HOLLYWOOD FEELING THE HEAT : Studios Speeding Up Production, Fear a Shutdown in Summer by Directors Over Residual Rights

Forget about “hiatus,” the traditional spring break when television crews pack up their sound equipment and head for the fishing shoals off Cabo San Lucas.

This year, the gang on CBS’ “Falcon Crest,” NBC’s “Our House” and other network shows expect to keep slogging away on hot sound stages as they stockpile shows for faraway next fall.

Meanwhile, movie makers are racing to finish an entire year’s production before the summer crop of films has even sprouted.

Hollywood is running scared--and bracing for what could become its roughest confrontation to date over the way movie and television companies share their wealth with the people who work for them. “Our labor relations people tell us there’s a 99% chance that we’ll have a strike this summer,” says one Warner Bros. production executive.

D-day is June 30, when a three-year contract between major producers and the powerful Directors Guild of America expires. Negotiations toward a new pact have revived a long-standing, and increasingly acrimonious, dispute over a brute economic question: Should directors, actors, writers and others get a percentage of the studios’ exploding revenue from videocassettes, cable television and other so-called “new media”?

Simply put, these creative workers are used to getting a portion of that money on the theory that they are entitled to share in the long-term payback from their labors. And the production companies want it back--arguing that studios need all the cash they can get from cassettes and elsewhere because costs have run amok and profits are weak.

“The companies are threatening rollbacks of residual rights,” says Michael Franklin, the DGA’s executive director. “We’re not threatening anybody, but the companies are fully expecting a strike.”

J. Nicholas Counter III, chief negotiator for the Alliance of Motion Picture and Television Producers, the industry’s main bargaining group, says the producers’ strike preparations are “no different” from steps they’ve taken in earlier bargaining situations. “The only difference now is the condition of the market (for movies and TV programs). Conditions are more severe than they were in 1984,” he says.

The top executive of one major studio, who declined to be quoted by name, says: “This is a turning point. It’s a question of this city’s competitiveness. The appropriate analogy is to Detroit in the 1970s”--when the highly unionized auto industry was severely hurt by competition from Japanese manufacturers, which had lower wage rates.

In terms of dollars coming in, Hollywood is richer than it has ever been. Last year, movies alone brought the studios a record $7.2 billion, up about 40% from $5.1 billion in 1984, according to industry analyst Steven Rosenberg of Paul Kagan & Associates. But overall profit margins have perennially been in the area of 10% despite the cassette bonanza of the last few years, and are considerably less than the return for newspaper publishers, broadcasters and cable TV operators, according to figures compiled by Veronis, Suhler & Associates, a New York investment banking firm.

Some entertainment executives--few of whom will talk publicly because of the current contract negotiations--claim their companies might shift more production to Canada, which has less stringent guild rules, unless the directors set a pattern for other unions by giving up at least some of their so-called “residuals,” the additional payments made to directors or others when a film goes from theaters into video stores, or from network television into syndication.

In 1984, producers narrowly averted a strike with an eleventh-hour settlement that gave the directors an increase in the royalties from cassettes.

In 1981, a 2 1/2-month actors’ strike stopped most film and TV production in the United States, threw at least 30,000 people out of work and stalled about $450 million in related spending. Writers struck for three months the next year and delayed the start of the fall television season. Revenue sharing was the primary issue in both walkouts.

Tensions are especially high now because the studios are clearly buckling down to weather a major work stoppage. “They’re speeding up everything they can get their hands on,” says Franklin, whose 8,300-member guild hasn’t staged a walkout in its 51-year history. In addition to movie and TV directors, the guild represents assistant directors, production managers and stage managers.

One MCA executive goes so far as to claim that his company will keep the massive Universal Studios complex operating with non-union directors even if the DGA walks out. “We don’t plan on closing this place down,” the executive says. “There may be a lot of Steven Spielbergs out there waiting to be found.”

The major television networks, two of which--ABC and CBS--just settled strikes by their newswriters, are putting their muscle behind the studios by putting shows into production months early for the fall season. Thanks to early green-lights, seven out of 14 NBC shows that have been renewed so far are already laying away episodes for next year.

“If anything, this network will probably do better if there is a strike than if there isn’t,” notes Brandon Tartikoff, NBC Entertainment president. “What happens in a strike situation is, you have to put on repeats of comedies. We’re blessed in that we have more comedies” than the other networks.

Even with the shows stockpiled, the networks would be hurt by a strike that went beyond midsummer. NBC’s most popular series, “The Cosby Show,” will not be able to stockpile episodes; its star, Bill Cosby, has feature film and other career commitments and is unavailable for an early start, even though the crew was asked to begin next season’s production, says “Cosby” director Jay Sandrich. The same is true of NBC’s “Family Ties,” where star Michael J. Fox has other commitments.

In Sandrich’s opinion, the industry assumption that the directors will strike is premature. “There are an awful lot of issues involved in our negotiations, and I doubt that a strike would be called over one simple issue,” he says.

The speed-up is “tougher on the writers than the directors,” says Joel Zwick, director of ABC’s “Perfect Strangers, “ which will have completed six episodes by June 30. “I think the concept of rollbacks is a big enough issue to strike over,” he adds.

By June 30, none of the major studios expects to have a movie in production--because virtually all of the studio films on 1987 release schedules have been rushing toward completion since early this year. “Just about every company has stockpiled. The release schedules are going to look very normal for the rest of the year,” says John Krier, a Los Angeles-based consultant to theater owners.

One big Christmas release--MGM/UA Communications Co.’s “Rain Man,” a potential block-buster starring Tom Cruise and Dustin Hoffman--has delayed production from this month until at least next August because of the strike threat. “Everyone involved (with the movie) sat down and said, ‘Do we really want to start knowing that we might get stopped in the middle?’ We like it too much to do that,” says one MGM/UA executive.

Some high-profile movie projects could keep shooting this summer even if the directors do strike. Peter Hoffman, president of Carolco Pictures Inc., says his company is one of about 100 independent producers negotiating a separate agreement with the DGA, and plans to start “Rambo III” in early June “whether the major studios are struck or not.”

Most studio executives polled claim the speed-up--planned well in advance of this spring--has been surprisingly smooth. “This is the most important labor negotiation in 10 years. We’ve planned very well for it,” says a top Walt Disney Co. production executive.

“The facilities available in town are more than adequate” to get the rush work done, says Daniel Slusser, general manager of studio operations at Universal, Hollywood’s largest production facility. “If anything, it just raises the price of sound stages a little.”