Entertainment unions elect new leaders; Social networking sites struggle for revenue

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Sept. 29, 2009

KPCC business analyst Mark Lacter talks about the leadership change at two entertainment unions and what it could mean for future negotiations; Mark also looks at the quest for revenue by social networking sites.

Frank Stoltze: On Tuesdays we talk about the latest business stories with Mark Lacter. Mark, two entertainment unions – the Writers Guild and the Screen Actors Guild – recently elected new leaders. And both of the new leaders are seen as moderates. Does this represent a shift in the way the unions plan to negotiate?

Mark Lacter: That’s the current betting, Frank. And it’s not a big surprise – this is what happens when unions take very tough bargaining positions in a terrible economy, and wind up not getting all that much for their efforts.

So at the WGA, John Wells, who had been executive producer of ER and The West Wing, is the new president, and at SAG, Ken Howard (you remember from the series The White Shadow) is that union's new president. The one thing these elections clearly show is a willingness among the membership to compromise.

Stoltze: Why do they appear to be taking that stance?

Lacter: Well, you have fewer movies and scripted TV shows being made, and the studios and networks are being very cost-conscious. That's why there are so many reality shows (none of which are unionized, by the way) and why Jay Leno has taken the 10 o'clock block on NBC. Of course, the biggest issue for the guilds is not about what's in prime time, but what's available on the Internet, on cell phones, on MP3 devices – all the new media platforms.

Stoltze: When the writers struck almost two years ago, they really pushed on this point.

Lacter: Right, and the studios and networks didn't budge because they claimed they didn't know how much money there was to be made. Truth is, they still don't, but by now it's pretty clear that more and more viewers are okay with watching 30 Rock on a computer, and that should warrant writers and actors getting a bigger piece of the action.

Stoltze: When are the next negotiations expected to come up?

Lacter: Not for a while – the middle of 2011, and by then they'll have an even better idea of the revenues being generated. That, presumably, will provide the guilds with more ammunition on what to ask for. Of course, whether they get it is another matter.

Stoltze: It's been four years since Rupert Murdoch bought MySpace for $600 million, and since then a couple more social networking sites have exploded in popularity – Facebook and Twitter. But there's still a big question about these sites – can they make money?

Lacter: Probably, but it’s been a tough go. Advertisers are still reluctant to invest in the social media world because the click-through rate is so low. Visitors to these sites just aren't tuned into the ads – and even if they were, advertisers would have a hard time knowing what to run next to a cat video or a blog about what Steve Julian had for breakfast yesterday.

Stoltze: So how do they plan to tackle the problem?

Lacter: What everybody seems to be stressing is don’t try to be all things to all people. MySpace is an example of a site that expanded way too fast and Facebook wound up taking away millions of its visitors. The company laid off several hundred staffers last spring, many of them locally based.

I point out in my Los Angeles magazine piece for October that they're focusing less on making connections with friends and more on showcasing music and video games. That kind of mix could generate more advertising, and perhaps MySpace will find a second life. Point is, it's not just about bringing in visitors – it's about supporting that traffic through advertising or some other kind of revenue, and so far, it's not been easy.

Thanks Frank.

Stoltze: Mark Lacter is a contributing writer for Los Angeles Magazine and writes a business blog at LAObserved.com.

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