Universal Studios chair who really was the leader on the studio side of labor relations in Hollywood for many decades.

21:29This episode is brought to you by HBO Max. It's the final season of the Emmy Award-winning comedy series Hacks, premiering April 9th. Starring Jean Smart and Hannah Einbinder, season five finds comedy queen Debra Vance and her writing partner, Ava Daniels, returning to Las Vegas to solidify Debra's legacy. Don't miss the premiere of the final season of Hacks on April 9th, exclusively on HBO Max, and listen to the official Hacks podcast on Spotify and HBO Max. Subscription required. Visit hbomax.com for details. Snoring? Gasping during sleep? Feeling fatigued? Wake up to ZepBound Terzepatide, the first and only FDA-approved prescription medicine for moderate to severe obstructive sleep apnea, OSA, and adults with obesity.

22:14ZepBound is an injectable prescription medicine that may help adults with moderate to severe obstructive sleep apnea, OSA, and obesity to improve their OSA. ZepBound should be used with a reduced-calorie diet and increased physical activity. ZepBound is approved as a 2.5, 5, 7.5, 10, 12.5, or 15 milligram injection. Z-Bound contains terzepatide and should not be used with other terzepatide-containing products or any GLP-1 receptor agonist medicines. It is not known if Z-Bound is safe and effective for use in children. Do not share needles or pens or reuse needles. Don't take Z-Bound if allergic to it or if you or someone in your family had medullary thyroid cancer or multiple endocrine neoplasia syndrome type 2.

22:51Tell your doctor if you get a lump or swelling in your neck. Stop Z-Bound and call your doctor if you have severe stomach pain or a serious allergic reaction. Severe side effects may include inflamed pancreas or gallbladder problems. Tell your doctor if you experience vision changes, depression, or suicidal thoughts before scheduled procedures with anesthesia. If you're nursing, pregnant, plan to be, or taking birth control pills. Taking ZetBound with a sulfonylurea or insulin may cause low blood sugar. Side effects include nausea, diarrhea, and vomiting, which can cause dehydration and worsen kidney problems.

23:18Talk to your doctor. Call 1-800-545-5979 or visit ZetBound.lily.com. ZetBound and its delivery device base in QuickPen are registered trademarks owned or licensed by Eli Lilly & Company, Get subsidiaries or affiliates. It's time to throw your lash curler away. Seriously. Lancome's new Curl Goddess Mascara keeps your lashes curled and volumized from the pregame to the after party. This fast-setting curl and volume mascara gives you up to 30 hours of wear with no way down. You know what? Curls really do have more fun. Shop Lancome Curl Goddess Mascara now on Amazon. So where does this leave us? Where does this leave the industry?

24:02Are you confident in saying that this is the key domino that's going to lead to labor peace for the next four years or three possibly? Is this, you know, if I'm the head of SAG-AFTRA and the DGA, it sort of puts a fire under me, right? Well, it does. And look, it's been clear. I mean, you talk about the next three or four years, the DGA is not going to strike. And they just they don't, as I said. That's just not something that they feel they need to to do, except perhaps the very most extreme circumstances. And SAG-AFTRA, Duncan has been, you know, when you when you talk to Duncan and look at his at his interviews with regard to AI, you know, big issue.

24:51um duncan has consistently been sort of of the mind that look we're not going to stop ai we're not going to put things on the train tracks we're going to try to you know make sure that the tracks are pointed in the right direction so i i don't think that there is a um you know a strike oriented or even down to the wire oriented issue there i think it's going to be if they're pushing for the tilly tax um at the end of the day to get by the way just to be clear you're referring to tilly norwood a name that we do not mention on this show because i think it's absolutely ridiculous how much press that that ai avatar gets but it is something that they have latched on to right she she who shall not be named right exactly uh but they do want that payment if anytime you use a digital avatar right and that could be pretty costly for the studios well very costly for the studios and also uh concern that they disadvantage themselves in comparison with a with some upstart that's non-union that just makes movies with with avatars and doesn't have to pay that's happening anyways isn't it i mean it's all it's all kind of silly in the sense that everybody's fighting within hollywood and the innovation is likely coming from outside the building and someone is going to create the, you know, toy story of AI generated video, and it's not going to come from the studios.

26:15Yeah. I mean, when that happens and actually gains distribution and becomes economically meaningful, I mean, that's the nightmare that, you know, the monster under the bed that keeps studio executives awake. Well, not just studio executives. I think everyone, because none of these labor deals prevent a studio from picking up for global distribution an ai generated movie right like if that happens they can do it now there may be some political blowback and people might be upset but some of these smaller studios like a lion's gate or something else if there's a great toy story-esque movie out there maybe this can movie that's happening or you know this animated movie maybe something like that catches the eye of a u.s distributor and all of a sudden they're in the ai movie distribution business regardless of what the guilds think right and regard i mean the talent relations become an issue you know obviously but but if i'm chris nolan i say okay you know universal if you would like to pick up this ai generated movie please do so but i will never work for you again right but the flip side is the cost advantages could be so great that But, you know, it becomes very hard for someone to, you know, just to say no to it.

27:31And it could be a startup distributor that does a deal directly with, you know, your friends at AMC and elsewhere. My friends. Yes, they could. I know Adam Aaron would love that if they all of a sudden became the home for direct distribution and exhibition of AI generated movies that could fill the theaters and give them a little bit more leverage in their negotiations with Disney and Universal and the others. If you don't want to pay us our fair share on the revenue split, we'll fill our theaters with AI-generated movies. That's right. It's not enough that they're online. Yeah, well, that's if people are willing to pay for them.

28:09If they're not slop, and eventually they won't be slop, people will pay for them. I mean, people say, well, you know, some people say, well, people want to see real people on screen. But Toy Story is not real people. Animation isn't real people. Well, animation is different, I think. But, you know, yeah, I agree with you. I think that's where the innovation is going to be to start. Right. That's the nose under the tent. Yeah, we'll see. And there's nothing in this deal that prevents that. Correct. I mean, not that we know of. And, you know, I mean, the only thing would be if there are real restrictions on training data, it becomes harder.

28:43I mean, if you think about what studios own, they own a lot of scripts that were pretty much good enough to be made, but never got made because of regime change, because of popular tastes, whatever, or they were close to good enough, not quite right. Well, that material, compared to what's out on the open internet, is all high quality training material. I mean, I think when you look at valuing a studio library, for example, you've got to look at the unproduced scripts all of a sudden and say, what could these be worth for AI training? That's a good question. I don't know. What are they worth? You know, I don't know.

29:14I mean, we'll see when the next consolidation happens, how they're valued. All right. So you are Greg Hessinger and the Studio Labor Relations people. Are you sitting in your office in the Valley like clinking champagne this morning, giving out ivory backscratchers? Like, are the studios celebrating this? Or is it too early to say who won here? I think the studios have to be celebrating them for years. Now, whether it's keychains or ivory backscratchers, I don't know. So but, you know, this is a it is a real win for them to get, you know, after again, as you say, it feels like it's just two years since we had the you know, we're getting over the strikes.

29:56And then the negotiations started again to have that extra year makes a makes a real difference. And let's point something out, which is that the when the unions negotiate, it's usually majority rule on the on the committee side. At some point, someone makes a decision. But when the studios negotiate, it's by consensus. So presumably, if six out of the eight, say, of the AMPTP agree on a point, but two of them don't, then that point doesn't get agreed on until it's been massaged to everyone's satisfaction. Yeah, and that's a key fact now because of the disparate business model of the various members.