The Modern Dilemma: "Who Owns What?"

Tweet

At first blush, the concept of a writer's strike strikes me as, well, funny—pencils of the world unite! And I happen to be a writer. I imagine for most business owners, the whole brouhaha in Hollywood seems a little absurd. TV show scribes do not seem as oppressed as, say, coal miners or factory workers. But maybe the strike isn't as trivial as it seems. Maybe it's a sign of things to come.

Robert Reich, the former Labor Secretary, offers his take on the writer's strike today in a short commentary on Marketplace, the American Public Radio show. Reich asserts that entertainment and entertainment-like offerings are becoming a much greater share of our collective output, accounting for something like 12 to 15 percent of all exports. But entertainment exports, particularly because many of them are digitial in nature, are easily pirated. Big media companies such as the Hollywood studios have been stepping up efforts to fight piracy in China and elsewhere. They argue that they deserve a hearty share of any revenue derived by the latest video game or DVD or song track.

One could argue, however, that the studios do to the writers what the Chinese do to the studios—take a disporportionate chunk of revenue for the crucial but relatively mindless task of distribution. The writers certainly seem to think that's the case, hence their aggresive labor action. "Whether the clash is with the writers' union or the Chinese, the underlying issue is the most basic of capitalism: Who owns what?," Reich explains. "And in this new digital age, the answer has to be negotiated anew."

Entrepreneurs may argue that writers should figure out a way to sidestep this conflict entirely, striking out on their own and leveraging new technologies to self-distribute material. In some cases, that has happened. But the big entertainment companies have been smarter than most industrial giants, it seems, when it comes to co-opting and inhibiting entrepreneurial impulses in their industry. As the Los Angeles Times reports today, an intricate client-patron system exists within Hollywood, wherein studios pay independent production companies large monthly fees that essentially cover the cost of their overhead, including payroll, office rent, even utilities bills. Writers and producers get steady cash flow out of the set-up; studios get first dibs on new creative properties. The arrangement allows creative types to be independent and even a little entrepreneurial, but there's very little risk, so their companies operate within the studio system rather than trying to disrupt it. This strikes me as a very clever way of addressing the innovator's dilemma.

As the Times reports, however, the studios are responding to the strike by citing the "force majeure" clause written into most of their deals with independent production companies that lets the studio suspend a contract without warning. In other words, the independents who are suspended will have to cover their own overhead until the strike is resolved. Observers suspect that the studios will suspend companies strategically, using the strike to invoke force majeure only against those firms under their umbrella who have underperformed in recent years.

"It's so sick," one writer told the Times. "The studios are using the strike to clean their books, getting rid of the writers they don't want and keeping the ones they do."

The article goes on to quote Dana Gould, a former writer on "The Simpsons," who noted that studios were particularly happy to dump production companies given that few new fall series had beat expectations. "It's a reboot," Gould was quoted as saying. "They want to hit Control-Alt-Delete on the fall season."

The result is that a lot of staffers who work for semi-powerful writers will be out of work—and probably really pissed at their former bosses whose strike precipitated their unemployment. As a strike-busting strategy, I'd say the studios are probably onto something.

Mike Hofman was previously editor of Inc.com and a deputy editor at Inc. magazine, which he joined in 1996. The site was nominated for a National Magazine Award for Digital Media in 2010, and was named the best business website by Folio Magazine. In 2006, Hofman was part of a team of writers nominated for a Webby Award for best business blog. He lives in New York City. @mikehofman