A detailed look highlights enhancements in TV compensation and SVOD, AVOD and pay TV residuals.
The Writers Guild of America achieved a deal Tuesday morning that addresses many issues vexing its members and seemingly vindicated its high-stakes strategy of negotiating down to the wire in a fashion that stretched the nerves of many in the industry.
At a macro level, the guild said it achieved a deal that was $130 million better than the agreement it would have gotten had it simply accepted a deal modeled on the one the Directors Guild of America achieved several months earlier. If true, the DGA may be perturbed. No doubt its leaders will be taking a hard look at the WGA package. So, too, will the SAG-AFTRA leadership, as their negotiations start in two weeks, and if the WGA claim is valid, the actors might be inclined to up their contract demands.
But those observations come with a caveat: It was not immediately possible to determine the validity of the WGA claim, as the guild did not provide figures for the value it ascribed to the DGA deal or for the deal that the writers achieved — whereas as recently as Friday, they had publicly valued their proposal.
However, on an issue-by-issue basis, there is no doubt that the deal addresses most of the panoply of issues the WGA brought to the table. Although the union hasn’t released the deal’s details, The Hollywood Reporter was able to fill in some of the blanks. Here’s a close up look at the new pact:
* Basic Wage Increases. These are believed to be nominally 3 percent per year, as with the DGA deal concluded several months ago. The DGA agreement reached several months ago included one 0.5 percent diversion from wages to the union’s pension plan, making the first year’s actual increase 2.5 percent rather than 3 percent. The new WGA agreement is believed to provide for as many as three 0.5 percent diversions — one in each contract year — to the union’s troubled health plan.
* Outsize Increases. The DGA deal included extra-large salary increases for a few categories of directors. The WGA sought a wide range of such increases, according to sources. It’s not known what, if any, were achieved.
* Health Plan. In addition to the wage diversions, the companies are apparently infusing additional monies into the Health Plan, for a total of just under $90 million. The union, in turn, has agreed to make $7 million in cost savings, which could come in the form of reduced benefits, increased premiums, tightened eligibility or a combination of two or three of these mechanisms. That decision will be made by the Plan’s trustees at a later date.
* TV Writers — Span. For short season series, the companies have agreed that writers will be paid pro rata overages if they work more than 2.4 weeks on an episode. The companies had wanted to fix this at 2.6 weeks and the writers at 2.0 weeks. Short season series are those whose seasons are 14 episodes or less. The companies had wanted to set this at 12 episodes, the writers at 16. The entire concept of span and the related pro rata overages is new to the WGA’s collective bargaining agreement.
* TV Writers — Holds and Exclusivity. Here, the writers were able to build on a provision newly introduced in 2014, which allows a studio to hold a writer idle and uncompensated under exclusivity — after production and writing are complete — for only 90 days, after which the studio must release the writer (the usual outcome) or begin paying a holding fee equal to one-third of the weekly scale rate. The provision previously applied only to writers making under $210,000 per year, but in this round of negotiations the ceiling was increased to $280,500 or $285,000 (it wasn’t immediately clear which). In any case, the provision applies to all series of under 22 episodes per season.
* Screenwriters — No Relief From Single-Step Deals. Screenwriters’ incomes are down because studios are making fewer movies but also because most deals are single-step now — just a single draft, without a rewrite or a polish (a light rewrite). The WGA wanted to limit or eliminate single-step deals, but it didn’t achieve this. And the guild even removed the “What Happened to the Screen Business?” page from its website — but THR archived it here.
* No Script Parity. The guild did not achieve script parity, a demand that scripts for all platforms be subject to the same wage floors regardless of the show’s production budget.
* SVOD Residuals. The WGA says it got SVOD (Netflix, Amazon, Hulu) residuals improvements worth about $15 million. The DGA deal includes the following SVOD residuals terms, which are also likely to apply to the WGA deal because of a practice of parallelism called “pattern bargaining.”
* High-Budget Movies Made for Netflix. The DGA obtained the right to negotiate with the producer over terms and conditions, including residuals, for any feature-length high-budget SVOD program with budget at least $30 million on a platform with at least 20 million domestic (US and Canada) subscribers. Right now, that means high-budget Netflix original movies.
* Other High Budget SVOD Product — Residual-Free Period. The period for residual-free reuse has been cut from one year to 90 days. Residuals in the first year are paid at a higher rate, 35 percent.
* Other High Budget SVOD Product — Residual Base. This has been decoupled from the network primetime residual base — which was frozen, see above — and is increased by 5 percent. Feature-length product for Netflix (i.e., platforms with 20 million or more domestic subscribers) budgeted at $13 million to $30 million has a special, higher residual base.
* Other High Budget SVOD Product —Subscriber Factor. The residual is now multiplied by a subscriber factor, which means that it will grow as platform do. Platforms above 45 million domestic subscribers are payable at 150 percent, those under 20 million receive varying levels of discount, and ones in the middle are neither increased nor decreased based on subscriber count.
However, a caveat: for a series, the number of subscribers that applied to the series premiere applies to the series in perpetuity. Also, where a platform bundles VOD with other services such as ‘gaming, music or free shipping” — they’re looking at you, Amazon — the parties “shall agree upon a methodology to determine the number of domestic subscribers.”
* Other High-Budget SVOD Product — Foreign SVOD Exhibition. New, additional residuals are payable for foreign SVOD exhibition.
* Other High-Budget SVOD Product — Theatrical Exhibition. The DGA agreement clarifies for the first time that theatrical exhibition of high-budget SVOD product generates residuals.
* AVOD Residuals. For ad-supported VOD — such as reruns of network content on the ad-supported version of Hulu — the current residual formula is 5 percent of a residual bas (an amount found in a chart) for each of two 26 week periods of reuse. In the DGA deal, this was increased to 5.5 percent, and the residual bases themselves increased in the same fashion as basic wages (notionally 3 percent per year). The same is likely to apply to the WGA deal because of pattern bargaining.
* Pay TV Residuals. The writers received a 15 percent boost in this residual, but understanding what that means requires knowing the formula. The WGA has the least lucrative formula for pay TV residuals of any of the three above the line unions: DGA members receive a per-subscriber fee (subject to a cap) when a pay TV show like Game of Thrones is rerun on pay TV; SAG-AFTRA performers receives a percentage of the licensing fee; but writers receive nothing in the first year (for up to ten replays) and flat amounts thereafter — for instance, $7,200 in years 2, 3 and 4 for a one-hour show, and $1,000 for each year thereafter that the show is rerun.
These amounts, and the amounts for shows of other lengths, now go up by 15 percent. (Initially, the WGA was seeking the DGA formula, but this was a long shot, since the different formulas have been in place for decades, and it was the WGA that originally insisted on what turned out to be a less desirable approach.)
* Pay TV Comedy-Variety Writers. Writers of pay TV (HBO, etc.) comedy variety shows will now get residuals.
* Parental Leave. The guild obtained eight weeks’ parental leave for TV writers — one of the few working conditions type provisions in its agreement.
* Other Likely Residuals Provisions. The following terms apply to the DGA deal reached a few months ago and, because of pattern bargaining, are therefore likely to be part of the WGA deal as well:
* Network Primetime Residuals. No increase. These kinds of residuals (network reruns) are becoming increasingly rare, since Hulu and other platforms have become the place for catchup viewing.
* Non-Primetime and Syndication Residuals. Increase by 1 percent per year.
* Basic Cable Residuals (Reruns). Increase by 1 percent per year.
* Foreign Free TV Residuals. Same increase as basic wages (notionally 3 percent per year).
* Diginet Reuse. More series now qualify for the lower diginet formula intended to make syndication of library product economical on such networks.
* Basic Cable Second Sales. More series now qualify for the lower formula intended to make second basic cable sales of library product economical.
* Dubbed Foreign Language Domestic Basic Cable Service. A new residual is payable for licenses to such services.
* Theatrical Exhibition of Television or High Budget SVOD Product. Additional residuals formulas were introduced, including for day-and-date releases.
* vMVPDs. New provisions were added regarding virtual MVPDs such as Sling TV and Sony PlayStation Vue, clarifying that such services are generally treated for residuals purposes in the same fashion as traditional MVPDs such as cable and satellite TV operators.
* Pay TV OTT Services. New provisions clarified differing treatment for bundled pay TV OTT services like HBO Go and stand-alone analogs such as HBO Now.
* Sick Leave. The DGA deal includes provisions providing for California sick leave and waiving various municipal sick leave laws. It’s unknown whether the WGA deal includes these provisions.
Thanks to Mr. Handel for his analysis! But, but, but…I’m shocked neither side got everything they wanted!
The Ol’ SAG Watchdog
*Headline selected by Hollywood Reporter