This article is part of a series on the 2023 WGA and SAG-AFTRA double strikes and their impact on Hollywood. Part 1 explored the issue of writing staff.
For more than six months in 2023, from May 2 to November 9, Hollywood productions were halted or shut down entirely by overlapping strikes by the Writers Guild of America and SAG-AFTRA. The last time these two major unions jointly downed tools was in 1960, when residuals, or guaranteed payments for the reuse of films and television shows, were the main point of contention.
63 years later, they were again at the top of the priority list and a union victory could have an equally lasting impact on the industry for decades to come.
When the WGA strike began, the only streaming residuals in play were “fixed” wastewhich guaranteed annual payments in pre-determined amounts that varied according to the length of the program and the size of the streaming service. This type of waste also exists in traditional media and compensates for the simple fact that something is being reused, even in contexts that go beyond that for which it was originally made.
The guild sought to add a performance-based residual value to this, which would reward the writers of a film or show for not just being used by a streaming service, but for being successful on it. In television, where this type of residual is based on revenue, these payments can sustain a career when a program arrives. Creating something like Seinfeld or Friendsthat not only achieves success upon release but continues to generate value over years of reruns means enormous wealth, but just working on a few episodes can provide a relatively steady income for an inconsistent career.
When SAG-AFTRA went on strike on July 14, they also made performance-based streaming residuals a focal point, and the combined pressure made their demands for change impossible for streamers to ignore.
This was expected to be a controversial question. The streaming model is built on performance data retention; At one point, Netflix praised the lack of published ratings as a selling point for the creative community to allow their work to be judged on artistic merit alone (Disk). Instead, high-profile writers and actors were paid more upfront to compensate for their lack of backend potential, and in a production boom, this system was adopted.
But as the linear TV business declined and more streamers moved in, the residual payments that had supported the base for years were dwindling and the issue became fundamental. At first, AMPTP rejected the WGA’s proposal and offered no response. But when SAG-AFTRA went on strike on July 14, they also made performance-based streaming residuals a focal point, and the combined pressure made it impossible for streamers to ignore their demands for change.
What the strikes changed
The Writers’ and Actors’ Questions, Explained
Although both unions pushed for success-based wages, their proposals for how this would work differed significantly. The WGA took the straightforward approach of suggesting a hearing-linked residual, with the methodology and parameters for success to be defined in negotiations. Of course, this would require access to viewership data, which streamers have been adamant about keeping confidential.
Meanwhile, SAG-AFTRA continued revenue sharing, which was potentially more complex. Unlike traditional TV, which sells ads for specific shows, it can be difficult to determine revenue for an individual movie or show when subscribers pay for the entire service. Streamers have a number of metrics they use to determine individual success, of course, but assuming that sharing them would be a failure, SAG preferred to go along with third-party measurement, overriding the role Nielsen plays in TV ratings. .
The terms of the 2023 contract, explained
Ultimately, the writers came up with a structure that streamers found acceptable and the WGA Agreement won the first hit-based streaming residue for the industry. Writers of a streaming film or series receive a bonus if 20% or more of a streaming service’s U.S. subscribers view it in the first 90 days after release or in the first 90 days of any subsequent year. The bonus would be equivalent to “50% of national and foreign fixed residue“value already agreed.
In what was a major development for the industry, the companies agreed to give the WGA access to total broadcast hours, domestic and international. They agreed to do so only confidentially, meaning the specific numbers would only be shared with the guild and not publicized, but “aggregated information may be shared.“What exactly this meant was unclear at the time, but it promised to be an important first step in data transparency.
The WGA agreement ultimately set the template for when SAG-AFTRA reached an agreement with AMPTP. Although the actors came in focused on revenue, as SAG chief negotiator Duncan Crabtree-Ireland explained in The city in November 2023,”I can’t even convey… how adamantly they insisted this would never, ever happen.“Their agreement ended up using a similar metric to trigger the bonus, with the amounts determined by the existing residual structure itself.
However, SAG-AFTRA took a different approach to distributing this money. While 75% of a performance bonus would go directly to the artist involved, 25% would be placed into a joint trust Streaming Payments Distribution Fund. This would be distributed among artists who worked on streaming films and TV shows, not just those whose shows were successful, sharing the wealth among a larger portion of the union’s members.
Where things are now
Short-term benefit may be small
After the terms were made public, the WGA’s approach to the new streaming residue received some criticism. In November 2023, analysis of Bloomberg estimated that, of the Netflix originals released in the first half of that year, only 5% would have surpassed the subscriber share benchmark. More than 70% of Netflix originals have been viewed by less than 5% of US subscribers.
Despite this, this report notes that “Because of its output and the amount of time viewers spend watching, Netflix will pay bonuses for more shows than any other service.“The subscriber structure was designed to account for streaming services of different sizes, but if these numbers prove correct, they also do not bode well for projects made for other streamers. It appears that the WGA’s residual victory, as structured Currently, it was achieved does not directly benefit many of its members.
When guilds first gained residuals, the amounts were nowhere near as substantial as they eventually became…
The SAG-AFTRA funding system aims to offset this, although as of July 2024, the details of the trust agreement have not yet been finalized (THR). This report mentions that some members are not satisfied with the agreed structure, but it is difficult to know what its impact will be without a detailed explanation of how the Fund will work.
This WGA and SAG-AFTRA win is all about the future
Although the short-term effects of this residual system are important, It’s hard to deny that this is a long-term win for guilds.
Part of the reason this issue proved so difficult to negotiate was that it was innovating and establishing language for something that did not previously exist. Now that this happens, they have a foundation to build on. When guilds first gained residuals, the amounts were nowhere near as substantial as they eventually became; terms for streaming waste will inevitably become more profitable with time.
The agreement certainly facilitates a much more civil discussion between the guilds and studios in future negotiations – it’s much easier to find an agreement when there are numbers to negotiate and both parties have a clear sense of where they meet in the middle. But it also gives unions a degree of power. As WGA negotiating committee member Adam Conover explained in The city after the strike:
Because now this is a contractual term, this is something that we will be able to audit, we will be able to resort to arbitration and we are doing so to be able to enforce it. And this is something the guild does year round… We don’t just trust their numbers, we go in and audit it using publicly available data, our own research. We take them to court over this or, more often, to arbitration. But what we’ve done here is open up the playing field of this battle, so that we have jurisdiction over this success-based waste…”
While both the financial gain and the change in data transparency may seem limited now, that’s only because this is just the first of many steps to come. By accepting a performance-based residual, AMPTP has essentially admitted that this is where the streaming landscape is headed. Streamers simply decided that if another metric had to take center stage alongside subscriber count, they would prefer a given show’s viewership to its revenue.
Then, The jury is still out on the ultimate impact of this strike victory – its existence is undeniably a victory, and was rightly celebrated at the time. But it could be years before we’re able to properly assess whether, of all the ways in which a streaming residual it could were calculated, this structure was right for creatives. And if the amounts gained in the short term do not prove to be largely significant, it remains to be seen whether the writers and actors harmed by diminished opportunities will still consider the sacrifice for posterity a success.
Next week, The 2023 Hollywood Strikes Part 2: AI Protections…