SAG Wants Actors to Share in Proceeds of New Media Distribution
by Seth Funk
April 2008
© 2008 Hrbek Law LLC. All Rights Reserved.
When the Writers Guild of America (“WGA”) approached the Alliance of Motion Picture and Television Producers (“AMPTP”) in Fall 2007 to ask for a share of online and DVD revenues, the requests were greeted so coldly that screenwriters walked off their jobs. The strike halted television production, delayed movie releases, and caused $3.2 billion in damage to the film industry. It also resulted in the writers receiving an increased share of the profits of their work.
It is therefore not surprising that similar demands by the Screen Actors Guild (“SAG”) and the American Federation of Television and Radio Artists (“AFTRA”), and the possibility of another industry strike, are making entertainment industry insiders nervous. The current three-year contract between actors and producers expires June 30, 2008, and SAG is currently nearing its third week of negotiation with AMPTP, having extended negotiations until May 2, while AFTRA has agreed to hold off until May 5. The 120,000 member Screen Actors Guild has not yet set a date for a strike authorization vote, though the major studios have postponed starting any new feature productions until the matter is resolved. Some are referring to this self-imposed restraint as a de facto strike.
Both sides have agreed to an unofficial news blackout, so it is difficult to determine the actual status of the negotiations or the details of SAG’s proposals.
However, we do know that the sticking point for both sides is focused around a few key issues: DVD residuals, payment for web-based and new media content, and shortening the free usage period for promotional purposes. According to SAG, changes in industry business models, particularly a decline in repeats on major networks and an increase in unscripted programming (such as reality TV shows) and web streaming of primetime shows and feature films, has resulted in a drastic decline in the long term compensation paid to actors for their work through residuals.
Residuals are critical to an actor's ability to make a living. As a deferred payment for the use or reuse of an actor's work, residuals are paid on a time cycle that allows many actors to receive income on a regular basis. Residuals accounted for 53% of all pensionable principal earnings for middle-class actors under the TV and theatrical contracts in 2007. Real earnings are on the decline with average inflation-adjusted residual earnings decreasing 7% over the last 5 years.
Additionally, the volume of primetime repeats are down 25.1% that last two TV seasons, resulting in fewer residuals payments to actors, even though consumers continue to spend more every year on home entertainment, and the DVD market is expected to remain highly profitable, in part due to the growth of Blue-ray technology. Viewers who miss an episode of their favorite television series can catch it later on TiVo, rent a DVD of the entire series, or watch it at their convenience on the network’s website, further reducing the demand for repeat broadcasts of episodes. Residuals payable to actors are typically limited to repeated broadcasts on television and not to DVD and digital repeats. This has contributed to a negative annual growth rate in real aggregate earnings to actors over recent years.
So it is understandable that, for SAG, getting fair residuals formulas in new media, DVD's and other markets is a priority. The money is still there, but it is coming from new formats not provided for in the current agreement. The actors’ union wants its members to share in the residual revenues from the programs they participate in, regardless of the medium in which the repeat episodes are distributed. With industry experts predicting that “television” programs will soon be delivered via our computers, it seems only reasonable that the compensation structure of any new contract takes new media into account.
So far, both sides are holding their ground. The deadline to agree is currently set for May 2, at which point either a new agreement is likely to be announced, or we may be facing yet another entertainment industry shutdown.
April 2008
© 2008 Hrbek Law LLC. All Rights Reserved.
When the Writers Guild of America (“WGA”) approached the Alliance of Motion Picture and Television Producers (“AMPTP”) in Fall 2007 to ask for a share of online and DVD revenues, the requests were greeted so coldly that screenwriters walked off their jobs. The strike halted television production, delayed movie releases, and caused $3.2 billion in damage to the film industry. It also resulted in the writers receiving an increased share of the profits of their work.
It is therefore not surprising that similar demands by the Screen Actors Guild (“SAG”) and the American Federation of Television and Radio Artists (“AFTRA”), and the possibility of another industry strike, are making entertainment industry insiders nervous. The current three-year contract between actors and producers expires June 30, 2008, and SAG is currently nearing its third week of negotiation with AMPTP, having extended negotiations until May 2, while AFTRA has agreed to hold off until May 5. The 120,000 member Screen Actors Guild has not yet set a date for a strike authorization vote, though the major studios have postponed starting any new feature productions until the matter is resolved. Some are referring to this self-imposed restraint as a de facto strike.
Both sides have agreed to an unofficial news blackout, so it is difficult to determine the actual status of the negotiations or the details of SAG’s proposals.
However, we do know that the sticking point for both sides is focused around a few key issues: DVD residuals, payment for web-based and new media content, and shortening the free usage period for promotional purposes. According to SAG, changes in industry business models, particularly a decline in repeats on major networks and an increase in unscripted programming (such as reality TV shows) and web streaming of primetime shows and feature films, has resulted in a drastic decline in the long term compensation paid to actors for their work through residuals.
Residuals are critical to an actor's ability to make a living. As a deferred payment for the use or reuse of an actor's work, residuals are paid on a time cycle that allows many actors to receive income on a regular basis. Residuals accounted for 53% of all pensionable principal earnings for middle-class actors under the TV and theatrical contracts in 2007. Real earnings are on the decline with average inflation-adjusted residual earnings decreasing 7% over the last 5 years.
Additionally, the volume of primetime repeats are down 25.1% that last two TV seasons, resulting in fewer residuals payments to actors, even though consumers continue to spend more every year on home entertainment, and the DVD market is expected to remain highly profitable, in part due to the growth of Blue-ray technology. Viewers who miss an episode of their favorite television series can catch it later on TiVo, rent a DVD of the entire series, or watch it at their convenience on the network’s website, further reducing the demand for repeat broadcasts of episodes. Residuals payable to actors are typically limited to repeated broadcasts on television and not to DVD and digital repeats. This has contributed to a negative annual growth rate in real aggregate earnings to actors over recent years.
So it is understandable that, for SAG, getting fair residuals formulas in new media, DVD's and other markets is a priority. The money is still there, but it is coming from new formats not provided for in the current agreement. The actors’ union wants its members to share in the residual revenues from the programs they participate in, regardless of the medium in which the repeat episodes are distributed. With industry experts predicting that “television” programs will soon be delivered via our computers, it seems only reasonable that the compensation structure of any new contract takes new media into account.
So far, both sides are holding their ground. The deadline to agree is currently set for May 2, at which point either a new agreement is likely to be announced, or we may be facing yet another entertainment industry shutdown.