Talks between Hollywood writers and studios imploded Friday, dashing hopes of an imminent resolution to a five-week-old strike that has upended the entertainment industry.
The impasse is the latest turn in what has become one of the most tumultuous and vitriolic labor disputes in recent Hollywood history. It comes after eight days of contentious negotiations that yielded very little, if any, progress between the parties.
The sides remain deeply divided on how to split up new media revenues as digital technology and the Internet transform the way entertainment is delivered and consumed.
Both sides blamed the other for the breakdown of the talks, which fell apart over disputes about how much writers should be paid for shows distributed online, and whether writers who work in reality TV and feature animation should be covered under the Writer's Guild of America contract.
In a statement, the Alliance of Motion Picture and Television Producers, which represents the studios, said it was "puzzled and disheartened by an ongoing WGA negotiating strategy that seems designed to delay or derail talks rather than facilitate an end to this strike."
Guild officials were not immediately available for comment.The latest setback will have far reaching consequences across Hollywood and for many businesses throughout Southern California that feed off the industry.
It may also foreshadow a new period of labor unrest in Hollywood, which has enjoyed relative peace for most of the last two decades.
A continued walkout won't affect only the 10,500 writers on pickets lines, but also thousands of other workers -- from crew members and actors to talent agents and studio office employees. Already, the strike has taken a heavy toll on so-called below-the-line production workers who work behind the scenes on film and TV shows.
The television industry, which already has been disrupted by the shutdown of more than 50 shows, will be even harder hit. Virtually all scripted television shows are expected to stop production by next week, causing a loss of 15,000 jobs and costing the Los Angeles economy an estimated $21 million a day in direct production spending, according to FilmL.A. Inc., the nonprofit group that handles film permits.
Some economists have predicted that a strike stretching into next year could cost the overall L.A. economy more that $1 billion. The entertainment industry accounts for almost 7% of Los Angeles County's $442-billion economy.
Instead of watching new episodes of their favorite TV shows like "Desperate Housewives," "The Office," and "Cold Case," viewers will see reruns and a plethora of reality, sports and news programs.
With no fresh episodes, networks stand to lose tens of millions in advertising dollars. They could also see a further exodus of younger viewers to the Internet and other forms of entertainment, eroding the networks' market share.
Film studios will also suffer more disruptions. While they have enough movies to fill theaters in 2008, already several productions have been delayed because of the strike. Those include Ron Howard's "Angels & Demons," a sequel to "The Da Vinci Code" and Oliver Stone's "Pinkville." Other films could face similar fates.
Studios plan in the coming weeks to ratchet up the pressure on writers by invoking "force majeure" clauses in employment contracts with producers and others. The provision allows studios in a crisis such as a strike to terminate deals after a period of time, typically four to eight weeks after suspension notices go out. Shortly after the strike began Nov. 5, studios sent out dozens of such suspension letters to writer-producers of shows that shut down.
Most studios have contingency plans to pare overhead after the first of the year that include shedding some production deals and employee layoffs, several studio executive said this week. Talent agencies, which have slashed expenses, plan similar job cuts.
The studios will now try to strike a deal with directors, whose contract expires June 30. The Directors Guild of America, which has struck only once in its 71 years, for five minutes, has a history of negotiating contracts early and has a more cordial relationship with the studios than the writers union does.
Studios are hoping that a deal with directors would set the template for agreements with writers and actors, whose contract also expires June 30.
Such a strategy, however, could harden the resolve of the striking writers, whose guild has often sparred with the directors union on pay issues. It could also drive writers even closer to actors, who share many of the same concerns and who are preparing for equally tough negotiations. Screen Actors Guild leaders have strongly backed writers during the walkout, with a number of their celebrity members walking the picket lines.
Studios have been preparing for months for the prospect of an actors strike by moving up movies' production start dates so they could wrap by the end of June.
A prolonged strike also carries risks for the Writer Guild. Although union members have been strongly united behind their leadership, the solidarity could fracture if the strike drags on, creating severe hardships for many lower- and middle-income writers. Already, a group of top writer-producers known as show runners has expressed concern about how the strike is hurting their own staffs.
With so much at stake for both sides, many question why the parties have so far failed to come to terms on a new, three-year contract.
The parties remain sharply at odds over a host of complex issues, at the heart of which is how writers will be paid as entertainment migrates online.
"The industry is at crossroads," said industry veteran Sidney Sheinberg, former president of Universal Pictures' longtime corporate parent, MCA Inc. "Fear is a great motivator here on both sides."
Writers fear being short-changed as the studios rush to distribute their TV shows and movies on the Web, cellphones, video iPods and other devices. They sharply disagree with studios over how much they should be paid when shows are sold and reused online or created specifically for the Web.
"I'm not going to be the chairman of the negotiating committee that gives away the Internet," said the guild's John F. Bowman. "There's an enormous burden of history here."
The studios, confronted with dwindling profits from DVD sales and rising production and marketing costs, say they are concerned about committing to the guild's new-media pay demands when the economics of the Internet and other digital technologies are still so uncertain.
"They deserve to participate in the growth of the business, but you can't choke a business before it gets started," one top studio executive said of the writers and their demands.
The dispute isn't fueled only by the issues, however. A clash of personalities and styles of the opposing parties -- with the guild's chief negotiator, David Young, and President Patric M. Verrone facing off against the studios' negotiator, Nick Counter. That bad blood exacerbated tensions and caused dysfunctional negotiations.
Young, a veteran labor organizer of garment and construction workers and a newcomer to Hollywood, transformed the guild's culture from a somewhat insular artists group to a more traditional, activist union focused on growing its base. His confrontational tactics, more associated with blue-collar unions, put him sharply at odds with Counter, a veteran and hard-nosed entertainment industry negotiator who publicly blasted Young as inexperienced and militant. The two men openly sparred well before talks even began.
The conflict set the stage for a dysfunctional and erratic bargaining process.
Although negotiations ostensibly started back in July, they didn't get serious until Nov. 4, the day before writers walked.
Talks resumed last week, prompted by a flurry of back-channel communications involving writers-producers, studio executives and top agents, led by Creative Artists Agency partner Bryan Lourd. That raised hopes that a deal was within reach.
Tuesday marked the first time that they had a serious discussion about one of the biggest issues dividing them: pay for shows streamed online.
The next day, however, talks took a turn for the worse as writers reiterated their demands for jurisdiction over reality TV and feature animation and a proposal that would give writers the right to wage sympathy strikes in solidarity with other unions.
Studio executives considered those nonnegotiable issues and were angry because they thought writers wanted negotiations to focus on new-media pay only.
Writers were equally upset that the studios didn't offer better proposals on such key issues as residuals for shows sold online and episodes created for the Web.
The frustrations on both sides boiled Thursday and Friday with the sides accusing each of misstating facts about the details of the latest round of talks.
