The WGA issued this news release just now. Below it is the MPAA reaction:
California Senate Judiciary Committee Passes Fair Market Value Bill
Landmark Legislation Aims to End Unfair Accounting Practices in Hollywood
Sacramento --The California State Senate Judiciary Committee today passed Senate Bill 1765, the Fair Market Value Bill. It was introduced by Senator Sheila Kuehl (D-Los Angeles) and coauthored by State Senators Darrell Steinberg, Gloria Romero, Carole Migden, Elaine Alquist and Assembly Members Fiona Ma, Sandré Swanson, and Mike Davis. The bill would end the practice by some major studios of “underselling” television series or movies, thus shortchanging the talent community as well as production workers. The bill can now move to the full Senate for consideration and then to the State Assembly.
“Studios should not be allowed to undervalue their products in sweetheart deals with their own parent company and cost creative talent and crewmembers their rightful share in residuals and contributions to health and welfare funds,” said Senator Sheila Kuehl.
“This bill is good public policy because it ends a long-standing Hollywood accounting technique that has cost the talent community, both above and below the line. We thank the Senate Judiciary Committee for their affirmative vote, and we will continue our efforts to help this reasonable bill become law,” said Patric M. Verrone, president of the Writers Guild of America, West.
Since the major media networks in the United States have come to own many cable channels, the practice of selling TV series or movies for less than the fair market value of the content has become more and more prevalent. In many cases, the product is sold or licensed from one entity to another entity within the same parent company. This creates a problem for actors, writers, and performers who rely on the amount of a sale of material for their residuals – payments made to the creators or performers of a work for showings or screenings after an initial use. Other union members in the entertainment industry, including the Teamsters, also rely on the amount of a sale price to determine contributions to their health and pension funds. Lastly, major profit participants are often short-changed when a movie or television series is sold for less than the fair market value of the content.
In the last few years, there have been many high profile court cases on this issue. Profit participants from TV series, such as The X-Files, Will & Grace, and Home Improvement among others, have filed suit to prevent the practice of selling television programs from one entity to another for less than fair market value.
Barry Broad, Legislative Director of the California Teamsters Public Affairs Council, commented: “Our members, who are truck drivers, animal trainers, location managers, and casting directors in the film and television industry, depend on residual payments for their health and welfare benefits. If games are being played to avoid paying these hard working men and women their fair share, then the time has come for the Legislature to pass a law that will protect workers in the entertainment industry from such unfair conduct.”
Here's the MPAA statement issued after the hearing today (The Motion Picture Association of America members include: Walt Disney Pictures Studios; Paramount Pictures; Sony Pictures Entertainment.; Twentieth Century Fox Film Corporation; Universal Studios LLLP; and Warner Bros. Entertainment Inc.):
MPAA STATEMENT ON STATE SENATE JUDICIARY COMMITTEE’S VOTE TO UNDERMINE DEAL THAT ENDED WRITERS’ STRIKE
LOS ANGELES, CA -- “Though not unexpected, today’s vote by the State Senate Judiciary is regrettable. SB 1765 is an ill-conceived bill that would criminalize legitimate business decisions by producers of movies and TV programs as they seek to generate revenue created for producers and talent alike. Films and television shows would have to be immediately sold to the highest bidder, upending the successful business practices that have made the entertainment industry a vital engine in the California State economy, creating more than half a million jobs and bringing nearly $43 billion of economic activity to the State each year.
“Of equal concern, this bill would essentially force a legislative ‘do-over’ of the collective bargaining agreement that settled the writers’ strike, which cost the California economy $2.5 billion. Writers and producers made an extraordinary effort to reach a fair deal that put an end to that work stoppage. Enabling the Writers Guild to do an end-run around the collective bargaining process would set a dangerous precedent for future labor negotiations.”
Outstanding! This legislation is long overdue, way to go Patric!
Comment by Walk The Line — April 8, 2008 @ 6:16 pm
I wonder if the Governator thinks about his residuals and royalties when he signs that bill into law.
If it passes, it will cause a major shake-up in the movie business. They might actually think about the movies first, instead of the accounting tricks.
My prediction: The bill passes the assembly and is signed into law by Schwarzenegger. The next morning every studio in the AMPTP packs up and moves to a state that doesn’t have that law. The law will follow the movies from state to state, until the entire movie business moves to a sweatshop in Indonesia.
Comment by Furious D — April 8, 2008 @ 6:23 pm
…and still NOTHING will be done about representatives-managers-producers. Those entities cause more detriment to artists than the studio inside dealing.
Gross points are the ONLY fair way to play.
And the WGA STILL will fail to represent their artists. Just based on this effort - if it fails or passes - will give WGA “leadership” enough BS PR clout to dodge the major financial issues of this industry for 4 or 5 years.
And the thing is, there isn’t anything needed to do to clean up managers and the agencies… all they have to do is enforce laws already in place.
But they won’t.
Comment by Invisible Hand — April 8, 2008 @ 8:04 pm
It won’t get past the Governator.
He’ll veto it because his deals were always structured as a percentage of first dollar gross.
He also did one movie for a $15 million plane.
He doesn’t care about anyone else & he’ll protect his studio boss buddies.
And there won’t be enough votes to over ride the veto.
Comment by Unindicted Co-conspirator — April 8, 2008 @ 9:55 pm
Here’s the problem…the bill doesn’t mention how in the hell they are going to determine what the FMV is for these shows….this is the bill:
SECTION 1. Section 17048.7 is added to the Business and Professions Code, to read: 17048.7.
(a) It is unlawful for the holder of rights in a motion
picture, television program or series, or radio program to sell or license those rights for less than their fair market value where a third party, including, but not limited to, an actor, writer, director, producer, musician, composer, or health and welfare or pension trust fund, is entitled to receive payment based, in whole or in part, on the proceeds from the sale or license.
(b) For purposes of this section, “fair market value” means the most likely price that the assets being sold would bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller acting prudently, knowledgeably, and in their own best interest, and a reasonable time being allowed
for exposure in the open market.
Comment by Shayne R. — April 8, 2008 @ 10:21 pm
Shayne is absolutely correct. The bill is too vague and will be challenged and overturned in court before it even gets half a chance to settle in. It’s ill conceived at best.
If they are fixing prices they are a monopoly, which they aren’t since there are multiple media entities so no one has to sell a film to say Fox since WB, Sony etc are also viable outlets.
If they are cooking the books, they are all publicly traded and have to have full transparency with the SEC and people could go after them there (which I have no doubts they could)
On top of all that, how about we get a law that doesn’t allow every god damn employer to hire their assistants as ‘independent consultants’ and pay them less than minimum wage by feeding on their desire to be in the movie biz. C’mon people. Stop crying for an actor who made a million not getting an extra 10K or a writer who was paid 100K not getting an extra 2K and worry about the saps being paid less than 20K a year working 50 hours a week to make you rich.
The #1 working recipients of Medi-Cal are people working as Hollywood assistants. That should be telling enough.
Comment by manny — April 9, 2008 @ 4:31 am
It’a also long past time for another United States v. Paramount (et al) 331 U.S. 334 (1948).
Comment by Nat Segaloff — April 9, 2008 @ 7:56 am
Well, if the MPAA hates it, it must be a good thing…
Comment by milo — April 9, 2008 @ 8:23 am
Here we go again, writers good, everyone else evil.
There is no question the accounting/net/gross profit standards need to be re-written. There is no question people skate on paying their taxes, really 1099 that independent contractor who doesn’t meet the 7-tests? No DON’T issue that 1099? We’re a one-off so we aren’t really the studio? REALLY? (yes I’ve heard all of the above)
The problem is and always will be, as with contract negoiations, WHO is the final decision maker of FMV?
It took how many months to decide what the fair equation for new media were to be? It’s still branded as unfair by some on both sides.
This bill is simply another way to clog the process, each artist need to be familiar with their contract, or have representation who are. Each artist (fund) need to agressively go after any entity they feel isn’t properly reporting.
As someone typed, 99.9% of these entities are public companies, even if they are Delaware incorporated. There are standards and if they are not being held the artist/fund in question needs to go one-on-one or do a class action suit.
A law is just going to sit in the courts for years languishing while one appeal after another is shot down and/or amemded.
Comment by sigh — April 9, 2008 @ 9:28 am
Do they believe their own crap?
“an ill-conceived bill that would criminalize legitimate business decisions… shows would have to be immediately sold to the highest bidder, upending the successful business practices”
Since when is selling to the highest bidder an “illegitimate business decision”?
Collusion is anti-competitive and in most situations it is actually criminal.
Comment by Paul — April 9, 2008 @ 9:34 am
Well it might be, and it’s the industry’s fault for letting such financial shenanigans get so far out of hand that the movie biz popped up on the government’s radar again.
As for the issue of competition in the media, it’s sort of like the Canadian banking system. There are about 6 big players in Canadian banking, and while they claim to compete, they don’t really do anything against each other, they form a united front against the consumer. They all act in almost perfect concert with each other. The media companies, while not so in synch, are pretty close.
Now the bill is pretty vague, but so are market values most of the time. The only real way to avoid the bill becoming a problem, is for the AMPTA and its members to fix the way they do business. They have to view their business as being about movies, not about accounting tricks.
Then they might be able to get production costs back within the realm of regular inflation as well.
Comment by Furious D — April 9, 2008 @ 9:52 am
Manny,
If they are fixing prices - they aren’t a monopoly.
If they are fixing prices - they are fixing prices
If they are a monopoly - they have the ability to fix prices.
It’s like saying; if they are wearing boots, they are cowboys.
What they are is an anti-competitive oligopoly. They are selling assets to divisions of their own corporation at below fair market value of those assets with the intent of undermining the contractual obligations they have to the stake-holders of those assets. This is an anti-competitive practice that should be illegal.
As far as enforceability is concerned: it will be difficult because the studios have never been very forthright about the accounting of their own profits. The studios can fight it in the courts or they can cooperate. If they choose to fight it, then the government can force the television and motion picture studios to separate from the television and cable networks. The government has been forced to do this before; when they made the studios sell their theaters. That is the next logical step. If that is what they want, they can get that too.
Comment by Paul — April 9, 2008 @ 10:04 am
“If they choose to fight it, then the government can force the television and motion picture studios to separate from the television and cable networks. The government has been forced to do this before; when they made the studios sell their theaters.”
Paul, you are aware that the current Supreme Court is one of the most pro-business courts in quite a long time, right?
Comment by Brad S — April 9, 2008 @ 1:50 pm
Brad S,
Oh wow thanks for letting me know. I gotta get out and read more newspapers like Brad. I guess nothing will ever change. Brad S has told us all to go home and not worry our little heads about it because the current members of the Supreme Court will ultimately find in favor of News Corp, Disney, Sony, Etc. Therefore we shouldn’t try to change anything.
Thanks Brad.
Paul
Comment by Paul — April 9, 2008 @ 2:14 pm
True, the studios are all owned by publicly traded companies but due to the magic of consolidated financial statements, GE or Viacom or Disney do not have to break out results specifically for their theatrical units, they can consolidate them into one report. Further, financial accounting and managerial accounting are two entirely different animals, there are two sets of books. Financial (external) accounting is where the studios must accurately report their numbers to Wall Street, where the CEO and CFO sign off and are held to be liable. Managerial (internal) accounting is where the true book cooking happens in Hollywood, the definitions and numbers for one particular talent deal can be manipulated as the studios see fit, with little or no practical accountability. Where the invisible hand of the market has failed, the invisible foot of government is needed….and it’s high time the studios got a well-placed kick in the pants.
Comment by Tom — April 9, 2008 @ 2:51 pm
Blah blah blah…The companies will move to another state. If anyone needed any proof that the WGA is nothing but pretentious business hating lefties posing for Holy Pictures, this is it. NOTHING.
Comment by Howard Veit — April 10, 2008 @ 11:12 am