The Wall Street Journal, December 5, 2007, Wednesday

The Wall Street Journal

The Wall Street Journal

Cracks in Producers' United Front
By MERISSA MARR
December 5, 2007, Wednesday

On a recent picket line of striking writers, a giant inflatable pig smoking a fat cigar bobbed above a crowd of chanting screenwriters. The image was classic Hollywood, portraying the producers as a united force of greed.

But behind the scenes, the producers are anything but united in their needs and ambitions. The major entertainment companies that dominate the Association of Motion Picture and Television Producers each have starkly different stakes in the strike's outcome.

The fate of talks between the AMPTP and the Writers Guild of America, which resumed yesterday, could depend on that dynamic. The diverging agendas of the companies' television and movie interests have resulted in the emergence of two camps: the moderates, which are angling for a swift resolution, and the hard-liners, which can withstand a strike longer.

At one end of the spectrum is CBS Corp., which analysts say could be the most vulnerable to the strike. Walt Disney Co. and General Electric Co.'s NBC Universal also have reason to want a quick settlement of the four-week strike. But News Corp. and Time Warner Inc. can better afford to hold firm on the most contentious issues, say people close to the talks.

As in any labor negotiations, though, the positions of the producers are also fluid. They want to present a common face at the bargaining table, where one of the core issues is how writers should be compensated when their work is reused in digital forms. But the perception of divisions among the studios could work in their favor, creating a good cop/bad cop scenario that might be key to getting the best deal. Indeed, News Corp., among others, has at times floated between the two camps. And if the writers ever look ready to compromise, several people on the producers' side say they would pull together pretty quickly.

After rebuffing a proposal by the producers last week, the writers returned to the negotiating table yesterday after a four-day break with a counterproposal that addressed some of the hot-button issues such as online streaming. The AMPTP said in a statement afterward: "We will spend the evening studying what the WGA had to say today, and we look forward to returning to the bargaining table tomorrow."

At the heart of the divide between the producers is broadcast television. The companies most exposed to scripted shows have been forced to halt most of their production because they have no writers. A strike that runs into next year could decimate the television pilot season and disrupt advertising sales for the next fall season at a time when viewers and ad buyers are already fleeing to the Internet. "I think it would go a long way toward changing how network entertainment is created and sold," NBC Universal Chief Executive Jeff Zucker said Monday at a media conference in New York.

If the strike drags on, CBS may be more exposed because its network is a bigger part of its company compared with its counterparts, analysts say. Some executives at other studios have privately expressed concern that CBS might lose its nerve in the face of a protracted strike. But CBS disputes the notion that it is most exposed. A CBS spokesman says the company is diversified in other businesses, which make up a significant part of its profits.

CBS Chief Executive Leslie Moonves said at the media conference yesterday that ratings may not be as high if the strike persists, but costs will go down and there will be no near-term or even mid-term impact on its bottom line. He said he was "hopeful" but "not terribly optimistic" about the talks, adding that "it's important that both sides stay in the room and discuss what's on the table and come to a resolution."

Like CBS, Disney relies heavily on episodic TV shows: Its ABC Television network airs the hit shows "Desperate Housewives" and "Grey's Anatomy," both of which have halted production. The casts of those shows have regularly joined writers on the picket line. At one picket, "Grey's Anatomy" actress Katherine Heigl carried a banner saying "Nick Counter is a Weiner," a reference to the AMPTP president.

NBC Universal is in the same boat, except that its network is in fourth place. It has some protection because it's part of GE, though. Mr. Zucker noted this week that NBC's primetime schedule represents only 10% of NBC Universal's bottom line and that he expects NBC to have enough new programming to get through March.

Taking a tougher stance, News Corp. President Peter Chernin responded to a question during a recent earnings conference call by saying that the strike could be "a positive for the company." News Corp. owns a network that relies less on scripted programming than its rivals, and it has a considerable cushion in its blockbuster reality show, "American Idol," which returns in January and doesn't rely on unionized writers. It is also airing the Super Bowl in February and can dip into a backlog of animated shows, including "The Simpsons," that work with so much lead time they still have many episodes in the can. (News Corp. has agreed to buy Dow Jones & Co., publisher of The Wall Street Journal.)

Still, Mr. Chernin was one of a handful of CEOs involved in behind-the-scenes talks with writers early on that were aimed at getting the two sides back to the negotiating table, according to people close to those talks.

Time Warner is also more insulated from the strike because of its far-flung assets in cable operations and movies. And its broadcast network is the relatively small CW. Time Warner owns a heavyweight movie studio, but the studios already have their movies for 2008 in the bag. As a result, the movie business isn't expected to feel real pain unless the strike drags well into next year. That also applies to such companies as Viacom Inc., whose main vulnerability is its movie studio, Paramount Pictures.

The guild has been making noises about being willing to negotiate with the companies individually, urging the moderates to ditch the hard-liners. Nikki Finke, whose blog Deadline Hollywood Daily has closely followed the strike, wrote in a posting Monday night: "There is not unanimity within the mogul camp on how to proceed with these resumed AMPTP-WGA talks."

Harry Katz, dean of Cornell University's School of Industrial and Labor Relations, says it's unusual that the management side of a labor negotiation is made up of so many parties of "different sizes, financial resources and interests." He adds: "Which coalition breaks first will be the critical element."

--Sam Schechner and Rebecca Dana contributed to this article.