Think Bigger
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Audio Recording by George Hahn
Last week, after five months of striking, the Writers Guild (WGA) and the Alliance of Motion Picture and Television Producers (AMPTP) reached a tentative agreement. “We can say, with great pride,” the WGA wrote, “that this deal is exceptional — with meaningful gains and protections for writers in every sector of the membership.”
Five months ago I compared the writers to the British coal miners of the ’80s, predicting they’d exit these negotiations severely impaired. I received a lot of “feedback” (“I hope you die,” etc.). Good stuff. So here we are. Headlines universally lauding the “historic deal” and “victory of human over AI.”
Unexceptional
The WGA is claiming victory as it has no choice. (Imagine declaring defeat after subjecting your constituents to five months of no pay.) So let’s put the ketamine down and acknowledge this is no victory.
The key issue in this debate was money. Specifically, the writers wanted more of it. Adjusted for inflation, the average writer-producer salary has declined 23% in the past decade. Last year, when prices rose as much as 8%, TV writers received a nominal pay increase of 2.25%.
So the WGA made a reasonable demand: a 6% pay bump. But last year, prices rose (I repeat) 8%. In other words, the WGA arrived at the negotiating table demanding a decline in purchasing power. And then … didn’t get what they asked for — they settled for 5%. Meanwhile the striking UAW have rejected an offer of a 20% increase, and asked for 40%.
To be fair, the deal includes pay escalations of 4% and 3.5% in years two and three, respectively. However, to keep up with inflation over the past three years (since the last contract was struck), the writers would have needed a 10% increase in year one. The new deal also includes an increased contribution to health and pension benefits of 1% and overseas royalty payments that, from my vantage, are purposefully opaque and wordy enough to give members enough psilocybin to hallucinate that there’s a there there.
The already ugly math gets hideous when you factor in the five months in which the writers, as a function of the strike, registered a 100% reduction in pay. For a three-year union contract to compensate for those losses, you would need to increase writer pay (again) by 14%. That’s in addition to the inflation losses. So the minimum increase the writers need to not lose purchasing power is 24%.
My favorite jazz hands in the agreement is writers get a 50% royalty bump if their show is viewed by 20% of the platform’s subscribers. Yes, and I’m giving my employees a 50% bonus every time the Jets win the Super Bowl. Sure, it’s happened … just not that often. The series finale of Succession registered three million viewers, i.e., 6% of HBO’s 50 million subscribers.
The Good Stuff
The WGA did secure a couple meaningful gains. As in two. First, there is now a minimum staffing requirement for writers rooms, which translates to more employment opportunities for young writers. Second, they’ve raised the minimum number of weeks studios must employ writers for shows. In other words, work lasts longer. These concessions are meaningful and reflect well on the guild’s commitment to investing in the craft and nurturing talent.
Follow the Mouse
This whole process, however, was a distraction from what the writers, actors, and all workers in the creative community should be focused on. Henry Kissinger once said of my industry: “The reason that university politics is so vicious is because stakes are so small.” The same holds true in media.
Last week I spoke with a group of Hollywood executives and writers. (I’m trying TV for the sixth time.) They were concerned about the strikes — but more concerned that their stalwart, the House of the Mouse, has transformed into a distressed asset practically overnight. Disney stock is at a nine-year low. Subscriber losses continue to mount, with a 7.4% decline in Disney+ subscriptions in the most recent quarter. Operating profits from the cable assets have been halved, and the company’s operating margins are down 75%.
It’s not just Disney. Revenues are falling at Warner Bros. Discovery, Comcast, and Paramount. Last month, cable and broadcast fell below 50% of total TV viewing for the first time in history. Meanwhile, the industry is becoming increasingly reliant on a ventilator of recycled content. All 10 of the highest-grossing movies from last year were repurposed from existing IP. Pixar’s biggest movie was Lightyear (the sixth installment of the Toy Story franchise), and the hot news in TV this week is Greg Daniels has a new show called The Office. I.e., a reboot of the reboot.
The writers can keep fighting for a larger slice of the pie, but the pie gets smaller every day. The WGA will have 15 milliseconds of fame before it starts digging through the rubble searching for remnants of its industry. The question they should ask themselves: What would a “meaningful gain” actually look like, and how do we achieve this? Is it really a 6% pay bump? More transparent residuals? A staffing minimum for writers rooms, striking against impaired companies? To achieve a truly exceptional outcome, the writers, the studios, the executives — everyone in Hollywood must do one thing: Think bigger.
Falsely Convicted
Fixing the problem means first identifying it. The adversary isn’t a Hollywood executive in a cashmere sweater; it’s a 17-year-old kid in a basement scrolling TikTok. The rise of social media is directly correlated with the decline of traditional media. TikTok now commands 95 minutes of user attention per day, equivalent to four and a half episodes of The Office. More than 200 billion Facebook and Instagram Reels are played every day — up 50% in less than one year. YouTube, a subsidiary app owned by Google, now rakes in as much revenue as Netflix.
The ad dollars Hannah Montana used to generate have not been shoplifted by Bob Iger, but Silicon Valley and Beijing. When queried whether they’d prefer TikTok vs. all streaming media, two-thirds of people under the age of 25 choose TikTok. There are between 300 million and 400 million creators on TikTok — their compensation is approximately $40 for every million views. None have ever threatened a strike. The result? A: The company’s valuation is roughly equal to Disney and Netflix combined.
It’s also no coincidence that the year of the writers’ strike is also the year of AI. AI was a core issue in the dispute. The writers (rightly) fear it could replace them and demanded the studios not use AI — which the studios (also rightly) declined. Instead, they met halfway: The studios can use AI, but the original writers must receive credit and compensation. This reflects a misunderstanding of AI. It’s not AI who will take your job, but a writer who leverages it.
Pennies vs. Benjamins
The industry is quarreling over pennies, instead of pursuing Benjamins. More market value in the Nasdaq was created in the first half of this year than in any six-month period in history. The catalyst was AI. The day Microsoft announced it was incorporating AI into its Office suite, it added the value of Disney. The day Morgan Stanley praised Tesla’s Dojo supercomputer, Tesla added the value of BMW. Meta’s new AI-powered recommendation algorithm drove a 24% increase in Instagram use this year. AI has inspired a tsunami of shareholder value: In 2023 alone, Google, Meta, Nvidia, Microsoft, Apple, and Amazon have registered a combined increase of $3.2 trillion.
Compare that to traditional media: The combined market cap of Comcast, Netflix, Disney, Warner Bros., Paramount, Fox Corp., and News Corp. is less than $600 billion. Think about that. The value gained by six tech firms this year is nearly six times greater than the current value of the seven largest mass-media companies put together. Hollywood needs to put down the slingshot, and go big-game hunting.
The Rapture, Pt. 2
As I’ve written before, the fastest way to build wealth is to monetize infrastructure others built for free. Amazon built a thick layer of innovation on top of a free enterprise plug-in called the U.S. postal system. Tesla leveraged green government tax credits to build an EV empire. Google struck the rare earth mineral that is user-generated data, mined it relentlessly at zero extraction cost, and placed banner ads on top of it.
AI is the resurrection of this business model, and the fuel is original content. Yesterday I discovered two of my books, The Algebra of Happiness and The Four, have been used (without my approval) to feed generative AI. I have not been credited or paid. I’m not alone. Last week, writers John Grisham, Jodi Picoult, and George R.R. Martin sued OpenAI for stealing their IP to train its algorithm. Before that, a group of artists sued Stability AI for using their content to generate AI art. So did Getty Images. I used to think tech companies loved user-generated content because most user-generated content isn’t protected by copyright law. (How many TikTokers are claiming IP rights on “day in the life” videos?) But now tech companies are taking it a step further. Now they’re harvesting content that is protected.
There is slow, if not steady, progress on this front. I also discovered I am a class member in a suit that includes all copyright holders whose work has been used in training. That Grisham suit is also a class action, but the class is fiction writers. To date, Big Tech has been hiding behind a complex generative AI algorithm too sophisticated for mere mortals to attribute credit for distinct IP.
These and future suits are important, really important. Hollywood won’t fall because Bob Iger or David Zaslav are greedy. It will fall because Silicon Valley stole the only asset that can truly differentiate generative AI: other people’s content.
What to Do
When I was on the board of The New York Times Company, two thirds of revenue came from ads. During the print days, it worked — we had strong control over distribution and could price ads on terms that made sense for the business. Then Google offered us what looked like a good deal: Let us crawl your content, and we’ll drive traffic to your website in return. More ad views, great right? Spoiler alert: not great.
So while Larry and Sergey were capturing our ad dollars, I proposed we form a consortium (NYT, News Corp, Condé Nast, Hearst, etc.) to block Google’s crawlers and have an auction for the license to our content. I believed Google and a somewhat relevant Bing (see above: 2008) would have paid billions. The board said no, and we missed the chance to upend the business model, to put creators — journalists, editors, artists — in the position of power, instead of the platforms. Soon enough, it was too late.
Consortium
This is that moment again. A world-changing technology has emerged, and we have the chance to write the rules so that we (creators) can make money from it. Notice how quiet Big Tech leaders have been throughout this process. Why? Because they see dead people. In this case, dead people are Hollywood studios and the creative community removing their heads from their asses, binding together, and transforming their assets into potentially trillions of dollars of shareholder value.
To garner an increase in compensation that is legitimately “exceptional,” the writers and the studios/executives/actors/publishers/networks must band together. They should form a consortium, file suits demanding Big Tech and AI respect their IP, license this IP, and start valuing their work. And they should do it as soon as possible. I’d suggest WME be charged with assembling the first 100 members and Barry Diller heads the new consortium. He knows everyone, understands the industry, is smart, and (most importantly) tech is scared of him. This would be infinitely more meaningful than the jazz hands of additional royalty payments for writers on The Last of Us.
Barely keeping up with inflation, minimum number of writers, 1% increases in pension contributions … Jesus Christ, think bigger.
Life is so rich,
P.S. This week I had my friend Ian Bremmer back on the Prof G Pod to discuss Ukraine, China, and AI — listen here.
P.P.S. I’ll be speaking with the “godfather of AI,” Dr. Yoshua Bengio, on the ethics of AI in November. Sign up now as spots will go fast.
The creative destruction Schumpeter wrote about is rolling over the entertainment industry. Instead of banding together, a creative person can leverage AI and create his own movie or online series. It is being done now.
Insightful and thoughtful but why in the world do you need to take the Lord’s name in vain. Respectfully I find it crude coming from an atheist to use and make a point.
Well said and I get the impression that other people in Hollywood are waking up to the same thing. Let me know what time the posse starts to ride.
Good
The ending would have been more fitting if you stated ” We pray that Jesus Christ could help them to think bigger so they can protect Truth, Beauty and the Good…
Great post.
My “great post” comment was intended for Scott, not the banal injection of Jesus into the comments.
While I wholeheartedly agree that the streaming bonus will not be beneficial for most shows on streaming, it’s important to point out, 20% of subscribers have to watch a show in the FIRST 90 days of release. Theoretically 10 million of HBO subscribers could watch a show in the first 90 days but if only 3 million watched the finale, I doubt Succession would have been a show to clear the hurdle.
Writers, and not massive corporations, are responsible for saving an industry under threat? The same industry that’s been decimated by the ZIRP fantasies of these same companies. Please. Writers have little power over the structure of the industry, and how on earth could writers and producers ever partner when studios and streamers were trying to gig economy the industry. A fair deal for writers was a prerequisite for the two to team up and address tik tok.
That it’s incumbent on writers and not studio heads to address the coming storm is laughable. Which group is powerful in this situation? I guess this article is tacit acknowledgement that the studios are too short sighted and greedy to create a healthy, sustainable entertainment industry and that only the writers have the foresight and patience to see that through.
The causation here is absolutely backwards. Writers, and not massive corporations, are responsible for saving an industry under threat? The same industry that’s been decimated by poor regulation and ZIRP fantasies of subsidized consumers and endless growth towards monopolization. Please.
I think you’re confusing what ‘should’ be done and what ‘needs’ to be done. Warriors don’t fight battles because it’s a good idea, they do it because it’s the best idea.
This weeks column is Scott at his best – disassembling stupidity in merciless fashion.
It is reminiscent of his early smack downs of We(don’t)Work, peering around corners. Today it’s Hollywood’s insular, entitled, tomorrow-will-be-just-like-today hallucination.
Its industry was formed in the 1930’s. It will have lasted 100 years.
Damn, cynical much? Tell me you failed to break into a job in the biz without telling me? Americas creative bohemourg is going through changes, that doesn’t negate the fact that it is important to protect those that add actually value to this experiment.
On the consortium of media idea, YES. Especially for public broadcasters. (Disclosure: I work with Canada’s-CBC). Human/journalist-in-the-loop verification data has enormous and growing value.
I’m of the opinion that the producers/studios believe generative AI will be sufficiently far along at the end of this contract to replace writers entirely. Look at how it’s gained functionality in just the short time the public has been aware of it. Kick the can down the road until writers have literally zero leverage.
My guess is Big Tech is already actively rewriting copyright rules and gearing up to steamroll them through Congress – to allow themselves to secure full IP rights to AI creations. After all, no one’s going to spend $200M+ to make a big AI blockbuster FX movie if it or a big chunk of it might fall into the public domain.
Great article. Well argued. Thanks. Another example of an industry squabbling over a dime on the pavement while dollar bills fly by overhead in the new wind.
Generally agree. Unions are groups of people. They have some power in Detroit.
But, Hollywood has always been about the power of an individual. Those individuals can be tyrant studio head, super agents, top actors, famous directors. Unlike those running companies, they do not think about anyone else in their organization. It is all about them. Blame insecurities, primarily small body parts or aging faces, but Hollywood hasn’t changed. If your company is focused on laser tech or HR software, you have to be deep in the business, If your company is based on YOUR decision who is to be a star, what song is promoted, or which movie is funded, you don’t really care about anyone else. Average life of a Biotech CEO is about 18 months. To fix Hollywood, results based management should be on the same timeline.
No sympathy for the publishers. They have left so much money on the table. Example: Why don’t the band together and offer a “news pass” applicable to every metro, and allow the equivalent of single-copy sales? Why did they never leverage their classifiieds before they disappeared? Why didn’t they leverage their calendar, sports, and police beat sections? The average newspaper publisher is a dolt who’d starve in a grocery store. They deserve the deaths that are just around the corner.
Good luck. Legacy media is dead. Streaming legacy media is dead. Great two brick business model. If one brick won’t float, find some more and bind them together and toss them back in and watch what happens. Barry Diller? Really?
“I proposed we form a consortium (NYT, News Corp, Condé Nast, Hearst, etc.) to block Google’s crawlers and have an auction for the license to our content. I believed Google and a somewhat relevant Bing (see above: 2008) would have paid billions. The board said no, and we missed the chance to upend the business model, to put creators — journalists, editors, artists — in the position of power, instead of the platforms. Soon enough, it was too late.”
Spot on, Scott. A similar story: As you probably know, AOL was working on developing its own search engine over several years. That effort was snuffed out in 2000 for about $30 million from the very young Google to become the default search engine for Netscape/CompuServe/AOL. The deal happened over a lot internal protest. AOL signed its own death warrant.
Side-note: AOL management did the same thing with online hotel and airline booking. I was part of a cross-matrixed team at CompuServe that built the first functional airline booking system (or possibly second, as we were neck and neck with SABRE spinoff Travelocity). After AOL bought CompuServe, we were eager to offer them what built and recommended that it be called AOL Travel. AOL’s then Travel Channel manager, Andrew Barbour, shut us down and announced that Travelocity would be AOL’s preferred travel partner. Once again, a focus on short-term profits killed a golden opportunity to become the market leader.
The amount of money the tech companies monetize off of teenagers is staggering. Just as staggering is the amount of harm they are doing by providing accessible avenues for cyberbullying, exploiting kids self self-esteem, and bombarding them with a false sense of reality. Parents ought to consider the adoption of the law Utah passed requiring parental consent for social media for kids under 18. Traditional media companies should consider getting on board and backing such legislation for their own good. As you pointed out, tech companies are eating their lunch and it won’t get better. In this case, it might be a win-win situation for parents and traditional media companies to take back some of the teen’s screen time for something more tangible. Not that Hanah Montana enriches a child’s life, however, she’s not weight-shaming them either. Thanks for your observation and analysis!
Sage. The ‘original content’ produced by AI is the combination if others original content. Those that are unable or unwilling to create content love the idea that others knowledge and experience is articulated for them, for free.
What happens if the class action is successful?
Not just to OpenAI and others LLM operators, who may have to retrain their models without the use of copyright protected content, a non-negligible but not catastrophic cost.
What happens to the materials *generated* by the use of those copyright-violating LLMs?
What would a jury award, based on the sum total value of all content descended from pilfered IP?
$1 per infraction?
Such a victory would be world-ending for any LLM operator.