Patrick McKendry

Earlier, I covered the writers strike in Hollywood and some of the characteristics that lead to the formation of unions. This is not the first strike taking place over a conflict between the Writers Guild of America and Hollywood studios. Albeit, this debate seems to be a more complex one. Writers are looking for updated compensation structures as digital streaming takes on a growing share of studio production and revenue. The growing role of generative AI technology in content production is also a concern, which we will talk about in a future post.¹

This current conflict is the 6th strike in the WGA’s history, and compensation has always played a fairly central role.² In 1960, negotiations included the first residuals for films. In 1981, the new contract included terms for “pay TV” cable programs. The 1985 strike was focused around disagreements for the residual payment formula of home video. In 1988, the longest lasting strike, talks focused on residuals for syndicated re-runs. The most recent strike from 2008, looked at residuals for new media and DVD content.² The trend is fairly clear. Writers seem to consistently need to fight with the studios to highlight and earn their value.

In the previous post on interdependence theory we explored regulatory fit, the idea that the goals of an employer and its employees can increase intrinsic motivation when aligned or hamper it when misaligned. An individual’s regulatory focus can either be oriented towards promotion or prevention. In the case of writers, they obviously have a promotion focus with the desire to work on larger, more fulfilling, and more high-earning projects.

It is probably clear at this point that in regards to their writing teams, studios have a prevention focus. The consistent withholding of value from these teams and recurring need for strikes by the writers to earn their worth demonstrates this. In this post, we will dive more deeply into this regulatory misfit and why it occurs. We will look at the cognitive biases at play for studios that lead them to undervalue their writers. And we will consider the contrasting biases of the writers as they also seek to evaluate their own abilities. Finally, we will discuss how this misalignment creates negative effects beyond the negotiating table and ultimately leaves both sides worse off.

‍

What The Studios Don’t See

Studios, writers, actors, directors, and production staff have a high degree of interdependence. Their ability to work harmoniously is imperative. Each brings a unique expertise to the table to deliver a high quality final product. Yet, it consistently seems that studios are keen to forget or at least under-value that high reliance that they have on their writers. This may not be entirely intentional. When studio executives step to the negotiating table, they likely bring with them biases that interfere with how they view the world. There are a few key ones that we can expect to come into play.

Zero-Sum Bias

With the zero-sum bias, one side assumes that they must lose any value that is equivalent to the gains won by the other party.³ When negotiating from the perspective of revenue sharing on existing projects, studios may perceive any concessions made to writers as a direct threat to their own interests, resulting in a win-lose mentality. This can hinder the exploration of creative solutions that create incremental opportunity and prevent the discovery of mutually beneficial outcomes.

Hyperbolic Discounting

People often mistakenly apply hyperbolic discounting to their decisions. This is the disproportionate emphasis of short-term gains over long-term benefits.⁴ For the studios, this can manifest as undervaluing the importance of investing in talented writers and fostering collaborative relationships. By over-prioritizing immediate financial gains, studios may inadvertently limit their ability to attract and retain top talent over time, which can have long-lasting detrimental effects on their creative output.

Salience Bias

The salience bias leads decision-makers to prioritize information that is most prominent or easily accessible over factors that are more difficult to see or measure.⁵ Across time there have been 18 Hollywood strikes - only 4 have involved screen actors and the 1 directors strike lasted only 3 hours.⁶ While writers play a critical role in creative output, they are far less visible to the studios than many of their peers. This can lead to executives improperly devaluing their contributions.

Compassion Fade

Speaking of not being seen, compassion fade could also be at play. This phenomenon occurs when empathy and concern declines as the number of impacted individuals increases.⁷ There are many fewer Hollywood directors, which could be a factor in why that group sees fewer conflicts with studios. With more than 10,000 WGA members on strike, executives may become numb to the impacts that their negotiating decisions have on the lives of individual people.

Illusion of Transparency

Finally, studios may suffer from the illusion of transparency, mistakenly believing that their intentions and positions are crystal clear to the writers.⁸ This bias can hinder effective communication and compromise as assumptions replace open dialogue. Executives may underestimate the need for explicit communication and fail to articulate their underlying motivations, leading to misunderstandings and missed opportunities for collaboration.

‍

What The Writers Don’t Realize

Unfortunately, bias goes both ways. Not only do studio executives have a long list of flawed frameworks that they carry into contract talks, but so do representatives for the Writers Guild of America. For the writers, many of the biases that I expect we see are related to how they value their contributions to the entertainment industry. Unlike the almost purely economic incentives of the studio negotiators, the WGA wants to win for its own economic interests and also to protect the role that they play in the art of storytelling. However, this does not mean that their own ideas are any less self-serving.

Effort Justification

Writers may engage in effort justification, assigning inflated value to their demands or positions due to the effort they have invested in their work.⁹ This creates unrealistic expectations as the WGA attempts to define their compensation. For example, in the latest proposals for the new WGA contract the studios offer would increase writer compensation by $86 million annually. The WGA proposal, by contrast, would increase compensation by $429 million.¹⁰ By recognizing this bias, the WGA approach can be more balanced, creating a higher likelihood of a reasoned discussion that results in positive outcomes.

False Uniqueness Bias

Similarly, the writers may exhibit the false uniqueness bias, perceiving the value of their creative contributions as more unique or indispensable than they actually are.¹¹ This can lead to a reluctance to consider alternative perspectives or compromises. Particularly in relation to the conversations around generative AI, this bias may inappropriately anchor writers to the idea that these emerging tools add no value and cannot replicate any aspect of their work. Such a view could prevent them from finding ways to use the tools to augment their value and leave them worse off in the long-term.

Endowment Effect / Law of the Instrument

The endowment effect describes how people tend to assign greater value to something that they own, as compared to an equally valued thing that is not theirs.¹² The law of the instrument describes a tendency to rely on familiar tools for solving problems, even when a different solution may be a better option.¹³ Paired together, these biases can help explain the focus that writers have on residual payments. Residuals have been paid to writers for decades and are a key sticking point in current contract negotiations. The reality of the consumer adoption of streaming may be that residuals are no longer the optimal way to support writer compensation. However, finding a better path forward would require the WGA to be comfortable giving up that tool.

Hostile Attribution Bias

Similar to how the studios may believe that their intentions are more clear than they actually are, writers may interpret the studios’s actions as more hostile than what is actually the case. This hostile attribution bias leads people to interpret ambiguous actions as intentionally malicious.¹⁴ This can escalate tensions and fuel a cycle of mistrust inadvertently. By recognizing this bias and pausing to consider alternative interpretations, writers can promote a more constructive dialogue and reduce unnecessary conflict.

‍

The Best Path is Regulatory Fit

It may be unlikely that the executives and writers ever come to see completely eye-to-eye on compensation and unique value-added for each group. That is a loss. While biases persist on both sides, it is crucial for both to recognize the benefits of negotiating in good faith and align their incentives accordingly. For any organization, misalignment leads to an almost constant friction and that negative mentality can seep into many aspects of work.

Negotiating in good faith encourages open communication and the sharing of ideas between studios and writers. Success between these groups does not need to be a zero-sum game. Realistically, Hollywood faces its own existential threat as content creation becomes increasingly democratized by creators on YouTube, TikTok, and similar platforms. While this short form content will never replace the creations of Hollywood, it has already stolen some share of consumer attention. And there is no telling what might come down the road that further splinters entertainment. The inward focus and in-fighting between Hollywood functions misplaces competitive focus and limits the industry from looking at how they can combine their efforts to grow in new and impactful ways.

We see this in the business world too. In the current economic environment, we see many businesses pulling back on benefits and asking more of their employee base. Many companies are requiring employees to return to the office, even though there are clear benefits to certain employee groups like individual contributors and parents.¹⁵ While this is an understandable request from companies, too many companies focus on the rule first and the value it offers later. Rather than simply requiring employees to return, a far better approach would be to work with employees to define an in-office experience that is worth the added hassle. In more extreme cases, broader cost-cutting policy updates create an environment where avoiding downside feels more rewarded than finding upside. Google, for a fun example, has removed public access to staplers.¹⁶ These types of rushed and poorly communicated policies can create a tit-for-tat environment where employees no longer feel the need to over-invest their energy in their employee because their employer clearly no longer feels the need to co-invest in them. Ultimately, this creates opportunities for new market entrants or near competitors to take market share from companies while their focus is misallocated.

Finally, when organizations treat their people right they have greater success attracting and retaining top talent. For Hollywood studios, treating writers as valued partners and addressing their needs and concerns can create an environment where experienced writers want to be. Granted, in Hollywood, the alternative paths are limited and in our other article I discussed how these limited options create the need for a union in the first place. But, for our business teams, this is of critical importance. It goes without saying that finding and replacing top talent is hard to do. Investing in them and leveraging their networks for even greater upside benefits everyone.

‍

References

‍

More on the Writers Strike - Bias in Negotiations