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Comic Martin Mull once noted that Hollywood is just like "high school with money," but the prolonged Writers Guild of America (WGA) strike--now in its third month and with no end in sight--is looking a lot more like "grammar school with credit cards." And while writers contend the dispute is about the future, it's really more about resolving grievances of the past.

The crux of the dispute is how much writers should earn when their work is re-purposed on the Internet. Studios--contending that new media is too new to develop any realistic business model for it--say that such Internet use is for "promotional" purposes, limiting the pay to $250 for a year of re-use, and $1,200 for scripts original to the Internet. Writers are currently paid more than $18,000 for the first network television rerun of a single episode, and a minimum of $30,823 for a one-hour script.

As a counter-proposal, writers (with the slogan "If they make money, we make money") have proposed a simple payment of 2.5% of revenue from all new-media distribution, which seemed utterly reasonable in the eyes of the industry and the public. Yet such a cut of the "distributors' gross" was firmly rejected by the studios. Writers are wary of "producers' gross," as it is dependent on Hollywood's notorious bookkeeping. No wonder early polls showed as much as 15-to-1 support in favor of the writers (Pepperdine University study, November 2007).

The debate was reminiscent of Hollywood's labor battles of the 1980s, when studios made a similar argument about the uncertainties of a new market called "home video," and got the writers to settle for a lowball deal. Studios subsequently reaped the benefits--writers' residuals now amount to about 4 cents per DVD. Resentment from the WGA has grown as the years progressed, as the writers' share continues to decline in relation to booming studio revenue.

But the media has been wrong to suggest the current battle is simply over cash. While the debate does affect how to divide pieces of the digital media pie (for which writers, after all, create the recipes), the work stoppage is really about the writers' desire to be treated as partners in a creative endeavor, a concept that studios have moved further and further away from. Residuals reward creators, just as stock options reward employees, or royalties reward patent-holders. It's funny that with all the MBAs running the show, studios fail to understand that simple principle of commerce.

In many ways, this is a re-enactment of the WGA strike of 1988, when the town suffered a 22-week work stoppage and Hollywood went into a malaise--with many people losing homes and leaving, fed up with the business altogether. New business models emerged from that strike, with the "spec script" boom of the 1990s (wherein ready-to-shoot, fully written scripts, rather than those developed in conjunction with the studio, sold with multi-million-dollar price tags) and the proliferation of reality television. With reality TV, the studios could rein in production costs, which made sense in the short run. But studios soon realized there was no syndication value in reality programming (meaning it had no "shelf life"--who wants to see episode four of the third season of Survivor?) and scripted television became vital once again.

Recent deals with David Letterman, Tom Cruise and Harvey Weinstein to provide the Writers Guild with everything they were requesting suggests the conflict can be amicably resolved and the writers' demands met. The studios' continuing refusal to come back to the bargaining table only accelerates the development of the disruptive technology that they have feared so much.

But it's the WGA's deal with Media Rights Capital that could end up being most significant. Co-founded by a new media entrepreneur who sold his dot-com for over $1 billion, MRC's willingness to form a pay structure for creators' work on the Internet is bound to have studios reconsidering their strategies. This could be the deal that bridges the gap between the two sides--the gap that's made for an especially chilly Hollywood winter.

As the town starts the New Year, the question facing Hollywood is: "What new business model will emerge from this strike?" Because--as in 1988--it may well be the work stoppage itself that changes the business forever. The studios could be cutting off their noses to spite their faces, because the longer the strike continues, the more inevitably it becomes that their one-time partners will begin to create and distribute product via the Internet--without them.

Thom Taylor wrote The Big Deal: Hollywood's Million-Dollar Script Market about how the 1988 Writers Guild strike altered studio business models. Taylor currently works at a global investment bank.