What's making writers and studios so nervous

WHAT'S MAKING WRITERS AND STUDIOS SO NERVOUS
[SOURCE: Los Angeles Times, AUTHOR: Richard Verrier and Meg James]
Talks between the writers and the major Hollywood studios about a new contract are scheduled to resume Nov. 26, but the walkout will continue until a pact is finalized. The parties remain far apart -- particularly about compensation for new media. Writers fear they are being shortchanged as the studios rush to distribute their TV shows and movies on the Web, cellphones, video iPods and other devices. The payments they receive when their material is reused, known as residuals, help writers weather the feast-and-famine cycles of Hollywood. As a result, they view this is as a seminal moment to claim their fair share of new-media revenues, not just for themselves but for future generations of writers. The studios, however, are worried about committing to the guild's new-media pay demands when the economics of the Internet and other digital technologies are uncertain. Sales at the moment are minuscule, amounting to millions, not billions, of dollars. Internet video advertising is also in its infancy, and no one knows just which format will click with consumers. Will they pay to download movies or insist on watching them free? Still, entertainment industry executives have touted digital media as a key driver of future growth. "Even the most ardent DVD supporter at a studio would have to admit that a good proportion of the content is going to be delivered electronically," said Kurt Scherf of Dallas-based Parks Associates. In fact, the current stalemate between writers and studios is based in part on their shared nervousness about the toll new media is taking on their traditional sources of income. The Internet has lured away younger viewers and advertisers from television while threatening to make movie studios more vulnerable to piracy and to gut their lucrative DVD business, which has recently peaked.
http://www.latimes.com/business/printedition/la-fi-newmedia19nov19,1,372...
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* Digital media won't be a sideshow in the future
Only about $20 million worth of movies were sold online last year, according to Parks Associates, a Dallas-based research firm. Compare that with $9.5 billion in theater tickets, $16.3 billion in DVD sales and $7.4 billion in DVD rental revenue. Estimates for how quickly the market will grow can vary greatly. Movie download revenue should rise to $1.8 billion by 2011, said Parks principal analyst Kurt Scherf. Streaming video that includes advertising is likely to be even bigger.
http://www.latimes.com/business/printedition/la-fi-future19nov19,1,22941...