Structured Finance strikes again! This time in Film….

Over the past few months, the financial battleground in Hollywood has been shifting under our feet as fast as a California Earthquake.

Film studio bosses are engaged in a struggle to eliminate the residuals now paid to screenwriters over the life of the production. The residuals are computed according to various, mostly Byzantine formulas. They can add up to significant trailing income for prolific writers and may constitute much of the current income of garden-variety writers.

Not surprisingly, studio bosses such as Warner Brothers’ Barry Meyer argue that there is no reason why a screenwriter or any other ‘creative employee’ should benefit forever from a hit when pillars of the community, like Mr. Meyer, are left holding the bag if the studio loses money. He and his co-magnates contend that it is only rational for residuals to be paid after the studio has recuperated its initial investment in a production.

Parenthetically, industry insiders believe that this apparent broadside at an entire Guild is only superficially about the residuals now paid on television and DVD re-sales. The real battlefield is the Internet. Studio executives, seeing the writing on the blogs, are looking to eliminate residuals outright for blog-delivered product.

Blaming money for trouble in Tinseltown is like blaming politics for gridlock in Washington. Joking aside, however, this is one more example of how financial relationships are being de-constructed by a logic that looks suspiciously like—structured finance.

Sylvain RAYNES