The major studios have made their first big move in the 2020 cycle of labor negotiations with Hollywood unions. Now, the industry is waiting to see how that opening bid plays with the two unions that could be hot zones of volatility later this year: the Writers Guild of America and SAG-AFTRA.
The Directors Guild of America unveiled March 7 the terms of a new three-year master film and TV contract with the Alliance of Motion Picture and Television Producers, the bargaining unit for Hollywood’s major producers.
The good news is that the studios appear to be attuned to the need to deliver a significant increase in streaming residuals, a festering source of frustration for many creatives. The bad news is that the focus of the AMPTP’s residual-sweetening offer may be too narrow to stave off clenched fists and picket signs — especially as macro-economic conditions have taken a sharp turn for the worse with coronavirus fears tanking global equities markets — as AMPTP negotiators prepare to dig in for the next round of talks. The WGA West and WGA East are set to begin talks with the AMPTP on March 23 against a May 1 contract expiration deadline. As always, the AMPTP adheres to pattern bargaining, which means that the DGA pact will set the basic template for new contracts with WGA and SAG-AFTRA.
“It’s an important move — and it may not be enough,” says a prominent entertainment lawyer of the DGA deal.
For the industry as a whole, the big headline from the DGA deal is that the AMPTP is prepared to increase residual fees in one aspect of the fast-growing streaming arena. The DGA deal calls for residuals on original, high-budget made-for-streaming series (original programs produced for Netflix, Amazon, Hulu, Disney Plus, etc.) to rise more than 50% from the previous contract.
Made-for-streaming originals are the fastest-growing sector of production, and one that is only going to keep increasing with HBO Max and Peacock joining Disney Plus as Hollywood continues to barrel into the stream scene later this year. The significance of squeezing more residual coin out of the studios in this arena was not lost on some WGA members.
“What [the DGA] asked for, and got, is very similar to what the [WGA] is asking for, so I am optimistic,” says a longtime WGA member.
But the agita over declining residual income for actors and writers is not limited to made-for-streaming originals. The broad availability of network and cable series reruns in the streaming arena — as well as vintage library shows à la “Friends,” “The Office” and “Seinfeld” — has stirred calls for higher residuals for all forms of streaming.
Another big concern as the industry transitions to on-demand platforms is the sea change in exposure for reruns. In the linear era, the volume of reruns was closely enforced by syndication contracts that were an inch thick and tightly controlled the number of plays that a series could rack up on a TV station or cable network over a set license period. In the new reality of streaming, episodes can be accessed by any number of users at any given time. In the past, more exposure equated to more money for residual participants.
The DGA noted that the new deal will boost residuals for original streaming series by “nearly fivefold” from 2016, when factoring in gains from the previous DGA contract that took effect in 2017. The DGA estimates that residual fees for an hourlong episode would come to about $73,000 over a three-year period, up from less than $15,000 in 2016. In the complex world of residual formulas, fees vary according to the size of a streaming platform’s subscriber base; the $73,000 estimate applies to shows airing on Netflix and the largest platforms.
The DGA announcement also noted that the high end of the improved residual structure means that made-for-streaming series will also surpass “the average residuals earned from all markets for the most popular network series.”
That’s an important psychological benchmark for the industry because the steady rise of streaming platforms has delivered the final death blow to traditional network reruns. Writers once typically received five-figure checks when an episode aired as a rerun in primetime. But more competition and changing viewing habits have ensured that networks favor unscripted series and other alternatives to serving up reruns in primetime.
“This is the start of a new day,” says director Todd Holland, who co-chaired the DGA’s negotiating committee with Jon Avnet, of the contract agreement. The pact still has to be ratified by DGA members.
WGA and SAG-AFTRA members will also get their say, eventually, on how this new day begins.
Dave McNary contributed to this report.