One of the more closely watched deal points of the DGA negotiations concluded last month with the studios was wage pay and residuals for new media content. Having gone first of the major guilds in the last few cycles of negotiations, the directors have tended to set the pace for so-called pattern bargaining, with writers and actors striking similar deals on new media and other issues. With streaming video on the forefront of Hollywood’s collective mind, this latest round of talks was of particular interest to the other guilds, and the directors didn’t disappoint.

The three-year agreement established, for the first time, minimum wages, terms and conditions for high budget original and derivative dramatic new media productions made for subscription video on demand (SVOD) that exceed certain minimum budget thresholds:

  • For SVOD services with more than 15 million subscribers, original and derivative dramatic new media productions above a second budget level (e.g. Amazon’s Betas, Netflix’s House of Cards) will receive network primetime rates and conditions. Productions below that second budget level will receive basic cable rates and conditions.
  • For SVOD services with fewer than 15 million subscribers, original and derivative dramatic new media productions will receive basic cable terms and conditions.
  • Below the minimum budget thresholds, rates and conditions will remain completely negotiable.
  • Residuals for high budget original and derivative dramatic new media productions made for SVOD will be paid as a percentage of the applicable network prime time residual base starting in the second year of exhibition.

The agreement with the AMPTP also calls for a higher price tag on residuals for ad-supported streaming and cable ad-supported video on demand (AVOD):

  • The free streaming window for television programs was reduced to seven consecutive days for programs after the first seven episodes of a new series, including for cable ad-supported video on demand.
  • After the free streaming window, residual rates, which will now include payment for cable AVOD, will increase to 4% in the first year of the agreement, 4.5% in the second year of the agreement, and 5% in the third year of the agreement for programs exhibited for each 26-week period during the one year period following the free streaming window. After the one year period, the employer will pay residuals at the rate of 2% of employer’s gross.

These increases, particularly bumping up SVOD minimum pay to the level of network or basic cable wages, have set the stage for the upcoming SAG-AFTRA negotiations with producers. Industry insiders have watched to see how breakout shows like Amazon’s Betas and Netflix’s House of Cards would be handled vis-a-vis talent payments, after breaking the traditional network TV mould this year with entirely new distribution models that allow for simultaneous multi-episode release. In some ways, the three-year guild contract cycles ending in the coming year was good timing for both producers and talent, as the new contracts will take some of the uncertainty out of the future of these emerging formats.

Time will tell whether performers, negotiating their film/TV agreements under the merged SAG-AFTRA mantle for the first time, will get as rich a deal. The union has other issues on its mind: rectifying the wage gap under existing SAG and AFTRA agreements, shoring up qualifications for member health benefits, etc. At any rate, they will have time to think about bargaining points, as the WGA is slated to negotiate their deal first.