New Collective Bargaining Agreement: FAQ
Q: Can you give us an overview of the deal and the industry gains?
A: Gains for the industry included a wage hike well within ranges being conceded in collective bargaining agreements throughout the nation and in the entertainment industry. We also got agreement from the unions to jointly conduct a two year multi-million dollar pilot on the GRP Payment Model developed by Booz & Company in a 2007 Study commissioned by the JPC and the unions. This is a major victory by the industry and will provide us with a fully operational system by 2011. While no one can force the unions to accept the results, they will be working hand in hand with us and an independent consultant throughout the pilot. Assuming the system works, the proposition to adopt the system will be compelling for both sides.
The controversy over how allocations in celebrity contracts between covered and uncovered services should be determined and how the union can challenge them was resolved very favorably for the industry. Coupled with the cap on P&H contributions, these gains on the P&H front will provide substantial savings to the industry over the course of the contract and into the future. Television and motion picture producers have enjoyed a cap for decades, putting the advertising industry in an inequitable position on contribution levels. That will now end in the last quarter of the third year of the contract. While we would have liked to implement that sooner, conditions of the pension plan and the investment industry prevented us from doing so.
While we conceded a minimum rate for commercials made exclusively for the Internet and new media, the provision is not effective until April 1, 2011.
Some other gains included an exemption for CEOs even when they are not delivering an "institutional message" and liberalization of filming employees at work. Advertisers may now direct them and may even film them off premises on recreated sets in studios where it is impractical to film them at the place of employment.
In the public service area, we gained recognition of our view that PSAs could be used in all media covered by the contract and agreement on a standard template for waivers. We also secured a three year waiver for the Ad Council, allowing them to produce PSAs that directly solicit contributions. Other producers of PSAs can also ask for the waiver and will most likely get it.
On the audition front, agencies and advertisers will no longer have to pay for the third and fourth auditions, provided the call backs are limited to a few of the actors who auditioned in the first two calls.
In addition to the across the board one time increase of 4.50% on session fees, we agreed to bump up commercials moved over to the Internet from three session fees to three and a half session fees for one year and from one session fee to one and a third session fees for an 8 week cycle. With respect to the 8 week cycle, however, you no longer need separate permission from an actor to opt for the shorter cycle if the actor has not withheld Internet rights. It is unusual for actors to withhold such rights when initially hired, so this is a real gain. We also now have the right to opt for an unlimited number of successive 8 week cycles, a major improvement over the prior deal.
In other concessions to the unions that have little impact to advertisers when viewed from a total cost basis, we agreed to raise the extra limits from 40 to 45 and to give extras a flat $8 a day for travel and about $5 a call if they're asked to bring their cell phones or PDAs. We also increased some minor costs in the Spanish language provisions, agreed to holding fees for cable only in exchange for exclusivity, and agreed to pay P&H on choreographers at minimum session levels. We already pay P&H on assistant choreographers.
All these concessions in the economic picture were important to the unions. Our concessions reflect the good faith effort we're now making to improve our relations with one another and to begin to come to the table looking for ways to agree rather than disagree.
Overall, the incremental increase in costs for the three years of the contract compared to last year, the increase is less than 2%. This level takes into account the economic condition affecting the ad community and the economy as a whole. If one factors in the last three years and predictions for the next three, the increase is a little over 4%, representing an average per year increase from 2009 through 2012 of less than 2% per year. This increase is appropriate in light of collective bargaining agreements negotiated in the last year when compared to figures published by the Bureau of National Affairs.
Q: How does the P&H cap work?
A: Under the current contract, an advertiser must make a 15.5% P&H contribution on 100% of an actor's compensation allocated to services covered by the union contracts. As a rule of thumb, that's usually 50% of the compensation paid where the actor is also doing print, personal appearance and other work not covered by the union contract. Given the lack of a cap, the contributions in many celebrity deals rose steeply to many hundreds of thousands of dollars. In the new deal, the contract was better aligned with other talent contracts in regard to pension and health contributions. Advertisers must contribute only on the first $1 million allocated to the covered services. The result is that no advertiser will have to pay more than $150,000 in P&H in any given year for a specific celebrity deal. The new cap is effective on January 1, 2012. While we would have liked to implement that sooner, conditions of the pension plan and the investment industry prevented us from doing so.
NOTE: This information was crossposted at http://jpc.typepad.com.