WGA vs AMPTP: Story of Streaming & AI Changing the Hollywood Economics

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In recent months it seems Hollywood has been failing in delivering quality content. However, there has been no shortage of drama in Hollywood. For over five months Writers Guild of America (WGA) has been on strike and battling with The Alliance of Motion Picture and Television Producers (AMPTP). I knew writers had some sort of collective bargaining, however it was news to me that studios were also had collective unit. It is usual when unions go on strike, the main demands are usually have to do with better compensation and benefits. While is still true in the case of WGA vs AMPTP, the core issues raised are more interesting. WGA has brought up arguments that shift to online streaming in the industry and emergence of AI as a viable tool for content creation have presented concerns that have significant impact in fair compensations for writers and economics in tv and movies industry in general.

Yesterday it was reported that WGA and AMPTP have finally reached tentative agreement. The details of the agreement are not clear yet, but it does look like studios have agreed to make streaming and AI concessions. WGA has announced that picketing would end, however strike will not end until that agreement has been approved by members and ratified. This will probably won't be the end of disagreements among various players in tv & movie industry. What is really interesting is the impact of technology, and more specifically streaming and AI had in the industry. This resolution among the parties will serve as a first step in realignment of economics and adapting to technological changes, and I curious to know where they are heading.

I wouldn't be surprised if overall health of the economy and unprecedented inflation rates of the recent years also played a role in creating the disagreements in compensation for writers. It seems inflation only made things worse. The core issues writers bring up have to do with streaming and how shift from traditional TV to streaming changed their workflow and income. First, with more Hollywood players shifting to streaming, there no longer was a demand to create TV shows with 12 or 24 episodes. New structure and demand for the TV content lowered the amount of episodes for each season of the show. This undermined the job security for writers. Previously they wouldn't have to worry about job security as they would be working on certain projects for a long time. With the shift to lower number of episodes, writers would have to look for more projects to remain employed to make sure their income stream is not interrupted. Non-compete agreements, and not using similar ideas elsewhere also created difficulty for writers, as it would limit their ability to be engaged in other projects/shows upon completion the ones they have been working on.

Another argument writers have made was the loss of income in residuals. In a traditional TV and movies structure, writers would also receive residual income if the content was re-aired, purchased or rented. The difference from the traditional residuals and after the shift to streaming was significant. If before writers had income in thousands of dollars for residuals, now it was in hundreds. Think of residual income as royalties or share of future profits from the content. While writers are in lower tier of profit sharing in residuals, over time they would add up and create a dependable source of income. At first glance, it would seem that the shift to streaming shouldn't lower the views and residuals should remain same. As this drama revealed that wasn't the case and residuals for streaming were treated differently.

Networks would decide not to re-air content if it was available for streaming, hence no residuals. Also, streaming removed transparency in accounting. As streaming became a new arena for competition in Hollywood, the studios and platforms became very secretive about the data regarding the views of the content. This would create a problem to accurately evaluate the demand for the content, and the revenues it may have generated. At the same time is created a new opportunity for corruptions and loophole for companies to gain unfair advantage and gave ability to restructure the economics.

Another issue with streaming is that, some content is exclusive for specific platforms and not available to be viewed in other platforms. This is true for older content as well. This too would have negative impact on residual income for writers. The arguments writers have made so far do sound reasonable, deserve to be addressed. One of the main counter-arguments studio make regarding streaming and new economics is that streaming is still new and have not been profitable so far. It is reasonable counter-arguments. It is true many platforms have been operating at losses for a while. However, this is because of the ambitions to gain market share. Many platforms joined the race after the fact, after Netflix and other early services demonstrated the future of content viewing in a successful manner. Just like any other big companies would do, giants of Hollywood decided to re-gain their market share. This requires a lot of money. This doesn't necessarily negate the fact that content created have been generating revenues, perhaps even more than before. Competition in streaming will continue. It is early to pick the winners. However, this shift should not create hardship for the creative mind that create the content.

AI was another item writers were eager to reach an agreement about. Advancements in technology always pointed to more sophisticated automation, disruption in industries, and emergence in artificial intelligence. This became more obvious this year. We all knew AI has been in works for a while. But what I didn't expect was AI tools becoming available for public. ChatGPT made the biggest revelation this year. Various AI tools becoming available for public to use and see the capabilities, made us all to rethink and reevaluate on previous understandings of AI and how this tech will impact various industries. As the progress is happening in front of our eyes, and competition is just getting started, we can only imagine how sophisticated this technology will become and we can only guess how it would impact various industries and economies. I hold a more positive outlook regarding this technology and believe new tools based on AI will create more productivities and create more opportunities. However, I do realize there will also be some initial difficulties in adapting to the new reality. Obviously, AI is a concern for writers as well.

Generative AI tools have demonstrated great deal of sophistication in generating content like humans. In months and years this will only become better exponentially. While writers are not concerned that AI will replace them, their concerns are studio utilizing AI tools to cut the costs. For example, studios would use AI tools to generate the content and then hire writers to make the improvements and add human touch. Since, in theory, writers are not writing the content from scratch, the costs of content creation would go down. What writers argue is that the work would be equivalent of creating the content from the scratch, but the compensation would be cut significantly. It is not necessarily the current practice for content creation in Hollywood. But it is not difficult to see how this may easily happen. Technology have always brought new tools for Hollywood.

As technology enthusiast, I do hope to see a fully AI made movie of highest qualities at some point. Just out of curiosity. However, I doubt I would give the same value for the AI creation compared to human imagination. This is a new technology. Future will show how it will be utilized. We don't know yet. I am sure there will be benefits. However, I doubt AI will replace human creativity. The demand for AI generated stories and art won't be the same as the demand for human creativity. There is something special about human mind. Both contents can co-exist and be used for different purposes. But in the end it will be about fake content vs real content.

I congratulate the writers in their victory and agreement reached! Now get back to work and create some awesome content!