• by Diane Mermigas , February 11, 2008

The media and entertainment proletariat, thrashing about in uncharted waters, should embrace the hard-learned lessons of the WGA writers' strike before the industry powers resume their former ways.

The overriding caveat to any stop-gap agreements: There is no controlling who creates, commands or capitalizes on content in a viral universe. The tug of war over vague residuals this time around will not be repeated when a new pact expires in 2011. By then, profit-seekers will have carved new trails through the interactive jungle. They will know what hit content from any sources will be worth because they'll know what consumers and advertisers will pay for it. Although the media world will be more fragmented, it will also be more lucrative--provided that it supports digital content and commerce.

Despite the pain, the WGA strike has been part of the transition process.

The broadcast and cable networks, their corporate parents, and the creative community have everything to gain by giving lip service to change. "The strike has allowed us to look at the way we do business, and the business will be stronger for it," NBC Universal CEO Jeff Zucker recently said. Then why stop at producing fewer new series pilots and scrapping the costly upfront presentation for Madison Avenue?

The strike-related dialogue has been primarily focused on two things: rationing out residuals and recycling a finite amount of existing content--both valid short-term concerns that are dangerously short-sighted. Whatever residuals writers and directors finally achieve in their new pacts isn't enough, but it's a start. Some of what the studios and networks are keeping for themselves will slip away; new media compensation is difficult to pin down.

The advertising-supported streaming Web video online is television's new syndication pipeline and film's speediest exhibition window--replacing more tightly managed sources of wealth. Some combination of set payment amounts and percentage of producers' gross Internet revenues will be fine-tuned in ongoing negotiations.

Writers this time have insisted on residuals based on a percentage of producers' Internet revenues. A compromise proposal calls for 2% of gross Internet revenues in the third year of a new pact. The writers' proposed pact is partly based on the Directors' Guild recent settlement. That pact calls for Directors Guild members to receive a flat $1,334 for the first year's use, and a percentage of producers' gross revenues in subsequent years. Whatever the terms of new deals now, defining overall revenues for streaming video and film will only get trickier.

Writers Guild members this weekend were voting on a tentative agreement calling for a fixed residual payment of $1,300 for streaming television programs online. In the third year of their new pact, writers would receive 2% of producers' revenue from such streams. Writers also will receive residuals for electronic downloads of movies and TV programs at nearly double the rate paid historically for DVDs, based on a percentage of producers' revenue.

The only thing certain is that all parties will require a guaranteed return on their creative, monetary or sponsorship investment. Another defining realization of the strike: Consumers go wherever they can to get what they want. And what they want is much more than the broadcast and cable networks' recycled series. The explosion of unique grassroots content and enterprising ways of giving professional content an online home says it all.

The Big Media companies need to get over their obsession with their own series. They need to put their resources and brand muscle behind unconventional development online and on air. They need to stop relying on the 90/10 or 75/25 splits with online distributors of their existing content. It's easy, but it's not the future. As long as the network companies can collect $10 to $50 CPMs for advertising on their familiar programming streamed online, they won't be motivated to engage in anything more enterprising than Hulu, Veoh, Joost and their own branded sites.

Bravo's recent acquisition of the whimsical series "Television Without Pity" is a measured step in the direction of original creation. But it's still too safe. Surely, dozens of new viable online showcases for incubating premium Internet talent and product (such as 60Frames, Channel 101, Funny or Die) will help Big Media find new ways to place financial bets on original fare. The strike has also encouraged venture capital and other funding sources to get behind new online homes--such as Visual Arts--for professional TV and film writers.

Vuguru's "Prom Queen" has provided a skillful template for creating original, appealing short-form fare for a demographic wedded to their mobile phones and social networks. What about a witty video blog journal that captures daily commuting, grocery shopping, or chauffeuring kids, and blends grassroots and professional contributions?

Whatever new and modified creative efforts emerge from this strike, they will have to be wrapped in social networking, social media and community to monetize content. There will be more creative collaboration. Advertisers will seek fewer one-off opportunities to pitch and more of the key consumer relationships they can mine to sell their goods and services. If the static TV networks and studios don't find a way to make that happen, they have missed the interactive boat. By the time the next WGA pact is hammered out, the nearly $1 billion spend on Web video advertising this year will have multiplied into a major category.

Big Media may still be the repository of Big Bucks, but in a viral media world, it has no handle on talent, which can come from anywhere. All parties would be wise to make their first matter of post-strike business writing the industry a new script.