Striking actors and writers have the advantage today, but history tells us that they are fighting an uphill battle against technology.
Machiavelli once said, “the innovator has for enemies all those who derived advantages from the old order of things.” It should not be surprising then, that we encountered violence at the dawn of the nineteenth century as the world was poised for rapid change. Unfortunately for those enemies of innovation, trying to hold back technological progress is like trying to hold back the ocean.
While the industrial revolution had begun in the eighteenth century, it was just now in the nineteenth century that found itself gaining steam. (Pun intended, although the steam engine itself dates to the eighteenth century, or even a few years prior.) The tools of workers, some dating back millennia in design, were being replaced by then-modern machinery. These machines could multiply a worker's effectiveness. With productivity growth outstripping demand growth (that is, population growth) we saw microeconomics in action: less demand for workers.
Thus arose in Nottinghamshire an outlaw who spoke for the oppressed people. Not Robin Hood, but rather Ned Ludd (often referred to as Captain or King Ludd). While Ludd was fictional, his disciples, the Luddites, were not. On the evening of March 11, 1811, a group of Nottingham framework knitters destroyed 63 frames used to create textiles. These frames allowed more junior, and hence cheaper, workers to produce hosiery. The destruction of the new machines continued not just in 1811 but for years to come. It echoed decades later in the Swing Riots of the 1830s as farm hands destroyed threshing machines. If you’re wondering how that story ended, stop by a textile factory or farm sometime and see how many workers are still crafting or tilling by hand.
This summer SAG-AFTRA (Screen Actors Guild - American Federation of Television and Radio Artists) joined the Writers Guild of America (WGA) on the picket lines. Not picking, but also impacted are make-up artists, set designers, camera operators, and many more off-camera people whose futures hang in the balance. There are multiple issues being negotiated, but two are at the core: residuals from streaming and use of AI. Kyle Andrews, an independent film producer and SAG-AFTRA strike captain commented on the challenges the unions are facing, “Now we’re dealing with a fully-fledged tech takeover of entertainment.” he went on to say while this issue has come up prior, this is the year SAG-AFTRA needs to take a stand.
Unfortunately for the Luddites, their efforts didn’t even constitute a speed bump on the road to progress and over the coming decades they did indeed lose their job to technological improvements.
Unfortunately, as with the textile workers of old, these workers are fighting a difficult battle against the tide of technological change.
I’ll note that I share the concerns of the SAG-AFTRA and WGA. I support unions and want to see stronger unions because major companies, like those in Hollywood, usually have the upper hand. I’m also an author, not just the “look at me mom I have a blog” type but a book where people pay money for it, providing me with a future stream of income from my prior work. I respect creative artists and believe they should be compensated for their work (generally if I walk by a busker, I give him money, even if the art is mediocre).
But my wants, and those of the WGA and SAG-AFTRA, aren’t what drives the outcome, it’s economics. I can’t say what specific compromises may or may not wind up in the next WGA or SAG-AFTRA contract, but the larger tide of change favors technology and technology rarely favors current employees.
In this article, I’m not commenting on “fairness.” There are valid claims as to fairness (or lack thereof) in that the movie and video game studios are earning hundreds of billions of dollars for their employees and shareholders and the actors and others are being paid a relatively small amount given those profits. Fairness is a valid tactic in negotiation, but it is not by itself an economic driver; if you think the toy you bought for your kid is underpriced, you’re not likely to say to the store, “let me pay you extra for it.”
Many of the issues involve one side wanting more and the other less. Percentage increase over non-streaming residuals, who is covered under contracts, size of staff, what constitutes work deserving pay, and more. Those will be negotiated as they have been for decades. As noted earlier there are two key issues in this round, both of which are underpinned by technological changes and their impact on labor; we’ll explore both below.
A key issue is how residuals are paid. When a show is in syndication (re-runs), the writers, actors, and others would get residual payments. It’s not as much as they got for the original episode, but it’s a significant part of actor et al. income. The re-run will produce new, albeit often smaller, ad revenue (or other revenue) every time it’s licensed, and that money gets distributed to those who made it. It’s not a direct transference but this ad revenue underpins the money used for residuals. When a show goes to a streaming service, actors get paid far less money. One of the claims made by the unions is that there's relatively more money flowing into stream services compared to the relatively low payments actors receive; hence, actors et al. are losing income from higher-paying-residual distribution channels as viewer eyeballs move to streaming and more shows wind up there.
A SAG-AFTRA friend of mine noted that streaming services don’t make money per episode (unlike a TV show which makes money from the ads shown with each episode), they make money per month with a subscription. In theory that can be translated into some payment formula such that there’s a relationship between views of a show/series and subscription revenue. In reality, this relationship (views of a show per subscriber) is a trade secret known to the streaming services and they should not (from their standpoint) give it up those secrets.
Time and again we see that those who control the money also control the people who don’t (c.f. musicians and record labels).
Time and again we see that those who control the money also control the people who don’t (c.f. musicians and record labels). The prior contract was written based on ad revenue (not explicitly mind you, but implicitly), not thinking much about non-ad supported streaming services and this is the result. Going forward, whatever contract is written, whatever the rules, the streaming services and other newer models, can subsequently tweak their business model to keep more for themselves.
This was less common decades ago when the only models were box office receipts at movie theaters or broadcast shows on TV and radio. Measurement of ticket sales and TV viewership was more transparent to both sides. Today the streaming services can now choose to show traditional ads, companion ads (including those in second screens), in picture ads, lead generation (including the “click to buy this dress the lead actress is wearing in this scene” leads), one time fees, monthly or annual fees, lifetime fees, credits used per show, swap credits (think airline miles used to buy magazines), all sorts of other sales innovations, or any combination of the above. Distribution is not just to TVs but also laptops, and cell phones; soon it may also include cars, a smart device (e.g., think echo dot with a screen, or maybe you just want to listen to the audio component of a show), VR headset, and more. A streaming service can suggest a formula related to dividing subscription revenue per subscriber by shows watched, but then make more money on the back end through ad sales, or other types of lead gen against those viewers; this latter revenue, although impacted by viewership of the shows, would not necessarily flow back to the people who made the shows unless the unions negotiate those contracts very carefully to cover such cases.
Bottom line, when the person who has agreed to pay you can change their accounting rules, don’t count your check until it clears.
Bottom line, when the person who has agreed to pay you can change their accounting rules, don’t count your check until it clears. If you think I’m being cynical, consider the hit that wasn’t: Men in Black. It cost $90M to make and brought in $598M. That’s a loss. (Read that again, it’s not a typo.) You might be thinking that $598M in revenue is greater than $90M in cost so that means profit. That’s because you’re just using traditional math while over in LA (la) land, they use Hollywood accounting which says it’s a loss. It’s not just Men in Black, also Harry Potter and the Order of the Phoenix, Return of the Jedi, and other films.
All this gives the power to the studios to control revenue and maximize their profits at the expense of those making the shows.
Writers earlier this year, now joined by the actors, are very concerned about AI taking their jobs. They should be.
One issue for SAG-AFTRA is around the studios paying a one-time fee to actors for unlimited future use of their likeness to be reused in new ways by AI. This is a bad deal for actors, and they are right to oppose it. (As someone who has been a guest on hundreds of podcasts, I was always careful about the waivers I signed. Many asked for universal rights to use my name, image, voice, and likeness in any matter. While they may have intended it primarily for promoting the show I was appearing on, the rights requested were too broad and I would ask for that to be stricken or reduced to the scope of the episode. If it wasn’t, I wouldn’t sign.) But this isn’t the biggest risk they face.
The destruction of the new machines continued . . . If you’re wondering how that story ended, stop by a textile factory or farm sometime and see how many workers are still crafting or tilling by hand.
Unfortunately for the Luddites, their efforts didn’t even constitute a speed bump on the road to progress and over the coming decades they did indeed lose their job to technological improvements.
In addition to the textile workers, farmers, milkmen, paperboys, telephone operators, pin boys, bank tellers, scribes & illuminators, type setters, and ice men have all been displaced. Factory workers lead the way in terms of lost jobs. This is to say nothing of the repair jobs lost because automation has made replacing an item cheaper than repairing it (ignoring any concerns for the environment). 87% of manufacturing jobs lost in the US from 2000-2010 were due to technological improvement, not outsources as some manipulative politicians would have you believe.
Consider book production. How much time was needed by an editor to read a manuscript and mark it up with a red pen? Then it was sent back to the author and ensuing phone calls or letters were needed to clarify. Word processing made this more efficient and reduced the amount of work needed by an editor per book. Today spelling and grammar checkers can do a first pass taking away some of the work that an editor used to do. AI tools can suggest rephrasing or other higher-level corrections. We still need editors but the demand for editors, driven by how much work per book is needed, has declined over the years due to technology. You can throw up all the barriers you want but you can’t stop the tide. (Although it should be noted that the lower cost of editing and other aspects of book production have also led to an increased number of books being produced, providing some increased demand for these services, not to mention demand increase from population growth.)
Let’s suppose the unions get everything they want. Studios must pay actors and can’t replace them with AI. This is a US contract. It applies to US studios and US actors primarily (even if they work outside the US). Meanwhile Bollywood and other international filmmakers will have no such restrictions. They can produce scripts cheaper using AI and non-union writers. They can make sets using AI, and make the actors look younger, more attractive, or make other alterations. You still need good actors, but the US doesn’t have a monopoly on those. US manufacturing lost some jobs to cheaper overseas labor costs at first, but then mostly to technology and automation. Given that it’s much easier to ship a movie over the internet than widgets by sea, the entertainment industry is at risk from automation, whether in the US or elsewhere.
These movies don’t have to be good; they just have to be good enough. The next superhero movie may still be a big US production with A-list actors, because it’s going to be a billion-dollar movie. But overseas production shops, especially those using technology, will produce low-cost entertainment. Consider that Milton Bradley’s (now Hasbro) biggest competition isn’t from other board games, but companies like King, the maker of Candy Crush. Soon this just-ok content will begin to compete with US studios and SAG-AFTRA productions for your attention. They don’t have to make billions to be profitable, millions are enough. In time their technology-backed low-cost structures will put pressure on the major studios (c.f. steel minimills as described in The Innovators Dilemma). Again, this may be a few decades away, but it is coming.
The market is quite accepting of good-not-great. As Justine Bateman commented over a decade ago, studios are asking for “visual muzak,” noting that today the TV is the second screen, not the primary.
Many people will argue that quality matters. Great actors, like great musicians, writers, painters, and others, do stand out from their only-good peers. But the market is quite accepting of good-not-great. As Justine Bateman commented over a decade ago, studios are asking for “visual muzak,” noting that today the TV is the second screen, not the primary.
What I’m suggesting won’t happen tomorrow, or even in five or ten years. But it will happen. Maybe in fifteen years, maybe in thirty. Human cost does not generally get cheaper but technological cost does. (Consider the inflation adjusted cost of renting a helicopter mounted camera circa 1960 for an aerial shot versus using a camera drone today.)
Of course, we’re assuming people will still want to see movie stars in films. Future generations may not want to watch Tom Cruise in Mission Impossible, instead they may prefer to see themselves in the role with their face digitally overlaid on some green screen suit worn by an anonymous body, or maybe POV based movies, experiencing the action using a VR headset and other technologies for the other senses.
How am I sure that history will repeat what we saw in other industries? Because the future (or past) is here. If you watched the movie Salt, there’s a scene in St. Bartholomew’s Church in New York City with hundreds of people filling the pews. The first few rows of people were standard background actors. The “people” in rows behind them were all created with technology. In this case, a technology decades old: inflatable dolls. In other words, we’ve already been using technology (in this case inflatable dolls) to replace live human actors. Sure, that’s just people standing in the background, and not yet active background actors, let alone people with dialog, but the Nucor minimills started with just low-end steel. They were dismissed by the bigger steel manufacturers as low end but over time moved up to producing higher end steel products. Today former goliath US Steel is only a $7 billion company compared to Nucor’s $40 billion.
To paraphrase the punchline from an old anecdote: the change is in progress, now we’re just haggling over the technology. You can argue then, that this is nothing new. But when we move from physical to software, the pace of change accelerates.
In the short term I suspect the unions have the upper hand. Protracted strikes are often a matter of who blinks first. SAG-AFTRA and the WGA don’t have traditional strike funds, just non-profit emergency support foundations. However, they have something other unions don’t: workers who are used to needing other jobs. Many of SAG-AFTRA’s 160,000 members have other work to bring in income when not acting. The production companies meanwhile are looking at holes in the upcoming revenue projections and layoffs are a real possibility. The standard office worker at the studio doesn’t wait tables or drive ride-share regularly to make ends meet. The striking workers have wryly noted that the strategy employed by the studios is misguided in thinking that they can make already struggling actors struggle more. I think the producers will blink first, in this round.
The counterargument is that studios are sitting on lots of content, e.g., unlaunched shows and behind the scenes clips, and so can outlast actors. While I know negotiations, I don’t know enough about the specific details of each side's current position to predict with any accuracy. I’m thinking SAG-AFTRA and the WGA will win this round, but this specific prediction is speculative.
Unfortunately, time and again, attempting to hold back the economics of technological improvements is like trying to hold back the tide.
Longer-term is clearer. As noted above, the steaming services, and possibly traditional studios, may be able to change the rules without violating the newly signed contracts. Unfortunately, time and again, attempting to hold back the economics of technological improvements is like trying to hold back the tide. Like factory workers forty years ago, and knowledge workers today, actors need to be prepared for labor volatility in the coming decades. There may be no small parts, but, for better or worse, there will be more technologically efficient ways to fill some roles.
There is an alternative option with historical precedent that can help both sides win. The unions could form their own distribution channel, an option I explore in How the Studios and Unions Can Win Together.
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