DGA Talks Open Second Front in Labor Battle; Directors to Focus on Streaming Gains

If Hollywood’s labor drama were a script, this would be the start of Act Two.

On Wednesday, as writers walk picket lines outside the major studios, the Directors Guild of America will sit down for its negotiations on a new contract with the Alliance of Motion Picture and Television Producers.

More from Variety

A deal — if they are able to reach one — could help resolve the writers strike. That’s what happened 15 years ago, when the Writers Guild of America was on strike and the directors went in for their contract negotiations. Leveraging the pressure of an industry-wide work stoppage that was in its third month, the DGA secured milestone agreements for unfettered jurisdiction over the internet and a residual formula for what was then quaintly known as “new media” exploitation of movies and TV shows.

The WGA then had the same terms baked into its 2008 contract through “pattern bargaining,” which ensures a level of parity among the WGA, DGA and SAG-AFTRA.

But this time, betting on the DGA to pave the way for a WGA-AMPTP accord is by no means a sure thing. At a meeting on Saturday, WGA showrunners were told by their union leaders that even if the DGA reaches an agreement, they should not expect a repeat of 2008, according to a member who attended.

This time around, the two unions have starkly different agendas, so deal terms that resolve the DGA’s issues still won’t address most of the writers’ major concerns.

For the DGA, the primary focus is getting a better deal on international streaming residuals. AMPTP president Carol Lombardini has already made an offer to the writers on that issue, which could form a starting point for talks with the DGA.

A DGA deal could then be applied to SAG-AFTRA, which begins its negotiations on June 7, potentially increasing the AMPTP’s leverage with writers.

“If I were in Carol’s shoes, I’d say ‘Let’s do DGA,'” said John McLean, former CBS labor relations executive, and a former WGA executive director. “If we can give them something in international, you go to the actors and then make a deal with them. That does put the Writers Guild in a tough spot.”

Notably, however, the DGA has gone out of its way to express solidarity with the writers. Jon Avnet, the chair of the DGA negotiating committee, appeared on stage with WGA leaders at a unity rally with other entertainment guilds at the Shrine Auditorium on May 3.

The DGA also broke with tradition and declined to negotiate early with the AMPTP, saying in February that the studios weren’t yet willing to address key issues. That was a surprising development from the guild that has had the reputation for being coolly analytical and business-like when it comes to contract talks, in contrast to the WGA’s more pugnacious approach, at times.

The DGA contract and SAG-AFTRA’s contract each expire on June 30. The DGA has made clear that it expects a tough battle with the AMPTP, and the writers strike has once again likely increased its leverage. A DGA strike — unlike a WGA strike — would also shutter all scripted production immediately, including film — which could in turn give writers more leverage.

But a strike would be out of character for the directors. The DGA — which also represents assistant directors, unit production managers, and stage managers — has struck just once in its history, in July 1987. That work stoppage lasted three hours and five minutes on the East Coast, and just five minutes in L.A. (Or 12 minutes, by the DGA’s count.)

In this round of bargaining, there is some overlap between the WGA and DGA agendas. In addition to an improved streaming residual formula, the DGA also wants hefty hikes in minimum rates to account for rampant inflation since the last round of bargaining.

But an agreement on those items wouldn’t address WGA concerns including a TV staff minimum, a requirement that TV writers be involved throughout production, and language on artificial intelligence.

The DGA, meanwhile, is also focused on its guild-specific issues, like on-set safety, diversity, and protecting the director’s creative control over a project.

The rise in global streaming has become the centerpiece, however. In a message to members last month, the DGA laid out data showing that with the domestic streaming business reaching a plateau, the studios are looking to foreign subscribers for growth.

The DGA tends to lead the way in setting streaming residual formulas. In 2014, the guild negotiated a formula for “made for streaming” shows — which have since become the fastest-growing source of residuals by far. The guild negotiated a tripling of those residuals in 2017, and a 46% increase in 2020 — both of which were applied to the other guilds.

But in the memo to members, the guild noted that the formula is still based only on domestic subscriber numbers.

“The bigger the SVOD platform domestically, the higher the residual,” the guild stated. “However, under our current formula, no matter how many millions of global subscribers a service might have, the Studios only pay you a fraction of the domestic residual to compensate you for all of the global audiences that enjoy your work. This effectively cuts you out of your fair share of the worldwide distribution and success of your work abroad.”

The current system sets up five tiers based on a platform’s domestic numbers, with platforms in the higher tiers paying a higher residual. The formula also includes a 35% boost for any platform with a significant international presence — which, now, is most of them.

That 35% number is a bit of a fudge factor. It allows for the fact that foreign subscribers generally pay lower subscription fees than domestic ones, and might not even be watching U.S.-made content. But with so much growth projected internationally, the DGA has decided it needs some mechanism to account for the increase in actual subscriber numbers — not a fixed placeholder.

Several indicators suggest the DGA talks could go more smoothly than the WGA’s negotiations, which collapsed on May 1.

For starters, the AMPTP has already agreed to a tiered system based on international subscriber numbers, for the WGA. The two sides are still far apart on the actual numbers — the studios say the WGA formula represents a 200% increase — but the AMPTP has accepted the general concept.

And unlike the WGA, the DGA is not believed to be seeking an increase in streaming residuals for hit shows. The studios balked at the WGA’s proposal for a “success factor” in streaming, as they adamantly refuse to turn over viewership data to establish a “performance-based” bonus residual for streaming shows, to offset the loss of income from syndication and international licensing.

The studios also seem flexible on another DGA priority — an increase in minimums. The AMPTP was willing to raise WGA minimums by 4%, 3% and 2% over three years — plus a one-time 7% increase for writer-producers. The studios also made clear that was not their final offer, suggesting they could go higher.

On the issue of safety, the DGA has been advocating for a “safety coordinator” on set who would be given broad power to shut down sets if necessary. The Motion Picture Association has been in talks with lawmakers in Sacramento on that issue for more than a year, and recently signaled tentative agreement on a pilot program to enact such a reform.

But negotiations can also be unpredictable. IATSE — which has never struck — walked up to the brink of a strike in October 2021, only to pull back at the last moment. The DGA could also push things farther than it has done before.

“I think they understand that all of labor has to stand up and fight against these companies that really do want to minimize us as much as possible,” Ellen Stutzman, the WGA’s chief negotiator, told Variety while picketing outside Netflix in Hollywood on May 8. “And the fact is, they can’t make the content without any of us or all of us.”

Cynthia Littleton contributed to this story.

Best of Variety

Sign up for Variety’s Newsletter. For the latest news, follow us on Facebook, Twitter, and Instagram.

Click here to read the full article.