There's reason for optimism in the IATSE's negotiations, but the issues at play reveal just how fundamentally Netflix has shaken up the way Hollywood does business.

When the Writers Guild of America (WGA) went on strike in 2008, streaming platforms were a nascent medium, and the guild’s desire to earn residuals from a yet-to-be-defined market was seen as premature. Now, as Netflix upends HBO in the Emmys race and Amazon searches for its own “Game of Thrones,” streaming powerhouses are dominating the industry, and their impact could lead to another major union strike with the potential to shut down production and post-production across the country.

As negotiations inch along between the International Alliance of Theatrical Stage Employees (IATSE) and the Alliance of Motion Picture and Television Producers (AMPTP), Hollywood could be less than two weeks from a strike that would paralyze the film and TV industries. In theory, anyway: Of all the local unions under IATSE, which represent a large percentage of the crew working on a production, only leaders of Local 700 — the editors — are talking publicly about a strike. Meanwhile, studios and producers don’t want to get caught arguing against the safety and long-term pension health for the hard-working crew.

Privately, both sides believe they can come to an agreement — however, they don’t represent the companies that are ultimately key to the negotiation. The disruptive business models of streaming platforms are the sticking point, but these companies aren’t members of the AMPTP. The IATSE negotiations will cover AMPTP members’ SVOD outlets, like CBS All Access and the upcoming platform from Disney. Traditionally, streamers’ own union agreements follow the lead of the AMPTP, and both sides are confident Netflix and Amazon will do the same again, but that is not a guarantee and there are those who wonder how many more contract cycles these disruptors can be counted on to toe the line.

David Giesbrecht/Netflix

This tension has been building for a decade. Subscription streaming services barely existed during the 2008 WGA strike; today, they are the industry’s deep-pocketed and dominant force, engaged in a multibillion-dollar arms race to dominate content creation. Streaming seemingly exists under an entirely different set of metrics for success: The concept of lucrative residuals seem almost arcane, while success isn’t measured by ratings or tickets sales, and streaming data is kept under lock and key.

That’s a particular challenge. While IATSE brings other concerns to the table — including the safety issue of extending the 10-hour “turnaround” (crew call time must be at least 10 hours after they leave set the previous work day) — the primary complaint stems from the decline in its pension, which is funded by residuals. And in the expanding world of original content made for streaming, traditional residuals from selling a show or movie to cable, premium cable, SVOD (Netflix, Amazon Prime, etc), and whatever’s left of the DVD market don’t exist; there is no financial second act for a show like Netflix’s “Stranger Things,” or Amazon’s “The Marvelous Mrs. Maisel,” since they will always be free for subscribers.

As of 2017, IATSE’s pension plan was only 67.4 percent funded — $3.8 billion in assets against $5.6 billion in liabilities — down from 80.8 percent in 2015 and 76.8 percent in 2016. Under federal law, pension plans reach “critical” status when they fall below 65 percent. From IATSE’s perspective, the pension plan’s instability stems from the same thing that has been at the heart of Hollywood labor negotiations for a decade: namely, how filmmakers get a cut of streaming profits.

Jackson Davis

A decade ago, studios got off the hook when they said the impact of streaming couldn’t be assessed because it was all too new to determine. Today, streaming has reshaped the world of entertainment and the power brokers have taken careful measure of its consequences. It’s why we see nine-figure deals signed by the likes of Ryan Murphy; saying “yes” to Netflix also means saying goodbye to endlessly lucrative syndication cycles. The union argues that without some kind of contractual adjustment that reflects this changing business model, retirement for some 60,000-plus IATSE members nationwide could be at risk.

The AMPTP has been careful to emphasize that they agree the pension needs to be fully funded; it’s proposed a “New Media Residual” plan, details of which haven’t been made public. However, it also questions if residuals are a) the real source of the pension funds’ precipitous drop (as opposed to poor investment returns), b) the right mechanism for funding the pensions, and c) who should pay for the increases.

IATSE hopes to follow the direction of the DGA and WGA’s most recent contracts, both of which carved out streaming residuals from the AMPTP for international streaming of a domestic SVOD original show or movie. Sources tell IndieWire that AMPTP has pushed back on this, arguing above-the-line talent traditionally received residuals for content’s “primary market,” while the below-the-line crew of IATSE did not.

Eric Liebowitz/Netflix

Underpinning all of this, however, is a fact that isn’t open for negotiation: The Silicon Valley mentality is at odds with Hollywood traditions. Tech companies value plowing full steam ahead, iterating along the way; if a few things get broken, so be it. What’s less clear is how long it will take for these tech companies to fully consolidate their power. But when they do, it’s reasonable to believe that they will see trying to retrofit the AMPTP and the unions’ old way of doing business as a cord that needs to be cut and replaced.

Disclosure: This author has an immediate family member who is a former member of IATSE.

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