Dibs On The Download Dough

Actors get just over a cent from ABC for every $1.99 download

He played the loser ex-husband in Cybill Shepherd's short-lived 1995 sitcom Cybill. Now, as president of the Screen Actors Guild, Alan Rosenberg has become a warrior in the digital age. Allied with Hollywood's other two major unions, the Writers Guild of America and the Directors Guild of America, Rosenberg intends to be the latest -- and most conspicuous -- speed bump on Hollywood's digital highway. Elected last September on a pledge to "fight like hell to get actors their fair share," the 55-year-old actor says in his gravelly New Jersey accent that he hopes to increase the amounts that studios pay creative folks for downloads to iPods, computers, and cable systems. For Hollywood, which is banking on digital downloads to make up for slowing DVD sales and a sluggish box office, the message is clear: Your partners want their slice of the pie.

It's the day after the Oscars, and Rosenberg is sounding a cry that will be heard in the months ahead, not only from actors and writers but also songwriters, TV station owners, and others affected by this new revenue source. "They are corporations, and their motivation sometimes is to maximize profits and not put on good entertainment," says Rosenberg. He simply wants "a place at the table to show we are partners in making the content." Translation: It's time for Hollywood to cut some deals.

ROSENBERG AND THE OTHER Hollywood unions want an increase in the residuals their members get for the $1.99 downloads of shows such as ABC's (ABC ) Lost and Desperate Housewives. Together all unions now pull in a total of just 2 cents per download, says SAG, with actors getting 1.25 cents. The problem is that ABC says the contract allows it to pay the unions based on the rates for DVDs, which SAG says are about a third of those for TV shows. Union leaders insist the network has chosen to pay the lowest residual rate and think their members should get more. The two sides are likely to fight it out in arbitration court, though it could spill over into a showdown in 2007 and 2008 when industry contracts expire.

The unions aren't the only obstacles for Hollywood. Local TV station affiliates of the big networks are steamed because day-old episodes of Lost, say, are being peddled over broadband, possibly draining away audiences for those shows. Meanwhile, studios that make programming for some other company's network -- think Sony (SNE ), which makes the sitcom King of Queens for CBS -- aren't rushing to sell digital downloads, at least not until that market begins to rival the still-robust revenues for reruns and DVDs of shows.

Hollywood has so far dodged a few of these bullets. CBS, which is making video-on-demand versions of CSI and other shows available through cable operator Comcast (MCSA ), has assuaged its affiliates by limiting the downloads to only those markets where CBS owns the local TV stations. But there are some issues that can't be avoided. Take music rights. You can't, for instance, download copies of the 1986 flick Ferris Bueller's Day Off. That's because the Beatles have blocked it until they can get their price for the song Twist and Shout, which is on the soundtrack. Other songs are similarly restricted by rights owners. DVD rental service Netflix (NFLX ), which has a 50,000-plus flick catalog, offers films and shows that have already cleared those music rights. By contrast, the studio-owned Movielink download site has only about 1,200 titles, says Jim Ramo, Movielink CEO. A larger catalog, Ramo says, "is the tipping point."

All it will take is money, and Hollywood has plenty of that. For years, the entertainment industry has grown by finding new technologies to distribute old fare. To profit in the digital era, executives may want to think about sharing some of the new-found wealth, before Rosenberg and other partners try to do the divvying for them.

Jon Fine returns next week. For his blog on media and advertising, go to www.businessweek.com/innovate/FineOnMedia

By Ronald Grover

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