While the Screen Actors Guild continues to take a hard line on the issue of residuals from new media, the union has already lost the battle over residuals from the most profitable source of entertainment DVD sales.

Under SAG's old contract, actors got 12 percent of every dollar that the studios received from all packaged media goods sold. SAG had been negotiating for 24 percent, but is now asking for 13.8 percent.

People familiar with the current negotiations between SAG and Hollywood's major film studios said that deal point will likely go by the wayside as SAG focuses on new media issues.

"Everybody is talking about new media but they've already left a hell of a lot of money on the table in the packaged goods home entertainment area," said Jonathan Handel, an entertainment and new media lawyer at TroyGould Attorneys in Century City.

Consumers spent more than $24 billion last year buying and renting DVDs, that's more than double what they spent at the box office, according to Monterey-based Adams Media Research.

While that represents a 3 percent decline in annual consumer spending compared with 2006, Adams is predicting that DVD sales will make a comeback by 2012, when total consumer spending will likely reach $25.6 billion. That is due to the comparatively slow rollout of high-definition players compared with the brisk sales of standard DVD players in the early 2000s.

Out of the $24 plus billion dollars generated largely from DVDs in 2007, conservative estimates show that Hollywood's major motion picture studios reaped at least 50 percent of that figure.

As a result, when SAG lowered its demand for DVD dollars, it left hundreds of millions on the table, Handel said.

More TV

The actors strike may be looming on the horizon, but television production companies have been stepping up filming TV shows and pilots in Los Angeles.

Permits issued between May 21 and June 24 increased to 119 from 37 during the same period last year, or 222 percent, according to FilmL.A. Inc., the agency charged with processing filming permits throughout the county. And location permits for filming TV pilots jumped 150 percent during the same period.

FilmL.A. attributes the increase to the writers' strike, which delayed production, and the fear of an actors' strike, which speeded it up.

There was also increased activity in feature film production around Los Angeles.

Permits issued for feature films were up 12 percent compared with the same five week May-June period last year.

Permits for reality TV filming rose to 86 during the same five-week period this year, compared with 54 last year.

Image Peace

Image Entertainment Inc., which specializes in distributing independent films, patched up its rocky relationship with film financier and producer David Bergstein in hopes of propping up its sagging bottom line.

Chatsworth-based Image, which reported net revenues down 14 percent to $26 million during the most recent quarter, recently settled a dispute with Bergstein's CT1 Holdings, which had tried to buy Image in December 2007. The deal was said to be valued at $132 million.

CT1 Holdings is the parent company of Bergstein's ThinkFilm and Capitol Films and a related part of the BTP Acquisition Co., an entity designed to acquire companies like Image.

As part of the settlement, Image hammered out a new distribution agreement with ThinkFilm, which has a slate of star-powered films that Image needs in order to gain traction with retailers.

"As a non-hit distributor, we are subject to shelf-space constraints more than other companies," Image Chief Financial Officer Jeff Framer said during a recent conference call.

Image now has an interim distribution arrangement as well as several standalone single-picture agreements with ThinkFilm, for titles such as "Then She Found Me," starring Helen Hunt. Under the terms of its new agreement, Image has the domestic home entertainment distribution rights to that film and others to be released on DVD this fall and into next year. This should help Image maintain its shelf space at retailers.

Debt Problem

Since taking control of the Tribune Co. late last year, real estate tycoon turned media mogul Sam Zell has laid bare his Los Angeles Times and KTLA (Channel 5) media outlets in L.A.

Times Editor Russ Stanton cited pressure from the plethora of free news content available on the Internet and a general downturn in print ad buying when the newspaper announced that it would be eliminating 250 jobs including 150 in editorial. That latter number represents 17 percent of the Times's editorial department.

A few days earlier, Tribune-owned KTLA announced that it would be laying off seven news department staffers and four reporters.

All this comes on the heels of Zell announcing that he would be shopping the L.A. Times historic downtown headquarters, among other high-profile media buildings such as the Chicago Tribune Tower, to prospective buyers.

The root cause of the bloodletting is Tribune's $12.8 billion in debt, creating what financial analysts have said is a very real risk of credit default. About $8 billion of the Tribune's debt came from a highly leveraged deal that took the company private.

Zell has told reporters that by making significant cost cuts, the company will be able to meet its financial obligations.

Staff reporter Brett Sporich can be reached at bsporich@labusinessjournal.com or at (323) 549-5225, ext. 226.

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