Hollywood Writers, Studios Avert Strike

Negotiators for Hollywood's studios and writers today averted a striked when they announced reaching a "groundbreaking" deal in contract talks.

The negotiators said they would recommend that all 11,500 members of the Writers Guild of America approve it.

Negotiator Michael Mahern said the new three-year deal represents an improvement of $41 million over the old contract. He said it was the "best economic package that the Writers Guild has achieved since 1977."

The benefits of the new pact include a provision designating Fox as a network and requiring it to pay full fees. Another provision specifies that writers will receive a better percentage of profits from residuals — the money writers get when a show is broadcast, rebroadcast or rented.

For the first time, the contract uncaps foreign TV residuals into perpetuity. But negotiations will continue over Internet-related residuals, Mahern said.

Among the other sticking points the guild had with the Alliance of Motion Picture and Television Producers were greater creative control, a higher guaranteed minimum payment and a bigger cut of studio profits.

Upon learning of the settlement, Los Angeles Mayor Richard Riordan issued a statement: "A cloud has been lifted from the Los Angeles economy and tens of thousands of Angelenos will breathe a sigh of relief."

Even though the writers have avoided a strike, the Screen Actors Guild and the American Federation of Television and Radio Artists could still halt most production. The actors unions are also in negotiations with the Hollywood producers and the two sides face a June 30 deadline.

More Trouble for Troubled Industry

A strike would have been bad news for an already ailing industry. Fewer people go to the movies, and television advertising is down. The last thing the networks want is to disappoint viewers in the fall.

"Any time you don't have on the hit shows that normally [bring viewers] to your network — what are called the appointment shows — you're taking a significant risk," said Brian Lowry, television writer for the Los Angeles Times.

The studios could have lost 10 percent of viewers in the critical 18-to-49 age bracket, primarily because the networks would be forced to air reruns.

The networks had been carefully preparing for a strike, going into overdrive to wrap up their fall television schedules and films set for release this year, while postponing other productions until after an agreement is reached.

ABCNEWS' Brian Rooney, Steve Futterman and Dave Alpert in Los Angeles contributed to this report.