About The Strike

I am watching the writers’ strike pretty closely, both as a writer trying to get into the guild and also as an observer of economic evolution. This is tectonic plate stuff we are watching here, the crisis of an entire economic model. Anyway, I haven’t posted anything about it (out of fear of sermonizing) but then today a friend did something foolish: she asked my opinion. She emailed me this link to Suicide by Strike, a blog entry by Marc Andreeseen, the founder of Netscape and current founder of Ning, in response to an article on the strike in the New York Times. Here’s what she said:

Robb – what are your thoughts on this article?

A strike by Hollywood writers began in New York just after midnight Monday…

[M]ore than 12,000 screenwriters represented by the Writer Guild of America West and the Writers Guild of America East in the early morning hours in New York began the first industry-wide strike since writers walked out in 1988. That strike lasted five months…

Throughout the weekend, guild leaders held orientation meetings for strike captains, who would supervise picketing teams, and otherwise prepared for an effort to shut down as much movie and television production as possible…

The sides have been at odds over, among other things, writers’ demands for a large increase in pay for movies and television shows released on DVD, and for a bigger share of the revenue from such work delivered over the Internet.

So imagine you’re a major media mogul, a captain of the film and television business, a shaper of global culture, one of the anointed few who can green-light major entertainment projects.

You’re faced with a massive, once-in-a-lifetime shift in mainstream consumer behavior from traditional mass media, including film and television, to new activities that you do not control: the Internet, social networking, user-generated content, mobile services, video games. It’s been snowballing since the mid 90’s, for like 12 years — 12 years of denial and obfuscation — but it’s really rolling fast now.

Many of your current lifeblood properties are not growing anymore or are in outright decline, and you don’t own enough of the vital new properties to offset that, nor are you certain how you would make money with the new properties even if you did own them. And the consumers you rely upon for revenue are so frustrated with your company’s inability to supply them with what they want, when they want it, that digital piracy of your content has become mainstream and socially acceptable behavior practically overnight, and all of your efforts to stop it seem to only make it worse.

And your company’s culture is not prepared to deal with the shift. Your company was founded 50 or 80 or 100 or 150 years ago by different people in a different time, and the overwhelming majority of your people now — smart and well-meaning managers and bureaucrats, but still managers and bureaucrats — have to be retrained and reoriented toward entrepreneurial thinking in a viciously dynamic and startlingly fast-changing world not of your, or their, creation.

Is this really the right time to pick a fight with the writers over royalties from DVD and Internet sales, leading to an industry-wide shutdown and massive economic pain for all sides in the world of traditional scripted film and television content?

Really?

If you’re a mogul, the key question has to be, what would the founders of my industry have done in this situation? Really, what would they have done? Thomas Edison, Darryl Zanuck, Jack Warner, Irving Thalberg, Adolph Zukor, David Selznick, Louis Mayer, David Sarnoff, Bill Paley, Walt Disney… presented with such a period of profound change and global market expansion, would they have declared war on the writers of all people or blamed Apple of all companies for their problems, or would they be charging ahead and developing new businesses, new forms of entertainment, new markets, and new sources of revenue?

In a nutshell, would they have crawled into a hole of protecting the status quo or would they be forging a new, exciting, optimistic future through force of will and creativity?

Why aren’t you doing what they would be doing?

If you, like me, are just a normal and normally happy consumer of TV shows and movies — at least when you’re not equally happily playing video games, surfing the Internet, networking socially, blogging, or kicking it with your IPod — then one day your grandchildren are likely to ask you, “Hey, old man, I learned in school today that there used to be these companies called ‘studios’, and they would actually spend tens or hundreds of millions of dollars making scripted entertainment, and you would actually sit still, in a chair, and watch it — whatever happened to that?”

And you’ll get to say, “Well, it’s complicated, but let me tell you a little story about the writers’ strike of 2007…”

Here’s what I said (I did get a tiny bit evangelical…)

A very good article. The writer is correct but the connection that he doesn’t make is that those guys who built the industry were entrepreneurs who ran private companies who could risk it all. The moguls that the article is addressed to are not individuals anymore – they are multinational public corporations.

The truth is that the guys who made Hollywood WERE faced with earth-shattering revolutionary change MANY TIMES and rolled with the changes – and lightning-fast. Silent black and white movies were killed by sound black and white movies were killed by sound color movies were killed by TV. TV was very analogous to the creation of the internet – it was just as devastating to the model as the changes are today. What did they do? The old-school moguls adapted by the seat of their pants and moved quickly.

What has changed since then? These guys were all bought out by multinational public corporations in the 1970s, or sold out to IPOs to become multinational public corporations themselves. There are so many layers of bureaucracy now it is unbelievable, and nobody can move anymore, and certainly not fast. When TV threatened to kill movies and literally kill his business, Walt Disney got a crazy idea and responded by simultaneously (1) jumping into TV – which nobody else dared to do – and (2) inventing the theme park to invent his own new model of content which also created its own new form of distribution (people would come to the park) – an entirely new model of content and distribution which he would own 100%. TV trumped movies so he trumped TV! How many layers of management did he have to convince of his idea? Zero. Stockholders? Nope. I’m simplifying, but you get the idea. He made the call and took the risk. Impossible today. Did this impact his writers/actors/directors? No. They kept on producing content. The American entrepreneur figured out how to sell it.

What is happening now is that manangement/corporate bureaucracy is getting squeezed as the writer nailed in the article. They don’t like it and they are trying to push that off to the creatives. The creatives don’t care how their work is distributed – they don’t care at all, they just want a very small percentage of the eventual profit. The residuals we are talking about are a lot of money but a very small rate of royalties. The creatives don’t care how their work is distributed, that is not their headache. That is the job of management. Management says “distribution is so much harder now with these technologies.” The writers/directors/actors say “be bold – figure out how to sell it.” Mega-corporations don’t know how to do this, and the creative people who DO know how to do this (Steve Jobs) wouldn’t be caught dead working for somebody else’s corporation – they’re going to make their own. The publicly-traded corporations are creatively bankrupt, virtually by design. It could not evolve any other way really. Do you want to work for a corporation or do you want to control your own destiny? Creative types will answer the same way 100% of the time. 

What supports the writers/actors/directors in this face-off and should give them confidence and ensures that time in on their side is this: – people want free content, but what kind of content do they want for free? Do they want pirated/free YouTube-style content, made by you and your buddy in the back yard? Do they want pirated/free low-budget documentaries and talking head movies shot on cheap video? No. If this is what they wanted, then the guilds and the creatives would be in trouble. But this is not what people want. They want pirated/free Transformers and Pirates of the Caribbean and Shrek. Consumers want free content, but they want this content to be big-budget movies with big-name creatives with high-quality scripts. Consumers want union products without the corporate price tag. The public’s demand for high-priced screenwriters is as high as ever. Somebody will figure out how to give them this while making a profit – somebody who doesn’t have to meet Wall Street expectations with every single movie.

This is not a crisis of the writers – this is a crisis of the entire model and a crisis of adaptation. The best idea I have heard about how to continue to make money in the changing technology economy is to do what TV did. TV content is not free to the consumer, it just FEELS like it. This is the key. People watch TV “for free” but forget they are paying $$$ for products whose cost is marked up to pay for ads. On the internet, people exchange pirated music and videos “for free” but forget they are paying $$$ for internet connections and hardware – but it FEELS free. With iTunes TV and movie downloads studios make it easy to download high-quality content without exotic equipment or connections – but then they screw it up and make the money exchange part of the experience. That is convenient but it doesn’t “feel” free. What if they made it “feel” free by having an internet plan that was priced higher but included all the free music and TV and movie downloads you wanted? Every kid in the U.S. would have this – every iPod would be full of music, every hard drive would be full of movies and TV shows. Every kid in the U.S. would pay for these extra iPods and extra hard drives and this internet plan – and all that little bit of extra money on each would go to the studios and management and the creatives.

What if a movie studio created its own satellite TV service like DirecTV. You pay $49.99 a month and everything is included – movies on demand free, like pay-per-view without the pay. All the movies and TV shows you can record, all included in the $49.99 per month. Where does the money go? Back to the middle management. The creatives get their small percentage of royalties like they have for decades. And it all feels free to the consumer. Everybody is happy.