Since the outbreak of the dual U.S. labor strikes, the issue of residuals has risen to the fore as a key battleground dividing Hollywood’s creative cluster and the studios, networks and streamers.
Both the WGA and SAG-AFTRA have proposed changes to the current, fixed residual system. The WGA has suggested a viewership-based residual model, in addition to fixed residuals, while SAG-AFTRA is asking for actors to receive a 2% share of the revenue generated from streaming content.
However, the AMPTP says the suggestions are “unworkable” and the two sides remain apart. At one point, there were noises that Labor Day had been earmarked for a deal announcement but the annual holiday came and went yesterday with no sign of an end in sight.
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In recent days, some in the U.S. have begun to discuss success-based residual metrics that already exist in parts of Europe, most notably with Netflix. The systems are driven by European copyright legislation that ensures ‘authors’ receive what business affairs execs would call “fair and appropriate compensation,” and can broadly be seen as a reward for making a show or film that cuts through globally.
Over the years, Netflix has struck collective streamer residual agreements of different shapes and sizes in France, Germany and Scandinavia. Each provides creatives with compensation for well-performing shows. However, Deadline has discovered varying degrees of transparency over what these creatives are being compensated for, and how. As is the big issue in the U.S., everything comes down to what both unions and streamers see as a fair deal — not easy considering the amount of data the likes of Netflix, Prime Video and others are willing to share.
It’s also worth noting that the streamers are more heavily regulated in Europe than other parts of the world. They are already ordered by EU law to ensure at least 30% of the films and TV shows they offer regionally are from Europe and are forced to fund European content either through direct commissions or through local film funds.
On a more macro level, the same issues around residuals exist on both sides of the pond, though more progress has been made in achieving ‘success-based’ systems in Europe. On the flip side, U.S. writers and actors already receive fixed annual payments for every year their show sits on a streaming platform, something European guilds are trying to emulate in their collective contracts. It’s also worth considering there’s a language problem here: ‘residuals’ in European entertainment broadly relate to annual repayments. ‘Success-based remuneration’ is closer to the U.S. understanding of the word.
Germany
In Germany, Netflix has birthed Oscar winner All Quiet on the Western Front and TV hits including Dark and Kleo. The country is considered one of Netflix’s most successful hubs in Europe but its collective agreement sparks debate among our sources.
Netflix struck a deal covering series with services union Verdi and actors guild BFFS in early 2020. Another deal, for film, was forged a year later, before the series agreement was updated in July 2022, at which point minimum compensation was increased. The deal provides additional payments to most on- and off-camera workers for original shows that meet a threshold of at least 10 million global ‘completers’ — those who’ve watched at least 90% of a production (the same as Sweden), and even those that don’t hit the target receive some compensation.
The film contract works on a sliding scale dependent on the size of the budget, we understand. For example, a project costing less than €5M ($5.4M) would require fewer viewers to finish the series than a bigger-budget original before the payment is unlocked. The higher the budget, the higher the original base rate, with films of budgets of €12.5M or more the higehst level. As with the Swedish system, the payment is made as many times as the threshold (which reverts to 10 million views after the first payment regardless of budget) is reached.
However, sources say payments have only begun to filter through in recent weeks, with one recent email seen by Deadline detailing “additional remuneration for royalty-entitled participants” — in this case an extra in a TV series.
One German agent told Deadline they felt they had been kept in the dark about the contracts and were unsure how much compensation their clients should be getting. They added that there have been frustrations that the agreement only covers original series and not acquired shows, vastly shrinking the pool of projects that require compensation. In this way, Netflix’s approach in Germany differs to that of France (see below). Netflix doesn’t comment on industrial relations.
Whatever the case, Verdi and BFFS, which used the European Union’s Copyright in Digital Single Market (DSM) Directive to aid them in negotiations, have since signed similar collective bargaining agreements with the likes of Sky Deutschland.
German writers and directors currently have no deal in place with Netflix.
Deadline understands writers guild Deutscher Drehbuchverband (VDD) is currently in negotiations with the streamer, with annual repayments a crucial factor in the discussions. VDD declined to comment for this story, but one source with knowledge of the situation said, “It’s been slow progress for everyone.”
Sweden
Sweden’s system is similar to that of Germany’s. Netflix struck an agreement for original TV series in 2020, with films added into the mix in 2022. The ‘collective frame’ agreements between Netflix and the Swedish union for performing arts and film, Scen & Film, says it “provides for initial remuneration as well as a staggered success-based additional remuneration, distributed to all entitled parties.”
Upon announcing an expansion into film last year, Netflix’s Senior Counsel, International Labour Relations, Rachel C. Schumacher, said, “Through this long and trusted partnership between Netflix and Scen & Film we will continue to ensure we are creating opportunities for fair and proportionate remuneration for the entire Swedish creative industry.”
When a title hits a “certain threshold of viewers globally” who have “completed” the film or series, an amount “specified in the collective frame agreement is paid.” There is no limit to the number of times the threshold can be reached and each time qualifies as an “additional success-based payment.” The deal also ensures a pro-rata payment is provided to shows and films that fail to hit the threshold, which is rumored to be 10 million ‘completed’ views globally. Previously-released films have been included in the metric retrospectively so creatives on those can benefit.
Last year, Netflix pointed out it had given talent on the FLX-produced drama Quicksand a success-based payment in 2021. Simon Norrthon, VP of the Federation of International Actors and President of Scen & Film, told Deadline six more productions “have reached the threshold for payment.” He did not name them.
“Our agreements with Netflix have been of great benefit to our members — artists and other creative professional groups — who receive appropriate and proportionate compensation for their rights, and additional bonuses when the productions are successful,” he added.
Netflix’s Swedish originals include the well-received crime series Snabba Cash from SF Studios, Nexiko’s young adult drama Young Royals and Yellow Bird’s Spotify docu-drama The Playlist, each of which have made headlines.
The streamer was the first to sign a collective agreement with Scen & Film, but mystery around the terms and shape of its deal still exists. Multiple sources have said the guild hasn’t revealed exactly what was agreed on, though payments still show up in contracts. As such, it’s difficult to know if, for example, how much a lead writer makes compared with a technical crew member or make-up artists, said one source in the country.
It is fair to say, however, that Netflix’s Swedish dealings have been more fruitful and collegiate than those in neighboring Denmark, where last year saw streaming services commence a commissioning shutdown after talks with the Create Denmark union broke down. After 11 months of strife, Netflix struck a deal with Create Denmark that included “a guaranteed initial rights payment upon launch on the Netflix service, followed by additional remuneration based on the success of a show.” However, Denmark’s lawmakers are set to bring in a 5% levy on streaming services’ turnover, which would significantly impact any service’s plans for original shows in the country. Those already investing 5% won’t have to pay but those under that threshold have to top up.
France
Netflix’s French agreement dates further back than the others and its creation can be linked to the country’s keen sense of cultural protectionism and strict laws relating to author’s rights (which is a unique interpretation of copyright and separate to the understanding of the term in other parts of the world).
In fact, the agreement with the Society of Dramatic Authors and Composers (SADC) and the Society of Authors in the Graphic and Plastic Arts (AGADP) was struck prior to the streamer launching in the country in 2014 and was aimed at ensuring ‘authors’ would receive “actual remuneration for the use of their works.” It’s worth noting the SADC and AGADP aren’t unions but companies set up to oversee management of copyright.
We understand that Netflix does not consider the agreement ‘success-based.’ In some ways, it is an outlier and less relevant to the residuals debate, but it does go some way to showing how local creative markets can proactively protect themselves when faced with disruption.
We understand the remuneration package is based on clicks — specifically how many times a click launches a French film or series episode — during a specific quarter. Netflix pays the SADC a confidential percentage of its French sales, and then provides the body with reports on views. The SADC then distributes remuneration to its members every three months based on those views. Shorthand: each click results in a residual paid directly to the SADC, which then forwards that on to the writer or director. It’s understood that, depending on whether a title is original or licensed, and film or TV, the amount will vary.
Detail on the agreement is patchy, sources say, and non-disclosure agreements mean transparency over viewing figures is rarely forthcoming unless it is leaked. Nevertheless, it is very different to the German and Swedish systems.
Notably different to the newer European remuneration systems is the fact the French agreement only counts views in France, Luxembourg and French-speaking Belgium and is not measured on a global basis. How that impacts overall remuneration is unclear, but we understand the SADC does have reciprocal agreements in place with others doing similar work in countries such as Spain and Italy, and the system is broadly considered to work well.
Prime Video, which launched in France in 2019, and Disney+, which followed suit a year later, signed similar remuneration agreements two years ago. The Disney pact was renewed last month.
Europe today
Netflix declined to comment for this article, but we understand the streamer sees the situations in the U.S. and Europe as very different. Firstly, residual payments are broadly higher in the States. Secondly, the streamers would prefer in Europe to negotiate on a country-by-country basis rather than treating the continent as one homogeneous block. Upon striking its first deal with Netflix back in 2020, a Verdi board member in Germany said it could be a “lighthouse agreement,” and it appeared more European countries could soon sign similar pacts. However, we understand Netflix only has a handful of agreements with creative unions in Europe in place today — and that is more than the other global streamers present in the continent.
Netflix sees European countries as very different from each other, with the concerns of creatives and the shape of the market in Scandinavia not comparative with those in, say, Spain, which isn’t unionized. Despite the similarities we’ve noted in the Swedish and German contracts, the likelihood of transposing a one-size-fits-all solution across the continent is minimal. We understand Netflix prefers to have teams on the ground to address local market concerns and work with each country’s key players.
What is clear is that remuneration systems in Europe have gone some way to building trust between Netflix and the creative communities, but questions remain over transparency and streaming viewing figures. Each solution is different, and the battle for compensation has barely begun across the continent — and around the world.
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