Hollywood studios drop key issue in writers talks

A sign marks the location of the Writers Guild of America's contract headquarters where negotiators are meeting to strategize, at the Writers Guild offices in Los Angeles, October 10, 2007.

LOS ANGELES (Reuters) - Seeking to remove a big stumbling block in stalled contract talks with Hollywood screenwriters, studio executives on Tuesday dropped a proposal to overhaul residual payments -- a key, decades-old source of writers' income.

The move came as the two sides returned to the bargaining table with two weeks to go before the current contract expires and rhetoric about the chances of a crippling strike against the television and film industry was running high.

The two camps have been sharply divided over the formula, first established in the 1950s, by which TV and film writers earn "residual" fees when their work goes beyond an initial broadcast or theatrical release into secondary markets such as reruns and DVDs.

The studios had been pushing to overhaul the system with a new plan that would withhold residual payments until after production, development, distribution and marketing costs are recouped.

The writers have vigorously opposed such a change, arguing they could not trust a Hollywood accounting system notorious for deliberately playing down or denying the commercial success of films when it comes to making good on profit participation.

The Writers Guild of America (WGA) has cast the studios' proposal as an assault on an earnings source vital to helping its members endure the boom-and-bust cycles of their livelihoods.

As the two sides resumed talks on Tuesday, the studios announced they were withdrawing the cost-recoupment proposal in the hopes of achieving a breakthrough in the contentious negotiations.

"In the overriding interest of keeping the industry working and removing what has become an emotional impediment and excuse by the WGA not to bargain, the (studio negotiating team) withdrew its recoupment proposal," said Nick Counter, head of the Alliance of Motion Picture and Television Producers.

But he added that the studios and networks would stand firm against demands by the union to increase residual payments for DVDs, pay television, basic cable or reruns on two fledgling broadcast networks, the CW and My Network TV.

Higher residuals for DVDs has been a major demand of the guild, along with greater compensation for writers whose work is distributed through the Internet and other digital platforms. Residuals for various kinds of digital media were not explicitly mentioned in the studios' statement.

The WGA said it welcomed the studios' move to withdraw the new plan, but maintained its resolve to press forward on the other issues. "The remaining rollbacks would gut our contract and will never be acceptable to writers," the guild said in a statement.

The current three-year contract covering the guild's 12,000 members expires on October 31, and union leaders have asked authority from the rank-and-file to call a strike if no deal is reached by then.

Studios and TV networks have been treating the end of the month as a de facto strike deadline as they stockpile scripts and speed up production on some projects as a precaution.

Hollywood screenwriters last walked off the job in 1988 in a 22-week strike that delayed the fall TV season and cost the industry a reported $500 million.

Reuters/Nielsen