On June 1, Conan O'Brien will become the fifth permanent host of NBC's “Tonight Show” at 11:30 p.m., while incumbent host Jay Leno will continue to host a nightly program at 10:00 pm starting in the fall. NBC has been heavily criticized within the entertainment industry for “abandoning” an hour of prime time in favor of Leno's show, which will likely draw far less viewers than the more traditional shows broadcast on CBS and ABC. (Fox, the other major network, has never broadcast past 10 p.m. in prime time.)

There's a certain irony in Leno's show displacing scripted programming at 10 p.m. During the 2007-2008 Writers Guild of America strike, Leno's “Tonight Show” resumed production without the monopoly Guild's permission. Leno wrote his monologue without a writing staff, which led to WGA complaints. Now, in part because of the WGA's “victory” during the strike, there will be fewer potential Guild-controlled jobs at NBC.

It's understood that NBC wants to save money by running Leno's show five-nights-per-week in prime time. Instead of five shows with five casts and five writing staffs, there is one show with one principal and one writing staff. But there is additional savings on “residual” payments. When a scripted program is rebroadcast, either by the network or in syndication, the holder of the original WGA writing credit must receive a payment. A topical program like Leno's, however, is rarely rebroadcast, so it's unlikely the writers receive any such payments.

Residuals are the lifeblood of the WGA's monopoly. The Guild claims jurisdiction over any form of programming in any medium. Since no program can exist without writing, the WGA reasons, writers have a perpetual claim to a percentage of any revenue the program generates.

Of course, the contributions of the credited writer can be misleading. The WGA itself decides how credits are assigned. Even if multiple writers contributed to a script – a long-running show can have over a dozen staff writers – the WGA usually allows only one or two people to receive the credit and residual payments. Thus, even if an individual writer's draft is rewritten 60% by the rest of the staff, he can retain a perpetual claim for residual payments. Meanwhile, other crew essential to a production are ineligible for any kind of payment beyond their regular compensation.

There is nothing facially wrong with residual payments. The marketplace allows for a variety of compensation schemes. What's troubling, however, is the popular misconception that somehow the WGA “protects” its members from the evil, corporatist studios. The truth is, the WGA needs the big studios to survive, and vice versa. If the market was decentralized into hundreds of independent studios versus a handful of “majors,” the WGA would have a much harder time expanding and maintaining its monopoly over writer services. Conversely, the major studios rely on WGA agreements as protection against potential upstarts that try to enter the market at a lower cost. Once the majors and the WGA set standards, there is heavy pressure to conform.

Of course, even the majors have to deal with market realities, hence NBC's decision to bring Jay Leno into the once-sacrosanct WGA territory of prime time. No doubt the WGA is flustered: How could a labor deal that increased the costs and risks of scripted programming result in fewer shows? It's a premise too bizarre for even the most veteran Hollywood scribe to comprehend.