DGA Reaches Deal, Apted Informs Membership

Members of the Directors Guild received this letter from president Michael Apted, referencing their tentative deal with AMPTP:

Dear Member:

I am delighted to announce that this afternoon, the DGA reached an agreement with the AMPTP on the terms of a new Basic Agreement which is subject to ratification by the members. The agreement provides important gains that address our very real needs in the present while
securing our place in the industry’s rapidly evolving digital future.

I am proud to report that the new agreement contains solid increases in wage rates for all categories, increases in the residual bases, continued security for our health plan, a number of increases that pertain to AD/UPM and AD/SM members and no rollbacks of any kind.
Moreover, it includes substantial, precedent-setting gains in the key areas of new-media jurisdiction and compensation. That said, it is important to note that there was more at stake in this negotiation
than simply wresting the best possible deal from an employer. Our fundamental goal was to protect our interests today while at the same time laying the groundwork for a future whose outlines are not yet clear. And we have done just that.


This was a very difficult negotiation that required real give and take on both sides. Nonetheless, we managed to produce an agreement that enshrines the two fundamental principles we regard as absolutely
crucial to any employment and compensation agreement in this digital
age:

–First, jurisdiction is essential. Without secure jurisdiction over
new media, production*both derivative of existing programs and
original*compensation formulas are meaningless.

–Second, the Internet is not free. We must receive fair compensation
for the use and reuse of our work on the Internet, whether it was
originally created for other media platforms or expressly for online
distribution.

To these ends, the agreement includes the following:

–It secures for the first time DGA jurisdiction over programs (both
derivative and original) produced for distribution on the Internet.
This sets an important precedent for our Guild as well as for the
industry as a whole. It means that we and the employers will enter the digital future as partners.

–It sets residuals formulas for EST (electronic sell-through or paid
downloads) that essentially DOUBLE the rates the employers are
currently paying. (Employers are currently paying EST at the home
video rate. We have now doubled that rate for EST.)

–It establishes ad-supported streaming rates where there were none
before at all.

We entered these negotiations fully aware of the impact the current
work stoppage is having on each of you as well as the industry as a
whole. The 2007-08 television season has been truncated and the 2008
pilot season is hanging by a thread. Countless feature projects have
been put on hold and tens of thousands of workers, both within the
industry and in related fields, have lost their jobs. Out of respect
for the writers, our creative partners with whom we work so closely,
we delayed our negotiations long past their traditional starting
point. We are stirred by their concerns and their passion, but with so much at stake*and the WGA and the AMPTP at an impasse after their
talks broke down for the second time*we felt it was our responsibility to you and to our industry to act.

We are proud of the results we have achieved.

TENTATIVE 2008 AGREEMENT

With respect to increases in the current Basic Agreement we have
secured the following:

-Annual wage increases.
-Annual residual base increases.
-Outsized increase in director’s compensation on high budget basic
cable dramatic programs of 12% for series in their second and
subsequent seasons.
-Series of important gains that solve long-standing issues for members
in AD/UPM and AD/SM categories, including:
-Confirms the existing process of employing Second Assistant Directors
to manage locations in New York and Chicago. This resolves a 40-year
issue.
-Establishes a wrap supervision allowance of $50/day for the Second
Assistant Director who supervises wrap on local and distant locations.
-Increases incidental fees and dinner allowances for Unit Production
Managers and Assistant Directors.
-Continuation of specially-negotiated 8.5% health care contributions
by employers, first established in 2005 Basic Agreement. Provisions
permitting decrease in contribution by employers removed.

Please See Attached Fact Sheet For More Details

With respect to new media we have achieved the following:

Jurisdiction

First, and most important, DGA has won jurisdiction over new media.
This agreement ensures that programming produced for the Internet
(both original and derivative) will be directed by DGA members and
their teams. The only exceptions are low-budget original shows on
which production costs are less than $15,000 per minute, $300,000 per
program, or $500,000 per series*whichever is lowest. DGA members who
wish to work in this arena will still be covered, subject to
individual negotiation.

We carved out the low-budget exception for original content because we recognize that in order to evolve and grow, our industry’s involvement in Internet production will require the same kind of flexible approach the DGA has used so successfully in organizing independent films. It seemed most productive to promote experimentation and innovation by allowing the companies to employ emerging talent, who may be non-union, on extremely low-budget productions, while simultaneously securing DGA jurisdiction over all professional-level Internet productions. In this way, we are part of the growth of the medium, a course that is clearly in everyone’s long-term interest, not least our own.

Electronic Sell-Through (EST)

We achieved one of our biggest breakthroughs with electronic
sell-through, the paid downloading of features and TV programming.

This agreement more than DOUBLES the EST residual for television and
increases the feature film residual by 80% over the rate currently
paid by the employers. Specifically, the EST residual rates will be
.70% for television on sales above 100,000 units and .65% for film on
sales above 50,000 units. Before they reach those break points
(100,000 units for TV, 50,000 units for films), the residual payments
rate will be .30% for all downloads until worldwide gross receipts
reach $1 million and .36% thereafter. Once the film cap of 50,000
units or the TV cap of 100,000 units is achieved, the new higher EST
rates will apply, regardless of whether or not gross receipts exceed
$1 million.

We also obtained a critical provision that payments for EST will be
based on distributor’s gross. This was an absolutely key issue for us
in this negotiation*and a major victory. Distributor’s gross is the
amount received by the entity responsible for distributing the film or
television program on the Internet. Historically, our residuals
formula has been based on distributor’s gross. This has enabled DGA
over many years to accurately determine residuals owed to its members, a figure that totaled about $250 million in 2007. In this
negotiation, the employers wanted to establish a different basis for
new media residuals*paying us a percentage not of the distributor’s
gross but of what the producer actually receives. Unfortunately, in
this world of vertically integrated studios, the producer’s gross
often amounts to zero. Securing distributor’s gross was crucial and we would not have entered this agreement on any other basis.

Equally important, the companies are now contractually obligated to
give us unfettered access to their deals and data, enabling us to
monitor this provision and prepare for our next negotiation. This
access is new and unprecedented and creates a transparency that has
never existed before.

Moreover, if the exhibitor or retailer is part of the producer’s
corporate family, we have improved provisions for challenging any
suspect transactions.

Ad-Supported Streaming

Before today’s agreement, the studios claimed that ad-supported
streaming did not require payment. The DGA entered negotiations with
an eye toward achieving a formula that would allow the companies a
limited promotional window while still ensuring that our members were
appropriately compensated for the streaming of their work.

Under the new agreement, a company has a 17-consecutive day window
around the initial broadcast of an episode where it may stream the
episode on the Internet without payment. (The window is expanded to
24 days during a program’s first season to help build an audience.)
The 17-day period can take place before, during and after the
broadcast date but may not extend beyond the 17th day after broadcast.

If the company wishes to continue streaming after the 17-day window
expires, it must pay 3% of the applicable residual base, or
approximately $600 (for network prime time 1-hour dramas). This
payment buys 26 weeks of streaming. At the end of the 26-week period,
the company can continue to stream for an additional 26-week period by paying an additional 3% of the residual base. After this second
26-week cycle expires, the company must pay 2% of distributor’s gross
for ad-supported streaming.

This agreement provides DGA members with a residual worth $1,200 for a year’s worth of streaming, nearly five times what the companies last offered the WGA.

Sunset Provision

Finally, the deal contains a sunset provision that allows both sides
to revisit new media when the agreement expires in light of the real
world experience we will gain between now and then. While the
conventional wisdom is that new media is a gold mine for the industry,
our research shows it’s still too early to determine exactly how and
when those riches will be tapped. With this in mind, we recognized the
need for an agreement that would eventually allow us to adjust to the
changing landscape rather than lock the DGA into a position that might
end up hurting us.

This agreement is the result of nearly two years of hard work and
extensive preparation. We held our first new media retreat with the
DGA National Board back in 2006, around the same time that we engaged
a group of respected consultants to analyze the issues. Our full
Negotiations Committee met a total of 11 times over five months and
our subcommittees continuously provided us with information on what
was important to the members in each of our categories.

Although we were prepared months ago to sit down at the table with the
companies, we waited to begin our negotiations until it was clear if
talks between the WGA and the AMPTP had either reached a conclusion or
hit a roadblock. At that point, we began laying the groundwork in
earnest and ratcheted up the intensity of our informal discussions.
Immediately after New Year’s Day, we called our full Negotiations
Committee to Los Angeles and met with them until January 11th, when
the committee voted unanimously to empower Gil and me to move forward
with formal talks. Intense negotiations took place over the weekend
and every day this week requiring long hours of work to hammer out
this final deal.

Going forward, the Negotiations Committee will recommend to the
National Board on January 26 that they approve this deal for
ratification by all of you*the DGA members. At that point, we will
send a ratification ballot to you.

One final note: All the research and preparation in the world are
meaningless if you do not have at the table a negotiating team that is
determined and relentless. In this, we were well- served by the 50
members of our Negotiations Committee. They represent the diverse
nature, interests and geography of the full Guild membership and their presence at the negotiating table–as well as the months of preparatory work they put in*was crucial to our success. Our National Executive Director, Jay Roth, and the hard-working and dedicated DGA staff are equally deserving of our gratitude.

Finally, none of what we accomplished would have been possible without the leadership of our negotiating chair, Gil Cates, whose belief in this Guild and determination to preserve and extend its hard-won rights is unwavering.

We thank you sincerely for your support.

Sincerely,

Michael Apted