Talks broke down last week between the major studios and SAG-AFTRA, with the studios saying that the gap between the two sides is “too great” to continue productive negotiations.
Until they can bridge the gap, SAG-AFTRA will remain on strike and the entertainment industry will remain shut down.
So how big is that gap?
About $480 million a year.
That’s the difference between what SAG-AFTRA wants in a new streaming residual formula — $500 million — and what the Alliance of Motion Picture and Television Producers is currently willing to pay — $20 million.
The two sides are at odds on other issues as well, including artificial intelligence and increases in minimum rates. But it was the vast gap on streaming residuals that prompted the breakdown in talks.
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Union leaders have said they expected to keep negotiating, and were taken by surprise when the AMPTP walked away from the table. But according to the AMPTP, the union gave an ultimatum, demanding that the studios agree to its “untenable” proposal for a per-subscriber tax or else the strike would continue.
Streaming residuals have been central to both the writers and actors strikes.
The WGA won a bonus for the most-watched made-for-streaming shows. The WGA was able to establish the principle that successful shows on streaming should pay more. But to do that, it was willing to settle for a relatively small amount of money — around $5 million a year at the outset, according to sources. (The WGA did not respond to a request for comment.)
SAG-AFTRA is aiming significantly higher. The guild has proposed that each streaming platform should pay 57 cents per subscriber per year. Duncan Crabtree-Ireland, the union’s chief negotiator, has said the sum amounts to less than a postage stamp per subscriber — a first-class stamp now costs 66 cents — or $500 million annually across all platforms.
That money would go into a jointly administered fund. The trustees of the fund would distribute it to actors whose projects appear on the platforms. According to the union, the funds would presumably be allocated based on viewership of each of the shows.
SAG-AFTRA has discarded an earlier proposal that would rely on Parrot Analytics, a third-party data provider, to assign value to each of the shows. Instead, the trustees would use the platforms’ viewership data, which the platforms have already agreed to provide to the WGA.
The trustees would also have to determine how to divide the residuals among the cast of each show. Under current structures, residuals are paid out based either on “time and salary units” or a “ratable distribution formula,” otherwise known as a “3-2-1” formula. Under either method, series regulars get more than guest stars, who get more than day players.
The AMPTP, meanwhile, is offering essentially the same proposal approved by the WGA. Under the WGA contract, which was ratified two weeks ago on a 99% vote, writers on successful shows a 50% bonus on their fixed residual. Shows will qualify if their domestic views reach the equivalent of 20% of the domestic subscriber base within 90 days.
About a quarter of made-for-streaming shows would get the bonus, according to data the studios shared with the WGA.
According to Netflix Co-CEO Ted Sarandos, it would cost four to five times as much to apply that provision to the actors. SAG-AFTRA has said it understands that the studios’ offer would pay out about $20 million a year.
When the WGA made its deal last month, there was some conjecture that SAG-AFTRA would have been looped into the process and would accept something similar. That has not turned out to be the case.
Negotiations with SAG-AFTRA resumed on Oct. 2. Fran Drescher, the president of the union, continued to press for a 2% revenue share, saying it would “change the world” for actors.
In the face of resistance from the studio CEOs, the union agreed to cut its proposal in half, to 1%. But the CEOs continued to make clear that they would not accept a revenue share at any percentage.
That’s when SAG-AFTRA returned, last Wednesday, with its proposal for the 57-cent-per-subscriber formula, which was intended to generate as much money as the 1% revenue share. In its presentation to the studios, the figure was given as $1 per year, leading the studios to conclude that guild wanted $800 million annually. But the union says its proposal cuts that amount to 57 cents to account for programming like news and sports that is not covered by the union.
That seemed to the studios to be a different version of the same idea they had already repeatedly rejected, and that the talks were not productive.
The studios have estimated that their July 11 offer is worth more than $1 billion to the actors over three years, mostly in the form of higher minimum rates.
