News

Tackling Hollywood Math

2/29/2008 7:00 PM Eastern

A bill introduced in the California State Senate could prevent a vertically integrated entertainment company from selling content between its own divisions at “less than market price.”

The bill, sponsored by state Sen. Sheila Kuehl (D-Los Angeles) would make it a crime to “undersell” programs between, for instance, a broadcast network and the cable networks owned by the same corporation. The bill states that the sale of movies, television programs or radio content for less than fair market value would be a crime. “Fair market value” is defined as the price paid if a commodity is sold in a competitive, open market.

The bill is backed by unions serving Hollywood's creative community, because shows often don't show a profit unless they make it to syndication, and residual formulas in contracts are based on the amount earned in those ancillary windows.

The senator is familiar with Hollywood and residuals: as a young woman, she played Zelda Gilroy, the woman who aspired to be the girlfriend of the lead in The Many Loves of Dobie Gillis. She is still in the Screen Actors Guild.

The bill also has support from the Writers Guild of America, which claims that sales at less than fair market value have become more prevalent as major media players have spawned more cable outlets.

The WGA notes that unions rely on the amount of programming sale prices to set contributions by members to health and pension funds.

“This important piece of legislation will help ensure reliable accounting among the major Hollywood studios so that creative talent and all entertainment employees that rely on residuals will be fairly compensated for the contributions they make to the industry,” WGA West President Patric Verrone said in a statement on the introduction of the bill.

The legislature might not have time to entertain such a bill. California faces a budget deficit estimated currently around $7 billion, in part because of the expense of fighting last summer's wildfires. Budget cuts are likely to consume much of the legislature's time through June.

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