Advertising “Strike Tax” is the Solution to Writers/Producers Impasse

In the first week of the Writers Guild of America strike, I offered a solution that has been gaining momentum over the past two weeks. “It’s time to think out of the box in more ways than one,” I wrote in November. So here’s the solution. Let the advertisers step up and agree to pay a tax on all network television ad expenditures for the next three years, beginning in September 2008, to fund a pool for distribution to writers, actors, directors, and related unions. This pool of funds will provide compensation for the writers’, directors’ and actors’ contributions to the digital rights expansion producers need and want, without requiring long –term economic valuation of the new media marketplace. A one percent tax on broadcast and cable network spending represents an estimated $400 million annually, $1.2 billion over three years. Two percent equals $2.4 billion. The networks and studios can’t complain about this solution. The unions can’t complain. While advertisers and agencies might protest at first, this Strike Tax will actually be self liquidating. As Sarah Fay, CEO of Carat U.S. and Isobar pointed out, “the strike is a huge issue for advertisers.”

If the WGA strike stretches into the summer and is joined by Screen Actors Guild and Directors Guild members, then the recent gains experienced by the networks as a result of returning late night hosts will be lost. This has the potential to destroy network television as advertisers know and love it. By ending the strike, advertisers will avoid suffering losses to their business resulting from under delivery on their required advertising exposure. They will assure the sustained viability of network television as a powerful medium for their messages, and they will support the industry as it transforms to a digital marketplace. In last year’s Upfront, advertisers agreed to pay substantially increased costs because network television is worth it. An additional one or two percent in costs might ultimately be extracted from the networks in negotiations, but networks will make it up by avoiding the substantial ratings declines the strike is causing and will continue to cause.