Category Archives: Internet

Smart Money vs. Dumb Money

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One of my web start-up clients recently extolled the virtues of smart money over dumb money.

My client asserted that smart money is the best way to grow a start-up. In addition to capital, smart money may provide infrastructure, personnel and the input of boards of directors and advisers. These boards provide additional expertise and guidance. Moreover the optics or perception of their association with the start-up increases the venture’s curb appeal and chances for success.

Dumb money, he cautioned, isn’t pejorative; it merely describes a cash investment with little or no oversight of the actual use of the funds other than initial approval of certain elements, cash flow and the overall budget.

To be fair, it’s like comparing apples and oranges. Smart and dumb money deals are structured in different ways to address different risks and expected returns of very different investors. Nevertheless, I was struck by the disparate thinking of movie producers and start-up entrepreneurs; film financiers and venture capitalists in their capital preferences.

My start up client preferred working with smart money from VC investors because he could leverage greater resources into the growth of his company than he could with the same amount of dumb money.

I explained that smart money is anathema to movie people unless it comes with distribution and even then, they’re never thrilled with an investor armed with approval rights over talent, budget and distribution. Dumb money shuts up and stays out of the way.

That said, we both agreed that if an investor offers up smart money, dumb money or any other kind of money, take it (provided it’s legal).

WGA Deal (Pretty Much) Closes. Now Let The Healing Begin.

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Everywhere you look, change is in the air.

All indications point to the writers strike being called off by Monday; certainly by sometime next week, at the latest. This is great news but it will likely take many months for the industry to get back on its feet and much longer to discern how the industry changed forever as a result of the strike. With NBC head Jeff Zucker talking about changing the business model that dominated the development and production of television shows for the past 50 years, you can be rest assured that some things will never be the same.

The strike in many ways affected a discreet group of people working in the business: the major studios and networks and those writers employed by them. This group by no means represents the entire entertainment industry.

Despite the strike, many non-signatory independents continued to do business and there was a boon in reality television production. Scribes writing screenplays for non-signatory companies continued to write. Nevertheless, there remained a cloud of dread over the entire industry.

Now that the strike appears to be over, I expect that the most dramatic short-term effect will be a spike in industry-wide morale rather than a spike in production. In my negotiations with reps this week, most are optimistic about the near future. To be sure, there is much to be happy about. However, it is unlikely that there will be a significant difference between working conditions over the next few weeks and those of the last few.

The WGA’s rank and file must approve the new contract (though it appears that the strike will be called off while the details are worked out). Many TV shows will remain shut down until next season; some shutting down permanently, making it unlikely that many writers and crew will have jobs to return to next week. The local economy will continue to languish; with industry job losses and mortgage foreclosures likely continuing into the spring if not longer.

However, the new deal should make many writers happy in the longer term. Go here for a summary of the tentative deal. The most notable deal points are the WGA’s exclusive jurisdiction over the Internet and cell phones, a residual kicker in new media reuse fees and separated rights. I will provide a more detailed analysis of the tentative deal in another post.

It will be interesting to see what effect, if any, the WGA’s exclusive Internet jurisdiction will have on those writing new media content. Although many writers of podcasts and similar content will be clamoring to join the Guild, Internet writing services apparently don’t apply towards membership in the WGA. Podcasts and other web content are not generally produced by signatories to the WGA agreement. Consequently such services will not be subject to the WGA’s jurisdiction despite the terms of this deal.

Despite the lack of details, most of my clients writing new media content for the Internet who are not yet Guild members will still expect the new agreement to analogously apply to their writing services even if their employer is not a signatory. Signatories for their part will no longer be able to hire non-WGA scribes to create new media content. Regardless of signatory or membership status, it is safe to say that these developments will likely mean big changes for new media creatives and those that hire them across the board.

Potential Breakthrough In Writers Guild Strike

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The Los Angeles Times and other news outlets reported over the weekend that the broad strokes of a deal between the AMPTP and the WGA could be in the offing as early as next Friday. The parties reportedly closed the gap over how much the studios should pay writers for free streaming of movies and television programs over the Internet. The parties still need to find a mutually agreeable distinction between content exploitation in which residuals would be payable and content promotion which would be residual-free.

The Directors Guild closed their deal over these issues last month but many striking writers (and SAG members) criticized that deal for not going far enough on streaming.

The breakthrough came when Bob Iger and Peter Chernin, the designated studio heads negotiating the deal, included more favorable streaming residuals than those in the DGA deal and separated rights for shows created for the Internet so writers receive extra compensation and credit for television shows based on online programming.

However, Guild leaders issued the following cautionary statement on Sunday morning:

To Our Fellow Members,

While fully mindful of the continuing media blackout, we write you to address the rumors and reports that undoubtedly you have been hearing.

The facts: we are still in talks and do not yet have a contract. When and if a tentative agreement is reached, the first thing we will do is alert our membership with an e-mail message. Until then, please disregard rumors about either the existence of an agreement or its terms.

Until we have reached an agreement with the AMPTP, it is essential that we continue to show our resolve, solidarity, and strength.

Picketing will resume on Monday. Our leverage at the bargaining table is directly affected by your commitment to our cause. Please continue to show your support on the line. We are all in this together.

Best,

Patric M. Verrone
President, WGAW

Michael Winship
President, WGAE

As I posted earlier, the break in the impasse here was the result of the principals fronting these discussions and negotiators likely ghost writing arguments for and against critical deal points. Sometimes, this approach is the only way to make meaningful progress in deal negotiations. Once Iger, Chernin, Verrone and Winship work out these broad strokes, the Guild’s rank and file still have to approve the deal. That would pave the way to resolving the strike and getting writers back to work in time to save pilot season and part of the fall television schedule (not to mention feature work) even if it takes months for labor negotiators to work out the details.

Required Reading

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As part of my daily online read, I culled the following from the past week or so. Usually I post these links and any editorial to facebook. I am going to start posting the most significant ones – those that I think are required reading for reps (and our respective clients) – on a regular basis to dealfatigue. Please let me know what you think.

Scrabulous Facing Copyright Infringement Charges

Change in the Business Model at EA Games

In Tentative Deal, Directors Send Message To Screenwriters

Arts Council in England Taketh (and Giveth), Leaving Anger in Its Wake

Netflix lifts limits on seeing online movies Read this if you read anything today. This is where video (and TV…) are headed. Wondering if it’s possible to do a deal with Netflix and Apple directly as you can with music.

Which comes on the heels of . . .
Apple Bets on Online Movie Rentals

Oprah Winfrey getting her own TV network

TV studios cut more overall deals
Companies cite WGA strike as main cause

Steroids beyond sports
Celebrities now among those linked to drug shipments

American Library Association announces literary award winners