Why Residuals Are at the Heart of the WGA & SAG-AFTRA Strikes

The Price for Profits: Why Residuals Are at the Heart of the SAG-AFTRA and WGA Strikes

Editor’s Note: This article originally published August 30th, 2023, but in the wake of SAG-AFTRA’s lucrative deal to mark the official end to the Hollywood strikes, we’re bringing it back to highlight the importance of the writers’ and actors’ fight for fair compensation.

The last time both the writers and actors were on strike was 1960. The unions were less than 30 years old, Dwight D. Eisenhower was president, and Ronald Reagan was considered a promising leader for workers’ rights. But the issue that spurred that initial double strike is one that’s also at the heart of our current 2023 SAG-AFTRA and WGA strikes: artists receiving proper payment for their work. Namely, residuals.

Residual payments were first demanded because of the rise of television in 1960. Suddenly, everyone in the country could be watching the same thing. One of the most popular options were films sold to the three networks to be played as special events every evening. This time, the films came with advertisements simultaneously cast to tens of millions of eyeballs. With the entertainment landscape changed, the unions had to react accordingly. Both the WGA and SAG eventually won the right to residual payments that allowed actors and writers to continue to make money off of continued sales and exhibitions of their works.

Strikes happen when the industry changes. For entertainment, this included the introduction of TV (1960 strikes), the emergence of home video (1980 actors and 1981 writers strikes), and the rise of the Internet (2007 writers strikes). In 2023, the major change is the dominance of the streaming landscape that has only accelerated in the 16 years since ‘07. Big Tech grabbed the industry and is squeezing it dry. And now they must reckon with the hard-won right to residuals.

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Residuals are often misunderstood by the greater public. From a distance, they lean into this image of Hollywood creatives as major money-makers continuing to cash checks off their work without doing anything. But most actors survive off of other jobs, and the number of wealthy screenwriters is a very short list.

How residuals are calculated is based on an incredibly complex formula that takes many factors into consideration. These include the date the project was aired, how large of a role the writer/actor played in the project’s development, the budget for the production, where in the world the movie or show aired, and how many times it was shown. The unions and studios work together to account for all the money owed to creatives and send checks out every month. Sometimes you might receive several thousand dollars for your show airing a rerun on primetime, sometimes you might get a few pennies from in-flight entertainment viewership for an airline.

Residuals provide a solution to many of the issues creatives face in their jobs that are not ubiquitous among other industries. Screenwriter Michael Jamin (King of the Hill, Just Shoot Me!) explains that residuals make up for the lack of guaranteed work in television. “We don’t have any job security. So we are risking the opportunity cost of pursuing a career that gives [us] a steady income.”

Television has always been gig-to-gig. Even if you find a regular job on a long-running show, it will one day come to an end. Shows also do not shoot through the entire year, so there will inevitably come a few months when you are not reporting for work. Most actors and writers also do not have the privilege of working year-after-year; the majority of actors will only appear on one episode, and writers rooms often change. In Jamin’s words, “Residuals really help many writers stay afloat so that you can live off [this money].”

That brings into conversation the new monster that is the streaming era. Streaming changed the entire structure of TV. 22-episode seasons are hard to find, now 6-8 is standard (down from the original 10-episode sweet-spot streamers used to tout). Streaming has also created the “mini writers’ room.” Far fewer writers now work on a given show and for far fewer weeks. If you got a job on a network show with 20+ episodes, that was at least 30 weeks of work. A 6-episode series could get you 10 weeks if you’re lucky. Actors are shooting for far fewer days as well. The end result is the same amount of effort towards getting a job with a fraction of the pay and security in an already risky business. That means residuals are being stretched for longer periods of time than ever before, making their profits far less plentiful.

Residuals also act as a version of royalties for creatives that they receive for relinquishing their ownership of their work. “Residuals are exchanged for authorship and copyright claims,” Jamin explains. “Studios want those claims.” In exchange for creatives forgoing private ownership, studios can perpetually advertise writers’ works or use actors’ faces to make their companies money. Residuals are the payment for this extended ownership.

This is where the philosophy of Big Tech collides with the union town nature of Hollywood. The modern tech industry was based on the promise of constantly evolving innovation; of engineers rewriting their code and redesigning their machines to keep up with new developments. A good piece of code could be used as the backbone for hundreds or thousands of new programs. But that engineer would have only been paid once for their service. This is why streaming is so hostile to the guilds. It cannot reckon with the fact these people demand payment for their share in the creation of exponential profits. Creatives recognize their importance and they do not believe in Big Tech’s myth of innovation as an inherent good we should all be grateful to help create. There is a money trail that the unions are good at following.

Streaming is pushing against the visibility that made residuals possible in 1960. Back then there were only three channels; a writer or actor knew when their work was being shown because there was nowhere else to look. When cable was created, there was more to parse but you could still pick up a guide and see what was playing. But now, streaming is obscured through layers of metrics and algorithms. There’s so many different services with different parameters: Is it paid per month? Are there ads? What about if it’s a FAST channel that’s free? What if two services are owned by the same company? Shows are constantly moving from service to service every month. SAG-AFTRA proposed specific residual payments that will continue as long as the program is on a streamer, but this is hard to keep track of when streaming services regularly delete and remove content without any fanfare. Beside being used as tax avoidance, it’s easy to interpret the recent trend of deleting shows as a way to get around having to pay hosting residuals to creatives.

Streamers also rarely disclose viewership except to show their success, but even these numbers are distorted. Netflix previously counted two minutes of a movie or show playing as a “watch,” despite the fact their programs autoplay. Only this summer did Netflix change their method to total viewing hours divided by the length of the show. This change was criticized as a deceptive move to transparency that actually restated the same stats Nielsen and other data collectors could already calculate.

Even when shows are clearly popular, creatives see very little money from them. Streaming is not beholden to the traditional residual rules (due to their status as “new media” rather than traditional television). Recently Suits, a traditional cable drama, has found enormous success on Netflix after being promoted heavily by its algorithm. Nielsen estimated the series had 3.1 billion minutes of viewing in one week, a new record. But Suits writer Ethan Drogin received only $259.71 dollars in residuals from his share of the streaming profits.

Streamers cling to their obscurity on purpose. Orange is the New Black—one of the first streaming originals ever developed—never had very public viewership data. But in a speech before one SAG Awards ceremony, many actors attest to current Netflix CEO Ted Sarandos’ bragging that more people watched Orange is the New Black than Game of Thrones (Game of Thrones averaged around 8 million viewers per season, peaking at nearly 12 million for Season 8). Despite this, the actors on the show reported meager earnings. Brook Soso received a residual check for $27.30 from the show’s foreign sales, with some episodes paying her only a few cents. But since the viewership data was obscure, the actors had no way to defend themselves and fight for a more just payment.

Big Tech desperately wants to keep these numbers secret. Knowing how popular creatives’ works are will be the key to getting residuals that match their contribution to studios’ profits. Residual checks are already often vague, but streaming has made them nearly impossible to decipher. Making viewership numbers more public is a key aspect in current SAG-AFTRA and WGA negotiations for the redevelopment of residuals. In recent negotiations with the WGA, the AMPTP countered the union’s demand for viewership visibility by allowing a handful of WGA staff members to observe viewership data for a few years and to compile a report to then discuss at a later contract (they cannot share this data with other WGA members during this period).

SAG-AFTRA proposed a revenue-sharing residual that allows actors in more popular series to receive a greater cut of the profits in its initial contract negotiations. But this would necessitate disclosing viewership numbers, which streamers heavily protest against. Despite the fact that popularity-based profit sharing is mandated in the EU, with German creatives in front of and behind the camera recently securing a similar type of program. Netflix and others protest that viewership visibility is impossible, but that’s never been the case. In reality, the tech companies are scared that if union workers can peek behind the curtain, they’ll understand just how much the streamers are obscuring their profits and hiding their failures.

By fluffing up the illusions, the studios have gotten too comfortable with operating behind curtains. The mystique of film has given the industry magic, but this has been weaponized against the workers that make images move and stories last for seasons. But this philosophy has infected too much of Hollywood’s inner workings. Jamin gained popularity by opening his writing residual checks on TikTok. For some, it was their first insight into how much (or little) these payments could be for. “Some people think I’m not making enough and some people think it’s a crime that I’m getting anything” Jamin says. Confronting the variability of residuals help to normalize their importance as a part of a creative’s career. Residuals are not a perk of the job, they are a part of it.

Residuals can make a huge difference in a creative’s life. In his interview with Rolling Stone, actor Brendan Bradley describes opening his first SAG residual check for NCIS in 2006, “I broke down crying because it was how I was going to be able to cover some of my rent.” Writers and actors who work on streaming projects rarely get this kind of relief. The risky job has gotten riskier while the paychecks have gotten smaller. They’re no longer a lifeline, they’ve become a funny joke to open a check for literal pennies or even negative money.

The 1960 dual strike was ultimately about confronting the idea that filmed works can live beyond their original lifespan. The 2023 dual strike is about the same thing. And the answer at the heart of both these movements is the protection of residuals that give creatives credit for giving life to these works. If studios get to make endless amounts of money, then actors and writers have to get a cut. Immortality is a nice benefit, but it doesn’t feed or house you. And if residuals sound strange, maybe it’s not the actors and writers who are asking for too much. Maybe your industry is also cutting out what is owed to you.

Leila Jordan is a writer and former jigsaw puzzle world record holder. Her work has appeared in Paste Magazine, Gold Derby, TheWrap, FOX Digital, The Spool, and Awards Radar. To talk about all things movies, TV, and useless trivia you can find her @galaxyleila

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The Price for Profits: Why Residuals Are at the Heart of the SAG-AFTRA and WGA Strikes