WGA update: the not-so-basic economics of industrial action

First: I love Alec Baldwin. That isn’t so related; it’s just worth putting “out there”.

He has written a piece for the Huffington Post, concerning the ongoing industrial action of the Writers’ Guild of America – for whom it is hard not to feel: hell, even the collective noun for their opponents (the Alliance of Motion Picture and Television Producers) sounds evil, and that’s not just because I’m a fan of Firefly, because so is ever other right-thinking individual.

To the article!

The entertainment business, movies, TV, music, is divided between buyers and sellers. The sellers are actors, musicians, directors writers and their agents. The buyers are the studios, the networks, the labels. Over the last fifteen years or more, the balance of power has shifted dramatically from the sellers to the buyers.

Once, powerful agencies made astronomical deals on behalf of their biggest clients. The rising tide that resulted lifted all boats. Major stars were paid large fees and their supporting castmates made enviable salaries, as well. In the 1990s, that began to change. Today, the biggest stars are still paid huge salaries, but other salaries have dropped significantly. Roles are cast at a fixed price and the producers find the actor who will work at that budgeted amount.

Some of the most prominent names in film and television switched sides. The end of the sellers’ market meant big name agents became producers, even executives, as the party was ending for many of their clients. Today, most agencies, one could argue, work for the buyers. Agents realize that their ten percent of their clients’ income comes from the studios and networks as a cushion shot. It is banked off of their clients, but it comes from the buyers. When I started in this business, agents went to war with the buyers on behalf of their clients over casting and money. Agents still fight for their clients to get a role, but the money discussion is brief. The buyers essentially fax over the deal and the artist says yea or nay.

The strike may go on for a variety of reasons. On one hand, the writers are cursed because they are right on most issues but they are awful negotiators. They got screwed in 1988 and expect the buyers to make up for that, like some kind of reparations. That will never happen. The time for making that situation right was 1988.

The studios have a different problem. They are owned by huge, creativity-deadening corporations and operated by lawyers and marketing executives who lord over the worst creative decline I have witnessed in a long time, particularly in films.

In television, companies like GE view properties like NBC the way realtors view square footage. GE does not care what is on NBC. So long as the programming is relatively inoffensive, they want to earn as much per square foot as they can. In the current strike, the writers expect the buyers to have a soul. The buyers, who cannot count a real filmmaker or television programmer among them, view a soul as an impediment to business.

Working backwards – and, full disclosure-wise-speaking, I do not own a TV in either town of my living – I find the line “the worst creative decline I have witnessed in a long time” speaks “to” something I cannot define easily. For a start, Joss Whedon and Stargate notwithstanding, nothing thoroughly intelligent has really been on since MASH and Astroboy; more specifically, though, what I see, now, is hand-wringing at the idea of ever-more reality shows making it on air, TV absent writers. That’s the yardstick? No bloody wonder TV drives me spare. We have writing still, meanwhile “news” is already a field for which Glenn Beck and Bill O’Reilly qualify.

Apropos which – writers being employees/form-writers, rather than artistic content-providers – the New York Times’ article concerning advertising was almost good (it was lazy, and utterly incomplete, but not a bad start).

Alec Baldwin is wrong, however, in his description of the industrial organisation of TV and film, “The sellers are actors, musicians, directors writers and their agents. The buyers are the studios, the networks, the labels.” It is not a market with buyers and sellers: it is an example (at the moment a very complex example) of a Principal-Agent model. Specifically: Agents (this is going to get weird), actors, etc. are not Sellers, per se. Content-providers (including actors) are Principals; Agents and Collective Representation Organisations (guilds, unions) are Agents.

Agents are Agents, rather than sellers, or Principals, because they aren’t selling anything: they are facilitating the selling of skilled labour, on behalf of the suppliers of that skilled labour. Why? Because actors know how to act: they are not versed in studio/corporate crap. Same for writers, musicians. When you see your doctor, they are your agent: you do not know how much medical care to purchase; your doctor, as your agent, advises you. You trust them, because they have information that you do not. Structurally (from blessed Wikipedia):

wiki pic

What’s the problem? The Agent often has incentives that differ systematically from those of Principal: this is the Principal-Agent problem. If one’s dentist tells them they need a root canal, maybe they do: maybe, though, they simply have a problem, for which a root canal is lucrative over-kill. When one is trying (and, here, failing) to successfully bargain collectively for a new system of profit-sharing, the Agents (agents, unions, guilds) may benefit from strike where the Principals do not.

This makes the problem quite complex: how does the Principal even figure this out? The Agent exists precisely because the Principal does not have this sort of information (and, remember, it isn’t as though every writer out there is – or has the time to become – properly informed about this issue). However, consider these as options for the Agent, as it appears negotiations are failing:

  1. Concede. Pursue a Maximin/second-best/least-worst outcome for the Principal. Risk, as a result, losing membership amongst a newly-dis-enfranchised Sellers/Principals, or
  2. Fight. Pursue instead, possibly a Pyrrhic victory, possibly a Forster-esque honourable defeat, possibly outright victory – but almost certainly a risky strategy that is more likely than not to leave the Principal with negative net utility. This time, however you will have put up a fight, and be more likely to keep your members.

During a strike, with incomes lost and the future at its least certain, we are inclined to rely more heavily upon our Agents; in fact, it is the time at which we should examine them the most closely (let me also point out that I am a staunchly unionist-leaning Australian. Don’t assume any of this means that I am against unions. Or dentists or doctors. Incentives are the way they are, though, and that’s that). Even Alec Baldwin says

In the current strike, the writers expect the buyers to have a soul. The buyers, who cannot count a real filmmaker or television programmer among them, view a soul as an impediment to business.

By conflating Principals and Agents a sellers, collectively, he makes the naive assumption that the Agents are any different to the Buyers.

To end Political: as we learn more and more about which “leaders” in Congress and the Senate heard and knew about, say, illegal wire-tapping, extra-ordinary rendition, water-boarding, etc., it behoves us also to consider the Principal Agent problem of our time. This applies to Government and to Media (including the Huffington Post. Hell, including me).

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