Thursday, February 14, 2008

THE LONG ROAD OUT OF EDEN

LABOR & MANAGEMENT PT.II

(***with apologies to "The Eagles" for re-purposed content -- and bladder warning -- this is a long one, so pee first***)

It looks like the WGA is back at work and even CBS mogul Les Moonves, demonized early on in the process, is touting the deal as fair and reasonable for both sides as well as acknowledging his personal respect for writers. Likewise, WGA President Patrick Verrone has credited Fox mogul Peter Chernin and Robert Iger of Disney for breaking the deadlock so a solution could be found.

And those expressions of appreciation and trust are great because they go a long way toward healing the rifts that have developed over the last months and draining away the last bad blood. As I said in Part One when this dispute went Postal, nobody "wins" a strike and the final contract will be imperfect.

It takes well-intentioned people on both sides of labor and management to make a collective agreement work and should one side or the other abrogate their new responsibilities or take advantage of some remaining loophole, then the whole painful process has been for naught and the industry will be back on the road to turmoil and loss.

I'm certain the feeling in Los Angeles, New York and other WGA production centers parallels the one I had after successfully negotiating the first Writers Guild of Canada collective agreement with Independent Producers. It was a new world, a lush and verdant Eden with plenty of low-hanging fruit for everyone.

Little did I know...


"Galaxies unfolding;
New Worlds being born
Pilgrims and Prodigals creeping toward the dawn
But it's a long road out of Eden."


In this negotiation, the WGA gained something that has been in Writers Guild of Canada contracts for some time -- residual earnings derived as a percentage of Distributors Gross. We collect our residuals, or "royalties" as we call them, differently. Our Independent Producer Contract has always followed the philosophy that "When they make money, we make money".

It's part of that Canadian tradition of treating people fairly.

Unfortunately, being "fair" hasn't worked that well for Canadian writers.

That's because some Canadian producers, protected by the privacy cloak of a public funding system controlled by agencies such as Telefilm Canada and further sheltered by regulators like the CRTC, who do not appear to police their own rulings that stringently, have been left free to make enormous profits.

Profits that are not shared with either Canadian taxpayers, whose money fuels their businesses, or the artistic community to whom they are contractually obliged to financially report on their Distribution income.

For decades, Canadian producers and broadcasters have gone, hat in hand, to the Federal government and the CRTC crying poor, declaiming their inability to compete with the gigantic Hollywood machine unless they receive Billions in production subsidies and protected status in the broadcast realm. And they have received both.

To be sure, Canadian artists have also benefited from the largess of the Canadian public under this system. Quite honestly, most of us thought we were just getting the chance to help our country tell its stories and build a culture for our neighbors and our children while defining Canada's face for the rest of the world.

And none of us were getting rich in the process.

But some were.

Appearing before the CRTC hearings on the Canadian Television Fund last week, one of our finest screenwriters, David Barlow, stated the following:

"Over the past decades, I have watched production companies and specialty channels being built on the back of Canadian television programs financed with public funds. I have seen these production companies and specialty channels prosper. I have seen hundreds of people employed by these companies and I have seen these companies and their libraries of Canadian television programs bought and sold in mega-deals and I have seen the major shareholders in these companies become multi-millionaires.

Canadian television programs don't make money? It all depends on how you do the accounting."

"We're riding to Utopia;
Roadmap says we'll be arriving soon.
Captains of the old order clinging to the reins
Assuring us these aches inside are only growing pains.
But it's a long road out of Eden..."


So let's talk about Accounting -- Creative Accounting.

In 1994, I co-wrote and Executive Produced four movies of the week for Alliance Communications (later Alliance-Atlantis) for broadcast on CBS. These were based on Harlequin Romance novels and I was initially contracted to do 16 of them. But I quit after completing the first four, unable to square the company's corporate culture with my own (however flawed) code of ethics.

I believe my exact words at the time were, "I didn't spend 25 years working my way up this business so I could become a pimp."

As you may suspect, there's some baggage here.

Under our agreement, Alliance was (and still is) required to provide me with ongoing financial statements tracking my share of profits from these films, both as a Producer and as a Writer. And from the beginning I was troubled by the reports I received on either side of my hyphenate. So I engaged a well-respected forensic accounting firm to help me figure things out.

Among my concerns was the lack of reported income from foreign distribution. The following is one small segment of that forensic accounting report...

"Various annual reports and the prospectus issued by Alliance referred specifically to the International distribution of the Harlequin movies.

1995 Annual Report (May 1995) Pg. 10 - "The Harlequin Romance Movies were pre-sold to all of Europe and Latin America -- 61 Countries in all."

Supplemental Short Form Prospectus (August 1996) Pg. 34 - "Examples of the global appeal of the Company's product include its made for television Harlequin Romance Movies, licensed in 90 countries..."

1996 Annual Report (August 1996) Pg. 4 - "Our television movies and mini-series such as The Harlequin Romance Movies have delivered winning ratings to our broadcasters.

We have built an international client list in over 100 nations whose demand for our product continues to rise as we deliver hit programs like the ones mentioned above..."


Sounds fairly rosey. Should be a good little earner! However, the report goes on to examine the financial statements provided to my production company and the Writers Guild of Canada...

"To June 30, 1996, the Harlequin movies appear to have been distributed to only 25 countries....not 61 as the 1995 Annual Report suggested."

Or the 90 that would be listed two months later in the August, 1996 prospectus. Or the indeterminate number over 100 which followed in the next Annual Report...

In a follow up statement, dated December 31, 2002, Alliance-Atlantis' list of territories sold had risen to 51 (actually 50 since they listed Trinidad and Tobago as separate countries) -- but still not 61 or 90 or a hundred and whatever...

Now, don't for a minute assume Alliance may have been less than forthcoming with their investor documents. First of all, that's seriously against the law. Second, those documents are assiduously policed by any number of Securities watchdogs and we in Canada are especially aware of what Bulldogs those guys are, right?

So one can only assume the smaller market totals reflecting far less distribution were some kind of inexplicable oversight in reports to parties who -- coincidentally -- might have greater difficulty acquiring information and less institutional assistance to clarify any confusion they may have had.

I found that out the hard way, finding my legal representatives stalled and stonewalled to the point where it made no economic sense to keep them supplied with Aspirin and ice packs to keep butting their heads against an immovable object.

Because Public money was involved, however, and knowing how stringent Telefilm and other government run funding agencies are in the ongoing documentation they require from producers, I figured that might be the best place to verify the earnings of these productions.

But I discovered that despite being tasked with dispensing hundreds of millions of taxpayer dollars on Canadian production, Telefilm, as a Crown Corporation, is not required to provide any such detailed information to anybody -- even under freedom of information laws.

In other words, they spend our tax money on what they deem fit and if one project makes a boatload of cash or another loses its shirt, you're not allowed to know the details -- even if you're only trying to find out if they got the same numbers you did.

Now, that's odd, isn't it?

Like, they're part of the same government which oversees all the legislation that governs labor-management discourse and contract law. So, you'd think if somebody asked if what was being reported under a legally negotiated Canadian collective agreement or contract matched what was being reported under a legally binding agreement with a government department, it wouldn't be a big deal to run your finger down a couple of columns and check.

But apparently it is.

Mind you, we've had other major producers (not Alliance) admit in court that they kept one set of books for Telefilm that showed profits and another for investors that showed losses, or outright falsified the nationalities of their "Canadian" writers to maximize funding and nothing much happened to them either.

Makes you wonder why Canadian producers are so loathe to challenge Hollywood. Honestly, these guys are fricken bullet-proof!

But, between that and the revolving door that seems to exist between those employed by Government funding agencies and the executive offices at major producers they occupy immediately before or after those gigs, it does make boy detectives like me start conjuring a lot of fanciful possibilities.

See, in the netherworlds of stuff like stock frauds and money laundering (not that I'm suggesting -- just a colorful metaphor) this kind of arrangement would be known as a "closed system", offering the participants all kinds of ways to line their pockets without any outsiders getting a peek.

Not that such a thing could occur in Canada. I mean, when was the last time anybody here used a government department to funnel money to their friends?

Besides that time with the thing...

And I wasn't the only one having a problem with financial reports. According to the Fall 2001 issue of "Canadian Screenwriter", the Writers Guild of Canada was grieving 119 Alliance-Atlantis projects for "non-reporting of distribution advances and/or excessive or unverified fees and expenses."

But even an organization as dedicated as the WGC could not sustain legal combat on that many fronts, although they put up a damn good fight. In late 2003, they finally had to throw in the towel like I had and move on.

The grievances were withdrawn with the Guild accepting that the reports and payments (if any) it had received by the settlement date were a "full and final satisfaction" to that date of some 283 titles produced by the Company or its acquisitions and associates between 1983 and 2002.

I was a little pissed by this. But I took the pain I had endured, multiplied it 283 times and knew the only sane choice was to move on.

But since few, if any, of these titles were earning enough Distribution income to get above water, a couple of questions have dogged me.

First, how did A-A keep getting the lion's share of Government funding year after all 19 of those years if they weren't showing Telefilm a significant return? I know nobody's allowed to know the answer to that, but it still seems worth asking.

"Weaving down the American Highway
Through the litter and the wreckage and the cultural junk
Bloated with entitlement;
Loaded on propaganda
Now we're driving dazed and drunk..."


Second, those titles make up 1/4 of the legendary 1200 title Alliance-Atlantis library created with $2.5 Billion in taxpayer funding that changed ownership in December 2007 after "rigorous" examination by the CRTC.

And we all know how medieval Konrad and the boys can get when the chance arrives to kick some privileged semi-monopoly butt!

This library was acknowledged in the Globe and Mail as "By far the most profitable piece of Alliance-Atlantis...its margins are huge and there is zero new investment required."

And then Globe writer, Gayle MacDonald, added this, "Goldman Sachs was eager to get its hands on the library - and on the tens of millions in revenue it generates each year." (G&M 06/25/07)

Which made me ask this -- I know "CSI" makes money (even after the bullion shipments that are hived off the top to SAG, DGC, WGA and its gross participants) but how is the rest of this well past its broadcast stale date library delivering such spectacular annual revenue when so many of its titles are not even in profit?

Perhaps with the library now in the control of (depending how much you trust the diligence of the CRTC) CanWest or Goldman-Sachs, the next financial report on these titles will finally clarify many of my questions.

But I'm not confident in that.

You see, I wrote and produced another series that was in profit from Day One, and returned buckets of royalties to its writers for many years -- until CanWest started running it EIGHT TIMES A WEEK for THREE SOLID SEASONS.

And oddly enough, since that started, it hasn't earned another dime!

Not possible, I know, but this is Canada.

I'll save that story for Part Three. You need to pee. And somebody at CanWest needs to give some serious thought to returning some phonecalls.

"Behold the bitten apple, the power of the tools
But all the knowledge in the world is of no use to fools
And it's a long road out of Eden..."

-- Don Henley, Glenn Frey & Timothy B. Schmit (Privet Songs/Red Cloud Music (BMI)/Jeddrah Music (ASCAP)

2 comments:

Bitter Animator said...

Wow, a lot to take in from that post. Sounds not all that disimilar to where I am right now.

Here, the market is small and almost no project (film or television) gets off the ground without serious amounts of public money, often in co-productions around Europe and, actually, Canada every now and again.

This should be seen as the wonderful opportunity it is.

But, in reality, what it has led to is that the independent sector is actually the 'dependent' sector. And they're more than happy with that. Many projects get made with public money, producers get paid and then they're happy. They move on to the next project.

Because the actual production budgets are very low, the writers, directors and people on that end get paid very little, often having to negotiate some pretty horrific deals. But the producers are juggling many projects and creaming them all.

Then the distribution deals kick in. In Europe, distributors take pretty much everything. Seriously. I know screenwriter of a European movie that hit pretty big over here and did better than many European films in the US and Canada going on general release. The screenwriter did not see a penny past his initial fee.

This is all down to that creative accounting you're talking about. The contracts are really dodgy and all come down to what they call 'producer's net profits'. But the distributor does their best to make sure that there is no actual physical cash to pay the producer and the producers do the same.

So your percentage of producer's profits is a percentage of a percentage of who knows how many percentages.

That's live action.

On the other hand, animation can actually do okay out of its distribution. The problem in animation is that producers will only ever go for a complete buyout of work. Creators, writers, directors and everyone else involved can't sell their work or get hired unless it's in a complete one-off fee buyout. Agents won't touch anyone in animation as a result.

Alliance-Atlantis was actually one of the companies that came over here exploiting that and the tax breaks we had.

Artemus said...

Guess why the CBC hired Kirstine Layfield as the head of programming.


TV in Canada is run like the mafia.