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Hollywood Woes


For the second year in a row, the specter of a potential strike is stalking Hollywood as the end of the year approaches and the awards season looms. This time it’s the leadership of the Screen Actors Guild that is asking its membership to vote to authorize a possible walkout that could come as early as January. The move comes when the town is still recovering from the punishing 100-day strike by the Writers Guild of America that began in December 2007 and didn’t end until the following February.

The threat of another strike is being stirred into what is already a witches brew of prospective job losses for the local film and television community.

l The economy’s recessionary slide is taking a heavy toll on television network and cable advertising. That decline is translating into cuts in production budgets for new pilots and programming as a whole.

l The nation’s credit crunch has spread to the entertainment business, drying up financing across the board for even the biggest deals, but hitting independent films especially hard.

l And the Canadian dollar has dropped a staggering 25 percent against the greenback in just six months, providing Vancouver, Toronto and other Canadian production centers with a considerable financial advantage, on top of existing subsidies, to attract shoots.

On the positive side, the International Association of the Theatrical and Stage Employees in mid-November tentatively reached a new three-year contract with the Association of Motion Picture and Television Producers on behalf of the 35,000 members belonging to the 17 West Coast studio locals and New York-based locals 52 and 161.

This was the first contract negotiated by IATSE president Matthew Loeb, who succeeded long-time IA chief Tom Short last summer. “This was a tough negotiation during tough economic times but both sides worked and negotiated reasonably to come to an agreement,” said Loeb. “This new agreement both protects members and allows new media to evolve,” he added. Details are expected to be disclosed shortly, and members of each guild will then vote on whether to approve the new contract.

AMPTP noted that the agreement with the IA “includes meaningful economic gains and groundbreaking new media rights” and was “consistent with the five other major agreements” the studios have negotiated this year with, among others, the Directors Guild of America, the WGA and the American Federation of Television and Radio Artists, which also represents actors.

The possibility of a walkout by SAG isn’t being taken quite as seriously as the WGA’s threat last year which did evolve into a fullblown strike. One main reason is the need to get at least 75 percent of SAG’s 120,000 members to vote for a strike authorization, a pretty high threshold to meet. In addition AFTRA, whose membership partly overlaps with SAG’s, has already reached an agreement with AMPTP and an increasing number of shows are being done under the auspices of AFTRA.

Even if approval from SAG members is obtained, it will be up to SAG’s national board to decide whether to actually call a strike. SAG president Alan Rosenberg said the national board would take such a step “only if it becomes absolutely necessary.”

Nevertheless, networks have started taking precautionary measures, accelerating production schedules for some television shows. And a cloud again hangs over upcoming awards events like the Golden Globes and Oscars if SAG keeps threatening to call a strike.

The SAG-AMPTP talks resumed in mid-November at the behest of a federal mediator but broke off again after four days of inconclusive negotiations. That has led to a war of words. A major sticking point continues to be the request by SAG for residual provisions for the internet and DVDs that go beyond what other guilds have accepted.

AMPTP said the leadership of the actors’ union has failed “to explain why SAG deserves more than everyone else in the industry,” adding that actors were threatening to strike “during a time of historic economic crisis.”

“Management continues to apply its one-size-fits-all demands to SAG actors,” Rosenberg countered. “And we continue to stress that actors have unique, reasonable needs that are different, not better, but different, than writers, directors and crewmembers.”

Meanwhile, the freeze-up in the credit markets is making it extremely difficult for studios to find outside money for film slates, impacting future production commitments. Hedge funds, which had been investing heavily in Hollywood, have shut off the tap, and Germany’s Deutsche Bank recently withdrew from financing motion pictures, leaving only three big U.S. banks, following the recent consolidation, to take up the slack at a time when they’re reluctant to make any loans. Even the $1.5 billion deal between Steven Spielberg and Bollywood’s Reliance ADA Group has yet to close.

But it’s the numerous low-budget films that have been hit the hardest. “The independent marketplace is in dire straits,” says Peter Dekom, one of the town’s top entertainment lawyers. At the recent American Film Market “there was very little buying activity on the smaller independent movies,” he notes. “Producers were looking for the handful of films that had real distribution agreements, but there are a lot fewer distributors in the market—a number having gone out of business recently—and every major and mini-major has announced a sharp cutback in the number of movies they are going to distribute.” A big question mark also hangs over what kind of bidding will take place at the Sundance Festival in early 2009.

A final factor with the potential to cut production in town is the sudden upheaval in currency markets, especially the fall in the relative value of the Canadian dollar against the U.S. currency. The loonie, as its known, was worth $1.07 less than six months ago but has dropped recently to around 80 cents, which is in effect a 25 percent decline in the cost of film and television shoots up north. “A lot of production that has been greenlighted the past two or three months has in fact gone to Canada,” notes Dekom.

Amid these negative trends, California Governor Arnold Schwarzenegger last month said he wants the state’s legislature to enact millions of dollars in tax breaks to lure film and television production to California, according to a report in the Los Angeles Times. The timing of the incentive proposal, which has been turned down repeatedly in past years, couldn’t have been worse. Due to the economic downturn, the state is running a deficit topping $10 billion and the governor has declared a fiscal emergency.

There are some bright spots. The domestic and international box office for theatrical releases remains strong for the time being, even though the lion’s share of revenues is being garnered by a handful of event features like Quantum of Solace, the latest James Bond movie. Issue-oriented films haven’t done that well, and if that pattern continues, studios will be reluctant to proceed with more serious films, concentrating on a handful of higher-budget movies with moneymaking potential. Under present circumstances, studios will have to step up to finance such films, making them more risky.

Another ray of light: A tax break for movie and television producers who agree to film their shows in the United States was slipped into the $700 billion bank bailout Congress passed in early October. It allocates $470 million, but that sum will be spread out over the next 10 years. That’s not much of an offset to the negative trends swirling through Hollywood these days.

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