ABC is in the the crosshairs of the Hollywood creative unions because of the network's policy for paying out royalties earned on digital downloads of shows like Lost and Desperate Housewives at iTunes. The network has said it will pay the same residual rate as is paid for home video, while the unions want pay TV rate, which is four times higher.
The unions say that ABC's decision to pay the videocassette rate, without consulting them, is a violation of labor laws and of the parties' previous agreements, and they threaten to enter into legal aribitration.
"ABC's actions are flatly inconsistent with our collective bargaining agreements and with labor law obligations, and fail to fairly compensate performers for the use of their work and images. SAG will pursue arbitration against ABC, or any company, which disregards their contractual commitments or attempts to deny our members just compensation," said Screen Actor's Guild President Alan Rosenberg in a statement.
The Writer's Guild also threatens legal action. The west and east coast chapters of the guild issued a joint statement arguing that the payout rate of home video is irrelevant in the digital age.
"ABC's unilateral decision to pay digital-download residuals at the home-video rate is a violation of our contract and an insult to our hard-working members. It is unacceptable, and we will aggressively pursue all legal options at our disposal," said WGAw President Patric M. Verrone.
"The members of our guilds demand the companies pay what they are contractually obligated to pay, and not a paltry residual rate based on an irrelevant home-video formula from the age of Betamax," said WGAE President Chris Albers.
In the Director's Guild statement, president Michael Apted said, "We will be filing claims against ABC and any other company that pays residuals on video iPod downloads according to the homevideo formula."
The network replied in its own statement, "The only question here is what the existing guild agreements provide. We believe that the residual for sales and permanent downloads of programs to the iPod is covered by the homevideo residual formula."
Accoring to Variety, the formula for paying royalties hasn't changed in more than two decades. In the 1980s, the guilds didn't think home video technology was going to take off, so they agreed to a lower payout rate from the studios and networks. There is no current agreement regarding payouts for digital donwloads or other new content delivery systems.
Recently, unions felt cheated when the networks and studios didn't reformulate the payout schedules for DVD technology. Now, with an entirely new wave of sales to be made and royalties to be earned in the digital world, the guilds are drawing a line in the sand.