(Bloomberg) -- The Golden Age of TV lives to see another day.
The agreement reached late Monday between Hollywood screenwriters and some of the world's largest media companies averted a strike that would have sent television production screeching to a halt at a time when the media industry could least afford it.
Writers claimed victory in the negotiations. They won pay increases, more residual income when shows are re run, and got higher contributions to their health plan. Credit memories of a costly strike a decade ago and the emergence of newer online players like Netflix Inc. and Amazon.com Inc., whose lavish spending on shows have drawn audiences away from live TV and may have strengthened the writers' position with the networks.
A strike “invited several serious risk factors,” including permanently losing TV audiences for good and more advertising dollars going to digital outlets like YouTube, said Doug Creutz, an analyst at Cowen & Co.
CBS Corp., 21st Century Fox Inc. and AMC Networks Inc., which rely heavily on advertising and scripted shows, all benefit from the settlement, even with higher costs, Creutz said.
“Almost any deal would have been preferable to an extended strike,” he wrote in a note.
Last year, media companies including Netflix and Amazon produced more original scripted programs than ever -- a total of 455. Netflix is spending more than $6 billion this year, much of it on original shows, and another $1 billion to promote its lineup. A strike would have shut down production and likely forced TV networks to rely on reality shows or re-runs.
New Lineups
Broadcasters like CBS, Comcast Corp.'s NBC and Walt Disney Co.'s ABC are preparing for the upfront season -- the time of year when they make glitzy presentations to advertisers planning their budgets for the fall TV season. A strike likely would have delayed the shows TV executives were preparing to introduce, putting a dent in their advertising revenue.
With major mergers pending, Time Warner Inc. and Fox also manage to avoid a thorny labor dispute while regulators are deciding whether to approve their megadeals, Creutz wrote. In Washington, the government is weighing whether to let AT&T Inc. buy Time Warner. In Britain, regulators are deciding whether to let Fox acquire the remaining stake in the pay-TV provider Sky.
For a look at what might have happened had writers struck, read this.
As part of the settlement, writers won a 15 percent increase in residuals for pay TV and $15 million in increases for payments related to high-budget content and for comedy-variety writers in pay TV, according to a statement from the Writers Guild. The deal also covers “contribution increases to the Writers Guild health plan that should ensure its solvency for years to come.”
The 2007-2008 writers' strike, which lasted for 100 days, cost the entertainment industry some $2 billion, according to the Milken Institute. It also affected a wide range of businesses, from restaurants to tailors, which rely on production for business.
Writers said they've been earning less per show because the business model for TV has changed. In the past, broadcast networks used to account for most of the scripted shows on TV and produced 20 or more episodes a year. Today, many new shows are made for cable or streaming services and have fewer episodes per season, meaning less for writers. They also earn less in residual fees for shorter series.
Compensation for writer-producers dropped by 8 percent to 26 percent over the past couple years, while showrunners have also seen their incomes decline, the union says.
To contact the reporters on this story: Anousha Sakoui in Los Angeles at asakoui@bloomberg.net, Lucas Shaw in Los Angeles at lshaw31@bloomberg.net, Gerry Smith in New York at gsmith233@bloomberg.net.
To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Rob Golum
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