Actors’ Digital Destiny

Brian Sullivan, an actor whose long list of credits includes commercials for McDonald’s and Honda’s Acura, has a request: Let him make a living. Aimed at negotiators sitting down to hammer out the 2006 SAG/AFTRA Commercials Contract with Producers, which expires Oct. 29, his appeal is hardly new in the world of labor negotiations. But it has taken on new urgency, thanks to the expanding digital landscape and the question of how talent will be compensated in it.

“Actors understand that [making ads] is a business,” says Sullivan. “And yes, technologies are changing every day, but there’s value in what we do. Talent helps sell the product. We’re hard-working, creative people trying to feed our families and pay our mortgages, and I know I give 110 percent when I walk on a set. I would ask that they take into consideration that we’re all in this together.”

Like an episode of the early sci-fi series Lost in Space, members of the Screen Actors Guild and the American Federation of Television and Radio Artists hope they won’t be left out in cyberspace. Cell phones, iTunes, iPods, Akimbo, AOL’s In2TV (which offers TV classics for free with short commercials)—these are just some of the destinations changing the media landscape, and turning traditional TV, and traditional TV spots, on its head. Throw digital editing’s ability to customize messages into the mix, and it’s no wonder that this year’s bargaining process, before it’s even started—in fact, there has even been talk that the current contract might be extended for a year—has advertisers and talent worried for their futures.

“This is all brand-new,” says one talent agent, who requested anonymity. “It’s just over the last six to eight months that we’ve stepped up our negotiations for everything [not in the contract] on a case-by-case basis. It’s a big issue, and I’m held hostage to what happens.”

An ad agency exec, who also requested anonymity, adds, “We call them negotiations, but it’s more like pulling teeth.”

While all parties agree that the current contract is a dinosaur, its bones easily traced to the 1950s, nobody’s sure what shape the new one will take. Some industry insiders even suggest the current contract should be thrown out with the garbage, and that a new one, nimble enough to adjust to the ever-changing world of new media, be created from the ground up. It’s hard to accomplish this, however, without the creation of a new business model. And that, unfortunately, is nowhere to be found.

It’s the $64 million question: How do advertisers capture eyeballs? Thanks to the fragmentation of audiences due to such new players as the Web, cell phone providers—even the TV screens on airlines like JetBlue—there’s little faith that ads are reaching their intended audiences. Worse, the technologies are coming at such an avalanche-like pace that no one can say for certain what the ad landscape will look like next month, much less next year.

“The line between media types is blurring,” says Peter Stabler, head of communication strategy at Goodby, Silverstein & Partners, which, among other new-media campaigns, created two microsites for Got Milk? (The five spots broke on the sites, and, to build buzz, and there are plans to do other channels later this year.) “We’re giving consumers options as to how they want to consume content, and it’s going to be difficult going forward to be very prescriptive in terms of media allocation. … Advertisers are going to flock to the media channel through which they believe they’ll get the greatest level of engagement and relevance. I don’t think [negotiators] can look backward and retrofit [the contract] to a TV-dominant platform.”

Matt Miller, president and CEO of the Association of Independent Commercial Producers, notes that “the current compensation model for commercials is very back-ended in that it lays out [approximately] 20 percent for session fees, 80 percent residuals. So [they need to] look at how that model might work. And while the usage fee doesn’t directly impact the production industry, to the extent that they can’t come to an agreement, it does.”

Douglas Wood, lead negotiator for the Association of National Advertisers/American Association of Advertising Agencies’ Joint Policy Committee (JPC) on Broadcast Talent Union Relations, asks, “Ultimately, how do we create a compensation system flexible enough to anticipate technology changes while fairly compensating actors and [allowing for the] creative flexibility advertisers need to reach consumers? It’s a very difficult endeavor.”

Though it’s early in the game, the JPC has already made its first overtures. On March 15, it sent out a press release—via Wood—announcing that a hunt was on for a disinterested consultant with expertise in television, radio and labor relations. The statement also notes that in many instances, “the payment to talent sometimes can be more than the cost of the media.” (For example, a small local cable buy reaches a minimal amount of people, says Wood, “but this has zero influence on what you pay talent.”)

In response, SAG sent out a statement noting, in part, that SAG/AFTRA’s negotiating committee would meet in the near future and would consider “the employer’s interest in a joint study.” It also acknowledged the complexities ahead, adding that notwithstanding, “the truth is that talent costs are generally less than 2 percent of the industry’s media costs. So it goes without saying that we share the industry’s commitment to ensuring that actors are fairly compensated.” At press time, the JPC and representatives of SAG and AFTRA were scheduled to meet to consider commissioning a joint study of alternative payment methods.

According to the 2004 4A’s Television Production Cost Survey, the most recent survey available, the average cost of spots of all lengths was $338,000. Of that, the total production company net costs were $254,000, and the average talent cost $16,000 per spot.

The negotiators’ starting point—the 2003 contract—is a rickety affair. To date, it has added, to no one’s satisfaction, new-media payment structures (or “silos”) for home video, cable and the Internet. The Web payment structure accounts only for rechanneled TV spots. Specifically, per the 2003 contract, “Provided the right to broadcast has not terminated, producer may initiate Internet use of the commercial for an initial term of one year. Payment shall not be less than 300 percent of the applicable session fee.” As for commercials made for “initial” Web use: “Producer may bargain freely as to compensation.”

Interestingly, and to no one’s surprise, in 2005, according to TNS Media Intelligence, Internet display advertising increased 13 percent, from $7.3 billion in 2004 to $8.3 billion in 2005 (figures do not include paid search ads, which account for an estimated 40 percent of Internet spending)—a larger hike than ad expenditures in cable, which showed an 11.4 percent change (from $14.2 billion in 2004 to $15.8 billion in 2005), or network TV, which actually went down 0.3 percent (from $22.52 billion in 2004 to $22.46 billion in 2005).

As for cable’s pay structure, in 2000 it was so contentious an issue that it in part led to a six-month strike. The guild wanted cable payments modeled after the network TV system, where talent gets paid every time a spot plays. But advertisers wanted network TV to go the way of cable’s structure, wherein talent was getting paid a set fee every 13 weeks. By the time the strike ended in a stalemate, Los Angeles alone had lost $125 million in commercial production business. Foreign production accounted for half of the total spots made during the strike, a number the JPC estimated at 10,000.

“Runaway production was simply devastating for a lot of actors,” says one New York actor who asked that her name be withheld. “We’re still feeling its effects today. I’m wary right now of anything that could jeopardize work. I’m not feeling militant.”

Neither were SAG’s negotiators in 2003. With the effects of the strike still lingering, the 2003 contract was approved in record time. Then-SAG president Melissa Gilbert and AFTRA president John Connolly presented, reported Daily Variety, “a low-key, wages-focused approach.” The cable silo wound up on that 13-week cycle, with an uptick in payment.

Though no one wanted a strike, the hasty conclusion of 2003’s contract left the rank-and-file wondering if they could have gotten more. This time around, say people familiar with the talks, there will be a concerted effort to keep SAG members abreast of the process.

Another potential sticking point: exclusivity (section 16 of the 2003 contract), wherein talent cannot be “in commercials advertising any competitive product or service.” As a spot could have a limited run on TV and then conceivably be re-run in cyberspace, ad infinitum, this limits an actor’s ability to find work.

SAG, in the meantime, is in the midst of negotiating not one, but two basic cable contracts: one for animation, the other for live action. On March 28, a tentative agreement for a 20 percent increase in residuals was made for its animation contract; a caucus will be held today for members to review the agreement before it goes up for ratification April 21-22.

Sallie Weaver, longtime guild deputy national director for contracts, recently resigned (departing May 1), complicating things further for the guild, though she is expected to stay on to finish negotiations, possibly even the commercials contract. Regardless, SAG does have longtime guild exec John McGuire still on board, who has served as chief negotiator on several different contracts, and will likely once again play a significant role.

Could this year’s negotiations lead to a strike? There is talk that SAG president Alan Rosenberg and his Membership First party (a group of SAG actors who expect the guild to put the membership first when setting policy) are itching for a fight—a charge Seth Oster, a senior exec at SAG, says is patently unfair.

“Alan Rosenberg and this administration have one priority,” says Oster, “to negotiate in good faith a good deal for the members of the SAG. … I think that perhaps people are a little nervous about dealing with someone who will stand up to them, but I fail to understand how that’s translated to fears of a strike.”

Says the JPC’s Wood, “I’m optimistic we’re all going to be on the same page, and going in the same direction together as opposed to going apart.”