0:00

NPR.

0:00

On strike! Shut up down!

0:03

L.A. is a union town!

0:14

The Walt

0:16

Disney Studios campus in Burbank, California

0:19

is not the happiest place on earth right now. For

0:22

the last several weeks, hundreds of protesters

0:24

have been marching back and forth in front of the studio

0:26

gates here, waving signs and shouting

0:28

their demands. What do we want? Fair

0:31

wages! When do we want it? Now!

0:34

These protesters are members and supporters of the biggest

0:37

writers and actors unions in the U.S. The

0:39

WGA, that's the Writers Guild of America,

0:42

and SAG-AFTRA, the Screen Actors

0:44

Guild and the American

0:45

Federation of Television and Radio

0:47

Artists. That's a bit of a mouthful for a union. I think you

0:49

really need a shorter name. Right. I'll

0:52

propose that, Matty. Both of these unions walked

0:54

out of talks recently with the Alliance of Motion

0:57

Picture and Television Producers. That's the organization

0:59

that represents studios like Disney and Netflix.

1:02

And they walked out over contracts regarding pay,

1:04

conditions and use of the writers and actors'

1:06

images. The writers have been pounding the pavement

1:08

here since May 2nd. The actors joined

1:10

them a couple of weeks ago. The strikers have quite

1:13

a few demands, covering everything from the size

1:15

of writing

1:15

teams to the threat posed

1:17

by artificial intelligence. But

1:20

one item keeps coming up again and again.

1:22

Residuals, we're definitely talking about that. Talking about

1:25

residuals. Residual income. Residuals.

1:27

Definitely residuals. Streaming residuals. Residuals.

1:30

Residuals are non-existent. Residuals, absolutely. Absolutely

1:33

residuals. This

1:36

is The Indicator from Planet Money. I'm Paddy

1:38

Hirsch. And I'm Darian Woods. Today, we're

1:40

going to look at one of the key sticking points in the

1:42

labor negotiations that has brought

1:44

film and television production in the U.S. to

1:46

a halt. Residuals. We'll

1:49

find out what residuals are and why

1:51

they're such a big deal to everybody involved.

1:54

That's coming up after the break.

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Culture doesn't happen by accident.

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Each week on It's Been A Minute, I take

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the things everyone's talking about and

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in conversation with my favorite creators,

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2:55

Alright,

3:01

before we get started, we do need to disclose

3:03

that many people who worked on this episode

3:06

are members of SAG-AFTRA, which is one

3:08

of the unions in this dispute, and it includes me.

3:11

But not me. Alright, well, we're gonna get you on, Dave Haddity.

3:13

Yeah, we'll see about that. But anyway, we're not here to talk

3:15

about me. We're here to talk about residuals,

3:17

which are a big sticking point in the negotiations

3:19

between entertainment industry, labor unions,

3:21

and producers. But what exactly

3:24

is a residual? Duncan Crabtree Ireland

3:26

is the chief negotiator for SAG-AFTRA, which

3:28

represents the actors in this dispute. A residual

3:31

is a wage that's paid for

3:33

subsequent use of something that

3:35

an actor did in a different market than

3:37

it was originally created for usually. Residual

3:40

income is paid to creatives, that's

3:42

actors, writers, and directors, as

3:44

part of a split compensation package.

3:47

They get paid the majority of their wage up front,

3:49

and then they get paid a smaller amount,

3:52

a residual payment, every time

3:54

the show they worked on re-airs. And

3:56

this arrangement works, or used to work, for

3:58

everyone.

3:59

the producers who do take on the risk

4:02

of making a whole portfolio of shows or movies,

4:04

any or all of which could fail. Luis

4:07

Cabral is a professor of economics at NYU, where he

4:09

teaches a course on the entertainment industry. Producers

4:12

take the lion's share of the risk, in fact, in some

4:14

cases, take the entirety of it. It's

4:16

not a good idea to concentrate all

4:18

of the risk in one of the parties. It is

4:21

economically efficient to shift

4:23

some of the risk away from the producer. Residuals

4:26

are in principle a way of doing that. Residuals

4:29

can let producers

4:29

reduce some of their upfront costs.

4:32

They pay creators less upfront

4:35

on the understanding that they'll have to make residual

4:37

payments later if the show does

4:40

well. Factors and writers.

4:42

Residuals are meant to

4:44

pay us in a continuing way as

4:47

long as the companies continue to make money

4:49

off of the

4:50

projects. This is Sarah Ramos.

4:52

She's a working actor. You may have seen her on Parenthood

4:54

or The Bear. She was also on the NBC

4:57

show American Dreams between 2002 and 2005. Her compensation

5:01

on that show was split like this. She

5:04

got $10,000 for performing in each

5:06

episode and for its first run on

5:08

the NBC network. That was the upfront

5:11

payment.

5:11

The residual, which was paid every time an episode

5:14

re-aired on the network, was $3,162. Now, you might be thinking,

5:16

that sounds like

5:19

pretty good money. You know, that show

5:22

was popular and it re-ran on the network.

5:24

So someone working as a frequent performer

5:27

on that show could make $160,000 a year. Yeah, or sometimes more

5:29

than that.

5:32

But here's the thing. Most actors aren't

5:34

regulars. Most appear on just one

5:36

episode, if they're lucky. And after

5:38

that, they're out of work. Sarah says

5:40

like most actors

5:41

and writers, she's been in that situation many

5:44

times.

5:44

Like we have to get

5:47

our job, do it on set,

5:49

and then go back in the trenches and try to get

5:51

another job, you know? And there's

5:54

a lot of in between time when you're

5:56

not getting paychecks for new

5:58

work. And that's when you

5:59

really need residuals. Serg

6:02

actress Duncan Crabtree-Island says that

6:04

on average an actor makes about two-thirds

6:07

of their annual income from residuals. These

6:09

are not super rich celebrity

6:11

people. These are faces you might

6:13

recognise, names you probably don't know, who are

6:16

just trying to make a living and make a

6:18

career. So it is a crucial

6:20

source of just survival

6:22

money for people who are

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working hard to pay their rent and to

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put groceries on the table. The actors and writers

6:28

that I spoke to in Burbank say it's becoming increasingly

6:31

difficult to build a career now, because residuals

6:33

are dwindling.

6:33

My name is Jessie Anis, I'm on Mythic Quest

6:36

and Veep and Better Call Saul. Thanks

6:38

buddy! Thank you!

6:40

That was a passerby telling Jessie how

6:42

much he liked her work on Mythic Quest. So

6:45

she's a recognisable face. She works.

6:47

A lot. But she's still struggling.

6:49

I'm a second generation actor. I grew up in Los Angeles

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with a struggling actor for a father and

6:53

his residuals on shows like Malcolm in the Middle

6:56

would pay our rent for the month. These

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days I'm a series regular on multiple shows on

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streaming networks. I don't see a penny

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of residuals.

7:03

It's a joke. The big issue

7:05

as actors and writers see it is

7:08

streaming. As more and more studios are

7:10

moving to playing their shows and movies on streaming

7:12

platforms, the old network residuals

7:14

that Sarah Ramos once earned are becoming

7:16

increasingly rare.

7:17

The streamers can put our shows

7:20

on their platforms and leave them

7:23

there for long periods of

7:25

time. You know, where on television it was just one airing

7:27

of the show and then the next time

7:31

they aired it you would have to pay for that. They

7:33

get these long windows

7:35

to screen our work and that's all

7:37

for the one initial compensation payment

7:39

we get.

7:40

Yeah, Sarah recently got a residual check for

7:42

her work on the NBC show Parenthood. NBC

7:45

of course now has its own streaming platform, Peacock.

7:47

Now for all 60 episodes of Parenthood

7:50

that she worked on combined, re-aired

7:52

across many platforms, including streaming.

7:54

That's internet rental, foreign, pay TV,

7:56

video and DVD. For all of that she

7:58

received just two

7:59

That's about $800 less than what she was compensated for a single

8:02

re-airing of just one

8:07

episode of American Dreams back in 2002.

8:10

Clearly, this is a problem for actors and writers.

8:13

But Louise Cabral at NYU says

8:15

the real issue is that the residual

8:17

system isn't a good fit for the way

8:19

that we consume television and movies today.

8:22

The current deals in terms of residuals

8:25

were decided decades ago at a

8:27

time when the technology for

8:30

a movie distribution was very

8:32

different than what it is now. Yeah, back then it

8:34

was easy to determine how many people watched a

8:36

show or a movie. The data was easily accessible

8:39

and it was widely shared. So it was relatively

8:41

easy for creators and producers to come to an agreement.

8:44

But measuring the streams

8:46

of a television show or a movie is

8:48

considerably more difficult because that data

8:50

is typically proprietary to the streamer.

8:53

Streaming companies live and die by

8:55

their data, which can be some

8:57

of the most valuable products in their portfolio.

9:00

And Duncan Crabtree, Ireland of SAG-AFTRA, says

9:03

that the producers are refusing to share

9:05

that data with actors and writers, even

9:07

with an independent third party involved.

9:10

It's kind of the fox-guardian of the hen

9:12

house when the companies say,

9:14

oh, well, an outside analytics company

9:16

can't possibly do this, but we also

9:19

won't share any of our

9:21

proprietary information on the success

9:23

of our project. So basically we're saying no

9:26

outside company can do it, but we also won't let

9:28

you see our data. And because of that, we can't

9:30

do a revenue sharing proposal.

9:32

I reached out to the Alliance of Motion Picture and Television

9:35

Producers to ask them about their stance on residuals

9:37

and data sharing and all of the rest of this. But

9:40

they declined the opportunity to talk with me.

9:42

And for actors like Sarah Ramos, this is precisely

9:44

the problem, especially with streaming companies,

9:47

a lack of openness. We asked her how

9:49

she sees transparency in the streaming industry

9:51

right now.

9:52

It's a lock box in

9:54

the bottom of a plane

9:57

that fell into the sea.

9:59

20,000 leagues. That's a good image.

10:02

It could be a long deep dive for the writers and actors

10:04

to get down to that plane, but they are all geared

10:07

up and willing to take the risk. They're hoping

10:09

that this strike will exert enough pressure to

10:11

bust that lockbox open.

10:13

Because there's gold inside, even

10:15

if it is only residual.

10:18

This week's producer was Julia Ritchie and our engineer

10:20

was Neil Rach. Our fact checker is Sierra

10:22

Juarez. Viet Le is our senior producer,

10:25

Kate Kincannon is our editor, and the indicator

10:27

is a production of NPR. Thank

10:30

you.