Warner Bros. Explains Why the Strike Was Necessary

05/25/2011 12:35 pm ET

[UPDATE: The following is an expanded version of the article posted on June 5, 2005. It was updated with new information on June 6.]

And so it was written, let any uncertainty about the Writers Strike be put to rest.

Should writers have struck, were the three months worth necessary, how was the deal? Walking in circles endlessly along the picket lines, the mind couldn't help but wonder about the numbing uncertainty, as questions pounded themselves into one's head with each pounding footstep.

Was there actually any profit yet in the Internet for studios? Is the goldmine many years off? Should writers have pushed Internet issues onto the backburner until later?

Your questions have now been answered. In a remarkably-open interview with a Warner Bros. executive, stark admissions about plans for developing the Internet were made in as blunt terms as possible. The interview for Interactive TV is utterly eye-opening.

"A couple of years ago," the executive states, "I said, 'Gee. One of these days, Internet TV is going to happen, and we should try to be the first guys in - or at least one of the first - so that we can control our own destiny by building our own retail store where we can directly sell to consumers. We started going through all of our television library. Over the course of a couple of years, we cleared 300-plus television series, and about 14,000 to 15,000 episodes of programming."

Yes, you are reading that correctly - over 300 TV series. 15,000 episodes of programming. Already. All cleared - already. For the Internet.

Officially, that falls into the "Yipers!: category.

But don't get ahead of yourself yet. Because that's not the eye-opening part.

Are you ready? The interview for was not with some middle executive making guesses, it was with Eric Frankel - then-president of Warner Bros. Domestic Cable Distribution. The boss.

And here's the remarkable thing: even that is not the eye-opening part!

The eye-opening part is that the interview was given July 18, 2006. Read that year again - 2006. The interview is from two years ago.

Remember now: the AMPTP said it wanted three years to study the Internet. It offered writers zero for the new Internet. And two years earlier, Warner Bros. had already cleared 15,000 episodes of its TV library for the Internet. All set to go.

By the way, from all reports during the strike, two corporations were hard-liners, refusing to allow a settlement that the others were willing to accept as fair. And so, largely because of these two corporations, the strike went on for three horrible months, devastating the economy of Los Angeles.

Those two companies were Viacom...and Time-Warner.

Any questions on the strike should now be all laid to rest, with all fingers properly pointed at the actual cause and corporate perpetrators.

(How screenwriter Peter Griffiths tracked down this interview, which he forwarded, is beyond me. But then Peter Griffiths never ceases to impress me with his knowledge and understanding of New Media. He and his brother David owned a notable software company in England, before selling it to move to Hollywood. Given the realities of the strike, their first screenplay was the aptly-titled, "Collateral Damage"...)

The full interview with Eric Frankel is breath-taking in its scope and details about Warner Bros.' plans for the Internet - the details they went through to clear the rights of series, the unwillingness to clear certain shows because they'd actually have to pay more for them, projects for other areas of New Media including mobile phones and additional platforms, interactive programming ideas and much more.

And then, in the end, when the Warner Bros. president is asked what the company's "ultimate goals" are for their Internet ventures (again, remember, this is two years ago, when the company supposedly didn't know what this whole, new-fangled Internets thing is), he responded -

"And we want those positive experiences to eventually work their way to the 10-foot environment of your television."

Gee. They wanted the Internet to blend directly into TV. Where the audience will watch the Internet on their TV. Just as if it was TV. And this was their "ultimate goal" two years ago. Well...okay, at least two years ago. Who knows how many years before this had become their ultimate goal?

Long as that full interview is, it's well-worth reading. The gall of the AMPTP international mega-corporations - throughout negotiations and the strike - will come seeping through your computer monitor, as their insistence with a collective-straight face about the unprofitability of the Internet gets stripped away with their bald-faced own words.

Just look at the answer that the President of Warner Bros. Domestic Cable gives to the question, "How are revenues generated by In2TV divided up?"

(By the way, it's not just that the word "revenues" is used, but note that this is present tense, how "are" the revenues divided? Present tense, spoken two years ago.)

"The money - which is generated from the commercial every time someone watches an episode of a show - goes to AOL," Frankel said back in 2006. "AOL then gives us our share of that money. The money is then distributed between all the participants in the show, via the Actors Guild, the Writers Guild, and all the various unions. So the people who participated in the show are definitely getting paid from this, just as they would get paid if we sold a series to, say, the Sci Fi channel."

Gee. Go figure. And this is from two years ago. And the corporations said they needed an additional three years to study the Internet.

(That sound you hear is the grinding of teeth of the Negotiating Committee. It's one thing to know full-well someone is lying, it's another thing to read it in print, after the fact.)

Oh, and not to quibble, but if any actor, writer or member of a various union has ever received a single penny from those revenues which Mr. Frankel says he has been divvying up, it will be a miracle akin to the discovery of the source of the known universe. Anyone get anything? Hands? Anyone? For goodness sake, Warner Bros. spent three months doing everything possible to avoid paying this.

But now, they have to.

At the end of the strike, I wrote that I thought the potentially biggest gain in the new contract was perhaps the most overlooked - the 2% of distributors gross from Day One of all old series from 1977 on. I argued that at some point, companies would want to put their entire libraries online, and this would become an open stream of income for writers (and all creative guilds), acting almost as an annuity.

It is not surprising, therefore, that when describing the content that Warner Bros. was actively using, Mr. Frankel stated that "40% of the programming on In2TV right now is from within the last 10 years; 70% is from within the last 20 years."

For those without high math skills, that 1977 starting threshold in the new contract is 31 years ago.

To make it more clear: all these shows that Warner Bros. had already cleared and was using for free are now covered, now earning its writer creators 2% of distributors gross from Day One.

It is hardly unreasonable to be absolutely certain that all the AMPTP corporations were thinking exactly like this, preparing exactly like this, acting exactly like this.

At least two years ago, corporations had each likely cleared tens of thousands of TV episodes for the Internet - while claiming they needed time to study it. Planning to merge the Internet with television - while claiming they needed time to study it. All the while, offering writers (and ultimately all the craft guilds) zero dollars, with 39 rollbacks. All of which now, acknowledged in black and white, shows it would have destroyed the Writers Guild and ultimately each of the craft guilds in its path.

The 17-day window for free Internet streaming is an issue that will eventually have to be addressed. It may be found problematic, it may be found to be a reasonable adjustment to how first-run TV is watched these days in the Age of Tivo. But in the big picture, those 17 days may end up being a little picture. As Warner Bros.' president demonstrates, the most prominent use of New Media may well be a venue for its library. Its massive library. And for that, writers just negotiated 2% of distributors gross from Day One.

By the way, In2TV is still in active operation, still streaming TV content, still charging for material, still running paid advertising. Still promoting, "Watch TV Shows Online For Free!"

And it's all there in the open. Running for two years on nothing but electricity, digital storage and gall.

The truth, we are told, shall set you free. Apparently, so too will the AMPTP.

It bears repeating that Time-Warner was one of the two corporations that most adamantly fought against a settlement - keeping the strike going for three months.

To anyone who wonders whether the strike, horrible as it was, lasting three months as it did, was necessary - the president of Warner Bros. Cable Distribution just explained it to, you why it was. Well, okay, not "just." But he did two years ago.