Behind-the-scenes earnings, or residuals, have played a crucial role in almost every successful film production in Hollywood - learn why.
In the ever-evolving world of entertainment, the concept of residuals has been a constant, a deferred minimum payment sent out when a recorded work is reused or sold to a new medium. However, adapting these traditional payment structures to the streaming era is proving to be a complex and contentious task for unions like the Writers Guild of America (WGA) and SAG-AFTRA.
Historically, residuals were based on traditional media reruns and syndication, but streaming has disrupted this by changing consumption patterns and revenue structures. For instance, WGA residuals apply to writers when works are distributed in secondary markets including streaming, while SAG-AFTRA residuals are triggered by reruns, theatrical releases, or streaming debuts.
However, many legacy contracts predate streaming, leading to situations where actors like those from The Office receive little to no residuals from streaming deals because their contracts lacked streaming language.
The core challenges include outdated contract language, revenue reporting and transparency, new payment structures, and union negotiations and strikes.
Outdated contract language poses a significant hurdle as early contracts did not anticipate streaming. Revenue reporting and transparency are complicated by streaming platforms' use of different revenue recognition methods. New payment structures, such as those that buy out residuals for a limited period, reduce long-term residual income. Union negotiations and strikes, as seen in the recent WGA and SAG-AFTRA actions, demand fairer residual structures for streaming.
Despite these challenges, unions are not backing down. The WGA, for example, has proposed a payment of $6,000 for every 2.5 million views on a platform, where a "view" means someone watched at least 50% of a program. SAG-AFTRA, on the other hand, wants 2% of the streaming revenue attributed to each show by Parrot Analytics.
The struggle for fair residuals is not a new phenomenon. It dates back to the 1940s when the American Federation of Musicians, led by James Petrillo, fought against "canned music" and ordered a halt to all recording by AFM musicians. The record labels eventually agreed to pay a small "royalty" on each sale to resolve the impasse, forming the foundation for residuals.
In the TV industry, residuals ultimately proved to be the only practical solution, but it was difficult to arrive at formulas that felt "fair". This struggle continues in the streaming era, with unions confronting the same challenge that faced Petrillo and the AFM, and that faced the unions that worked out the first TV residuals - how to apply old payment structures to a new medium.
In conclusion, while entertainment unions recognize residuals must evolve for streaming, adapting old formulas to new technologies involves renegotiation, transparency issues, and contract rewrites to ensure ongoing fair compensation over time in the streaming era. Recent strikes and agreements reflect ongoing efforts to secure equitable residuals despite these challenges.
References:
- Streaming Residuals: What You Need to Know
- WGA and SAG-AFTRA Strike Deals on Streaming Residuals
- The Office Cast Members Reveal They're Getting Little to No Residuals From Streaming
- The Long History of Residuals in Hollywood
- WGA and SAG-AFTRA Tentatively Agree to New Streaming Residuals Deals
In the transition from traditional entertainment mediums to streaming platforms, unions like the Writers Guild of America (WGA) and SAG-AFTRA are advocating for fair residuals to adapt to the new moviemaking and TV landscape. For instance, WGA residuals apply to writers when works are distributed in secondary markets including streaming, while SAG-AFTRA residuals are triggered by reruns, theatrical releases, or streaming debuts. However, outdated contract language, revenue reporting and transparency, new payment structures, and union negotiations and strikes pose significant challenges to achieving equitable residuals in the streaming era.
