In David Letterman's House, the Writers Wear the Pants

As Hollywood writers prepare to enter their ninth week on strike, the Writers Guild of America (WGA) has for the first time been able to claim a victory in their efforts to secure a new and favorable deal covering so-called "new media" -- the free streaming video and paid downloads from services such as iTunes where consumers can watch movies and entire seasons of television shows on their computers or on portable devices such as smart phones and iPods.

This deal was agreed upon on Friday between the WGA and David Letterman's company, Worldwide Pants, which owns The Late Show, a unique circumstance on the late-night talk show circuit as all the other hosts including Jay Leno are strictly employees of their respective networks, who own the shows.

The CBS network which broadcasts Letterman's show distanced itself from the agreement in order to maintain a united front with its supposed competition under the Association of Motion Picture and Television Producers (AMPTP) umbrella, an organization that represents every major network and studio in the business.

According to statements made by Patric Verrone, President of the Writers Guild of America, West, the deal signed between the writers union and Worldwide Pants was substantively similar to a proposal that was on the negotiating table when the AMPTP walked away on December 7th.

With pressure building on the late-night hosts to return under their existing non-writing contracts, all of the major hosts were set to return on January 2nd without their writing staff and since most of the hosts are WGA members, unable even to write their own monologues or skits due to strike rules prohibiting such conduct -- often referred to as "scabbing" -- limiting them to extended interviews of guests who are willing to cross the picket lines.

Worldwide Pants CEO Rob Burnett -- himself a WGA member -- released a statement on December 15th revealing his previous attempts to secure such a deal with the guild nearly as soon as the strike had begun in early November. With only a few days left before Letterman and the other hosts were scheduled to return, it looked increasingly doubtful that Verrone and Young were willing to make good on their previously stated interest in making independent deals.

Now that such a deal is in place, it can serve as a precedent, should other independent companies or even AMPTP members wish to break ranks and get a leg up on their competition. NBC in particular has been mentioned as most likely of the big four networks to strike a deal on their own, as it relies more heavily on its late-night fare and is the most needy for advertising dollars.

NBC recently began returning upfront payments made by advertisers when it couldn't meet is ratings obligations and couldn't hand out "free" commercial repeats to make up for the shortfalls.

Beyond the matter of whether or not this deal will encourage other independent production companies to follow suit, additional questions remain regarding this deal's effectiveness against the other late-night shows, along with potential fallout amongst some feature writers which feel they have little to gain and a lot to lose from this strike. The Screen Actors Guild President Alan Rosenberg has encouraged his membership to frequent Letterman's show while avoiding those that are returning to the air without their writers as a show of solidarity.

SAG members are acutely aware of the repercussions a failed writers strike could have on their own negotiations with the AMPTP that will take place sometime in the spring, as well as what they might gain should the WGA succeed in securing a favorable deal on new media.

Politics on the Democratic side of the coming presidential elections will also come into play as the top three candidates have pledged not to cross any picket lines, which would mean a virtual boycott of the late-night circuit which relies on scripted monologues and, to a lesser degree, skits, which take up a significant portion of each shows one-hour time slot.

David Letterman will have an immediate and perhaps devastating leg up on his rivals should most of the high-profile SAG members frequent his show -- along with the Democratic candidates -- which could turn into an eventual permanent gain once a new contract between the AMPTP and WGA is finally agreed upon.

Unfortunately for writers, the interim agreement with Worldwide Pants will have the secondary effect of boosting revenue for CBS at the same time all other writers are walking the picket line at the network's gates in their attempts to force CEO Les Moonves and the others to return to the negotiating table.

The stock price for CBS Corp. has fallen 6% since the strike began on November 5th, and the network isn't alone. General Electric, which owns NBC Universal, which in turn owns NBC among other properties, has seen its stock fall 9.6% during that period. News Corp, Disney, and Time Warner -- all dominant players within the AMPTP and owners of production studios and broadcast networks all of them -- have seen similar declines of 6.2%, 6.3%, and 8.7% respectively.

A theoretical fund controlling 5,000,000 shares of News Corp stock would have lost nearly $7 million in value since the strike began, and with no end in sight, those losses may eventually compel AMPTP members to take action to satisfy increasingly uneasy investors in what has been described as a market in the midst of an existing downturn.

Few networks have new episodes remaining to air, and even with the pending return of Fox's American Idol, there is little hope that the current television season can be salvaged even if a deal were made today. Several high-profile films including a sequel to The Da Vinci Code have been scrapped on the verge of going into full production due writers such as Akiva Goldsman being no longer available to make changes.

The Directors Guild of America is set to begin their traditionally early negotiations within two weeks, while no further talks are scheduled between the AMPTP and the Writers Guild of America.