Hollywood Babble On & On #855: All About The Residuals

Today, I'm going to take a moment to talk about a part of the business we call show that is extremely important if you are working in it.

I'm talking about residuals.

"What are residuals?" you ask, furrowing your brow in a feeble attempt to understand.  Well the answer is simple.

These are residuals.

Yep, residuals are money.

However, it is not a share of the box office gross. Let's get that misconception out of the way right up front.  That sort of thing has to be negotiated by your agent.

Residuals are fees paid to the people involved in the making of a film or TV show when said film or TV show is sold to a secondary market.  These residuals are negotiated by the various unions, SAG, WGA, DGA etc., and they also manage their collection and disbursement.

Screenings on airplanes are not included for some reason, having been defined as part of the movie/TV show's original release.  That little tid-bit says a lot because everything involved in residuals depends on how the terms are defined. 

Things differ slightly between movies and television residuals, so I'll try to explain them to the best of my ability.

MOVIE RESIDUALS: Come from sales of films to television, and home video markets. These include pay cable, basic cable, and broadcast television, as well as DVD and online sales and rentals.  

Now you'd think that it's a license to print money.

Well, yes and no, and it all hinges on how the terms of the residuals contract are defined and how the rights to the movies in questions are sold.

Take writers for example. The contract between the WGA says that the credited writer(s) of a feature film deserve somewhere around 1.2% of the film's gross receipts from TV/home video sales and rentals.  Sounds good right, especially when sales and rentals can add up to the tens of millions of dollars.

Not really.

You see the studios define the film's gross receipts that actually pay residuals as the Producer's Gross Receipts from these sales. The Producer's Gross Receipts are 20% of the total of those sales.

So when you buy a DVD, the store gets a cut of the sales price, the studio gets the rest. The studio then pockets 80% of that sales price, and toss 20% to the producers to dole out to everyone else.

That means that our example, the ink-stained wretch who wrote the damn thing, only gets about 1.2% of the 20% the studios decided to let them have.

Then there's how the movie studios sell their films, especially to cable outlets.  Basically, they put a whole bunch of movies, both blockbusters and turkeys, into a big fat package, and sells the whole damn thing to a broadcaster for one fee. Thus the big hit, which should be worth more, gets the same amount in residuals that the bomb that no one wants to see.  So, unless there's some sort of bidding war for a specific film we're basically talking the scraps of scraps.

It is different for writers when it comes to internet sales and rentals.  Thanks to a contract negotiated by the WGA when the internet was still rather nascent, that 1.2% residual paid to the writer comes from the full 100% of the share collected by the studio.

So download like a bastard, because it will make the writers happy.

TV RESIDUALS: Follow a slightly different structure.  They are primarily built around reruns, but the most important things are how the show is rerun, and where.

If the network reruns an episode of a TV series, like they used to do every summer, they paid full fees to the people who made it and starred in it.  Pretty sweet money.

However, nowadays the networks try to avoid doing these "full reruns" and try to play games with what constitutes a rerun and such.

Then there are the reruns in both syndication and cable.  If you are the studio/producer who owns the show, you're golden, it's all gravy.  If you're a writer and actor, it can become problematic, especially if you have a deal where a cable channel buys all the reruns to your show.

Ever notice that when a basic cable channel airs reruns of a series, they play living shit out of it.

There's two reasons for that. 

1. It fills up air time without buying or producing original content. 

2. The more a certain show is aired, the smaller the residuals paid to contributors become.

So it's very possible to be a writer, director, or star of a successful and long running series get a residual check for 5¢ for all their work while the network and the cable channel, who are often part of the same conglomerate, continue to make millions.

And let's not forget that residuals count as income, so you have to pay taxes on them too.

However, all is not bleak.

If you have a prolific career, with a wide range of material, it can all add up, and can make the difference between making a living, and destitution.

Now this all a very glib and superficial explanation of an extremely, and needlessly, complex issue.  If you want to learn the specifics, please check with the various creative unions, like SAG, WGA, and DGA, who make available a lot of information on the issue on their websites.