Hollywood studios drop key issue in writers talks

By Steve Gorman

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.