We keep hearing that Hollywood writers are striking because they want a bigger piece of the studios’ digital revenue. That’s understandable, given that writers more or less missed out on the DVD boom when they struck their last contract, and that a new one may be in place for a couple of decades. And everyone expects that the Web is going to become a major moneymaker for Hollywood — one day.
In the near-term, though, there’s almost nothing at stake: More precisely, we estimate that the difference between the writers’ plan and the studios’ offer is about $7.2 million.
maths after the jump.
Writers’ current take of digital revenue:
Downloads: $552k (0.3% of 2007 est. download wholesale market of $184 million, using DVD residuals formula)
Downloads: $552k (Downloads at 0.3% of wholesale)
Streaming video advertising: $2.88 million (1.2% of Hollywood-related streaming ad revenue, est at $240 million for 2007)
Downloads: $4.6 million (2.5% of digital download wholesale)
Streaming video advertising $6 million (2.5% of digital ad revenue)*
That $7.2 million gap? That’s somewhat less than Dick Parsons’ bonus last year.
Of course, that number won’t sway writers in the near term — right now, they’re angry about missing out on the DVD boom (2007 sales est: $17.3 billion) and swearing that they won’t get fooled again. Forrester, for instance, estimates that advertisers will spend $7.2 billion on streaming web ads by 2012. But within a few months, it may get harder for some of the union’s rank and file to sacrifice current paychecks for future paydays.
Thanks to Jonathan Handel, entertainment lawyer at TroyGould Attorneys and James McQuivey, media analyst at Forrester Research for their help with this analysis.
*This total doesn’t include other possible revenue sources, which include banner ads, subscription fees etc; it also doesn’t factor in various costs that studios charge against their gross numbers, including bandwidth, etc.)