5 Things You Need To Know about Residuals

Residuals Faucet

One of the biggest question marks when trying to ensure profitability on a film or TV project is the residuals payment obligation. The talent guild agreements are filled with nuanced rules that can end up costing an unsuspecting producer or distributor much more than anticipated.

Here are five tips to keep in mind, both when estimating the total cost of your film and when negotiating licensing deals to make sure they’re profitable.

  1. Leaving someone off the cast list results in more than hurt feelings.Improper verification of the residuals cast list (i.e., getting it wrong) can generate claims and additional costs. Here are some common errors in creating the residuals cast list:
    • Omission of SAG- AFTRA Talent
    • Upgraded Extras
    • Talent in re-shoots
    • Stunts and stunt coordinators in second unit
    • Choirs hired in post-production
    • Talent called to loop or re-voice
    • Talent in clips or excerpts from other films or recording used in film
    • Celebrity look-alikes, sports stars, political cameos hired outside normal casting
    • Nude body doubles hired as principals
    • Failure to properly calculate SAG or IATSE residuals proration
    • Failure to recognize special agreements or waivers negotiated at the time of production
  2. The first million is the sweetest. Under all collective bargaining agreements, residuals on the first $1 million reportable receipts from Home Video are payable at lower percentages.  In cases of shared distribution territories, agreements should detail which entity gets the benefit of these lower residual rates. In cases where the agreements do not make this clear, it is to the distributor’s benefit to make the first Home Video reporting.
  3. Watch out for the ol’ PH&W prepay. Advances to star talent are often made prior to production and outside of a payroll service. Consequently, these amounts are sometimes overlooked in preparing the residual cast list and are not credited toward that talent’s Pension Health & Welfare contribution ceilings. This results in overpayment of PH&W on residuals.
  4. Separate payroll services = doubled PH&W contributions. In cases of shared distribution where the responsible parties are using separate payroll services, residual payments made by one party are not likely to be credited by the other against talent PH&W ceilings. This also results in another PH&W overpayment on residuals.
  5. Be an approval-seeker when it comes to setups. When two parties are using separate payroll services, it’s important to coordinate the approval of the residual setup. Making residual payments based on different allocation or proration would be a red flag for an audit.

One of the best things you can do to protect yourself and make your film attractive to distributors is to get your final residuals cast list together while you’re still in production. A residuals payment service can help you assemble the list, and should even be able to forecast the cost of residuals for various release-to markets.

Learn more about Media Services Residual Payments, or request more residuals information here.

DGA Talks with Film/TV Producers Set for November 4

The DGA and AMPTP will enter into formal talks for a new collective bargaining agreement on November 4, 2013. According to a joint statement, the negotiations will be held at AMPTP headquarters in Sherman Oaks, CA under a press blackout. The DGA – which represents directors, assistant directors, UPM’s and technical coordinators – has often reached agreement with the studios in relatively short order once talks have started. Of the three major Hollywood above-the-line talent guilds, the one that negotiates first in a given contract cycle has historically set the unofficial “template” for agreements with the other two. In the latest round of talks three years ago, when the DGA again negotiated first, that template included 2% wage increases and language addressing new media programming and playback.

The WGA has the first agreement to expire, in May 2014, while the DGA and SAG-AFTRA contracts don’t expire until the end of June. Once an agreement has been agreed to by both sides, it will go to the DGA’s national board for review, and if approved will be sent to membership for a ratification referendum.

Media Services Releases 3 New Apps for the Production Industry

Showbiz-Labor-Guide-AppMedia Services and Showbiz Software are proud to announce the release of three brand-new mobile apps for iPad and Android tablets. As first reported in the Hollywood Reporter, the production tools were released yesterday in conjunction with the annual Labor Guide Launch Party in Los Angeles, held at the W Hollywood.

The flagship app is the Showbiz Labor Guide, which mirrors the printed edition of the same name, but with easy touchscreen lookup of any wage rate from film and TV union agreements spanning the United States, such as IATSE, Teamsters, SAG-AFTRA, DGA and WGA.

Showbiz-Labor-Guide-App-InteriorThe drill-down menu allows producers and accountants to select region, agreement and occupation code to get wage and hour minimums sorted by schedule (Daily, Weekly, On Call, etc).

The Showbiz Directory app is a standalone mobile database of entertainment industry vendors and crew members in production centers across the country. Media Services eForms is a series of fillable, signable forms for employees working on film, TV and commercial productions. Many of the forms are specific to Media Services’ payroll division: now clients and their crew can fill out start paperwork and send it directly from their tablet devices.

All three apps are currently available in Apple’s App Store; the Labor Guide and Directory can also be found in the Google Play store. The Labor Guide was released with the introductory price of $19.99, while the other two apps are free.

In conjunction with the rollout, Media Services and Showbiz Software raffled off three iPads to attendees of last night’s launch party, where several hundred were in attendance. The New York launch party is slated for December 6 at Chelsea Manor. Register for it here.

DGA Spots New Commercial Pact

Some days, it’s good to be a 2nd assistant director for commercials. The DGA announced Monday the national board approval of a tentative new national commercial contract with the AICP, and included in it is a 15.8% raise for the category. Other positions will see a standard 2% increase for each year of the three-year pact, as well as a 17.65% increase in employer contributions to the health plan, and additional contributions for directors. The agreement also gives commercial producers more flexibility on hiring for spots shot outside the U.S. and Canada, while maintaining existing employment opportunities for 1st ADs.

Talks with the AICP on the pact spanned over three separate periods during the past few months, led by associate national executive director/Eastern executive director Russ Hollander and a negotiations committee made up of DGA members. While negotiations were completed in September, with a Memo of Agreement signed earlier this month, the guild’s national board didn’t have an opportunity to vote on it until its regularly scheduled board meeting last Saturday. The board unanimously opted to send it on to membership for a ratification vote, which is expected to pass.

“Commercials represent one of the steadiest areas of work for our members, and we are pleased that the new agreement will keep our members working, secure their healthcare benefits and allow producers the flexibility they need to keep this industry vibrant and competitive,” said Hollander.

“We entered into negotiations realizing that in this changing world there are challenges to the memberships of both the AICP and DGA,” said Matt Miller, president and CEO of the AICP who acted as chief negotiator for the association’s labor committee. “Together we were able, through frank discussions, to reach an agreement that helps us each address issues that will benefit our mutual constituencies and in turn the industry as a whole.”

Ratification packages are expected to be sent to members this week, and due back sometime before the end of the year, according to the guild. With the term of the agreement beginning December 1, retroactive increases may be necessitated.

Labor Guide Launch Party Rocks Hollywood

We had a blast with all our friends at the Labor Guide Launch Party Los Angeles last night at The Station Hollywood in the W Hotel! Prizes were raffled, Labor Guide Lemonades and appetizers consumed, and scintillating conversation exchanged at our fourth annual running of the event. Thanks to everyone who came out to celebrate with us and to our generous sponsors for helping us make it all happen. Already looking forward to next year!

“We’re lucky to have such wonderful sponsors and guests, who just seem to make the party better every year,” said Leimomi Coloretti, Media Services director of outreach and events. “It’s truly an honor to host this event, where we get a chance to connect with all these amazing people in the industry and learn about the great things they’re working on. Thanks to everyone who made it out!”

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