The Herald Tribune has reported that the writers strike is diverting attention away from the real problem in Hollywood--namely that there's no money in the movie business anymore. If that's the case, then why all the fuss from the writers?
Apparently, what's happening is that big-name stars are taking a share of movie revenues via an arrangement referred to as "participations. " These top celebrities--Tom Hanks, Will Smith, Stephen Speilberg, etc--take a share of overall revenues before the other monies are divvied out to the other parties--the writers, for example. Per the article:
The report, by the research company Global Media Intelligence in association with its partner Merrill Lynch, concludes that much of the income - past and future - that studios and writers have been fighting about has already gone to the biggest stars, directors and producers in the form of ballooning participation deals. A participation is a share in the gross revenue, not the profit, of a movie.
It goes on to say that taking these participation arrangements into account, the movie business actually lost money last year.
Total sales for last year's slate, the company figures, will ultimately be about $23.7 billion, down about 4.6 percent from 2004. Total costs, meanwhile, rose to $25.6 billion, up 13.2 percent.
That's $2.9B in the red. Add to that a sharp decline in foreign DVD sales--7% domestically and 15.5% in non-US markets, and you've got a lose-lose situation for writers.
I know absolutely nothing about the movie business, but I do know a failed business model when I see it. Furthermore, we all know that union strikes aren't the way to fix an industry burdened by shady accounting practices and old-school distribution philosophies. These parties need to get together and determine a new way of financing, creating, and distributing movie content in a new age of technology--and soon.
Otherwise, tens of thousands of web-savvy entrepreneurs and content creators will steal their market from them.
Movies are here to stay. But Hollywood, on the other hand...
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