Pressure builds in writers strike

Writers are fearful the Directors Guild of America might set up an alternative template for new media issues.

Six weeks into the writers strike, the stakes got higher for all parties by week’s end. To illustrate how contentious the situation had become, writers filed an unfair labor practices complaint against the Hollywood studios in a bid to force them back to the negotiating table.

Negotiations collapsed about a week ago when the alliance of producers refused to bargain further unless the union dropped proposals that included the authority to unionize writers on reality shows and animation projects.

Writers are turning up the heat because they are fearful the Directors Guild of America, about to open its own contract negotiations with the producers, might change the agenda and set up an alternative template for new media issues. However, the directors signaled their own demands are going to significant as well when it comes to being paid for programming on the Internet and other new distribution outlets.

The existing contract between the Directors Guild of America, which represents about 13,500 directors and associated production workers, and the Alliance of Motion Picture and Television Producers, is set to expire June 30. Last week, the directors said they will begin bargaining for a new contract at the start of 2008.

As television shows ran out of original episodes, a Wall Street firm said last week it will cut its earnings forecast on media conglomerates if the writers strike continues into 2008.

In a note to investors, Natixis Bleichroeder said “the strike is beginning to have an economic impact on the television business, will shortly begin impacting the film side [and] if not resolved will impact our estimates for 2008.”

Companies whose earnings could be hurt by a protracted writers strike include CBS, News Corp., Time Warner, Viacom and Walt Disney. However, Natixis said owners of broadcast networks will be hurt first.

Assuming the strike costs ABC, CBS and Fox each $100 million of revenue and income off of their $5 billion to $6 billion of TV network and station businesses, the impact would be 9 cents off of our 2008 CBS estimate of $1.95 (earnings per share), 3 cents per share off of our (Disney) estimate of $2.30 and 2 cents per share off of our (News Corp.) estimate of $1.20, according to Natixis Bleichroeder.

To bolster that claim, General Electric CEO Jeff Immelt countered the spin by some studio executives that the strike was of no harm to their business. Immelt said the strike is already having a negative effect on NBC Universal, a division of GE unit. GE had projected a 10 percent to 15 percent growth in segment profit for NBCU in the fourth quarter, but Immelt said it will come in at the 10 percent low end, citing the “impact of the strike.”

Longer-term impacts of the writers’ walkout include “accelerated migration of viewers from traditional media into new media,” Natisxis predicted.

Also, talent deals at various studios may be axed in the coming days, and the coming development season is in jeopardy, causing the television networks and show producers to move to a year-round development cycle.

The winter Television Critics Association press tour has been cancelled. Daily Variety reported that the media companies are pleased with that development, saying that none of the major broadcasters had wanted to risk alienating TV journalists by being the first to pull out of the tour. The strike gave them cover.

Barring a breakthrough between the WGA and Alliance of Motion Picture and Television Producers, reports say it already appears that pilot season for the 2008-2009 season will be scaled back dramatically, if not cancelled altogether.