Payments Considered ‘Security Blanket’ for Actors : Film-TV Strike Possibility Hinges on Residuals Issue

The prospects of a strike that could delay the fall television season hinges in large part on complex negotiations over secondary payments to actors, called “residuals,” that last year put more than $100 million in performers’ pockets.

For three decades, actors have been collecting residuals, which are defined by Webster’s New World Dictionary as “an extra fee paid to a performer for reruns of filmed or taped material.” It means that every time the movie “Chinatown” is shown on television, Jack Nicholson gets a payment. Every rerun of an episode of “MASH” means more money for Alan Alda.

However, simply calling them “extra fees” gives no sense of the critical role that residuals play in the lives of actors, writers and directors in Hollywood, many of whom--unlike Nicholson or Alda--are not big stars and experience long periods of unemployment.

“A lot of people structure their lives around residuals,” said Michael Franklin, executive director of the Directors Guild of America. “Residuals are a security blanket in the entertainment industry.”

Collected Payments

Last year, the 60,000 members of the Screen Actors Guild (SAG) collected $100 million in residuals. The 27,000 members of the Los Angeles local of the American Federation of Television and Radio (AFTRA) collected $24.3 million in residuals from June 1, 1985 to May 31, 1986.

So it is no wonder that the major issues in the current labor negotiations between the two actors unions and the Alliance of Motion Picture and Television Producers revolve around residual payments.

The actors unions have said the producers are demanding unacceptable “roll backs” on residuals, and they have the approval of their members to call a strike if they decide it is necessary. The producers have declined to comment publicly on the actors’ charges, but they want to change several elements in the residual payment structure in order to cut their costs and become more profitable.

Complicating the issue is the introduction of new methods of film distribution that are dramatically changing the industry, including the rise of pay television and the burgeoning video cassette market.

Despite the fact that the two sides set a target deadline of midnight tonight for concluding a new three-year agreement, negotiations reportedly were moving slowly Tuesday.

A strike could come as early as Thursday and would halt filming of feature films and prime-time television programs, which have just begun production for the fall season. Daytime soap operas, commercials, network news and radio would not be affected.

There are three major issues concerning residuals. The first concerns residuals from television shows rerun in syndication, meaning either on a non-network station or on a network at 11:30 p.m. or later.

Currently these residuals represent a percentage of the actor’s minimum base salary for the original program and decline with each successive rerun of the show. For a first rerun an actor gets 50% of the minimum base salary. This gradually declines to 5%.

The producers’ proposal would replace this system. Under the plan, the cast of a movie or television show would divide 3.6% of the fee a producer (such as Universal Studios) receives from the television station that buys the show. The formula would continue until the amount in residuals paid the cast would equal the amount paid under the old formula. Then the old rates would apply.

Patty Duke, the president of SAG, and Frank Maxwell, the president of AFTRA, have described this proposal as a “bombshell” that would be a “direct blow to performers’ earnings.”

The producers contend that they need to change the system, because they have a number of shows that they are unable to syndicate because high residual payments have priced them out of the market.

Formula Change

The unions and management are also reportedly far apart on the producers’ attempt to change the formula for making residual payments from so-called “supplemental markets,” meaning primarily movies sold on video cassettes and to pay televison.

Currently, actors get 3.6% of the producers’ gross receipts on cassette sales. The unions are seeking the same percentage of the distributors’ gross receipts.

As a rule of thumb, the producers’ gross is generally one-fifth of the distributors’ gross, because it has been reduced by the costs of manufacturing, marketing and distributing the cassettes.

Last year, domestic sales of video cassettes totaled about $1.5 billion.

The unions also object to the producers’ proposal that they not pay residuals for what are known as “pay-per-view” showings of movies within the first year of their release in a theater. This would mean, for example, that if in the next year there were a special showing of “Aliens” on television that viewers had to pay an extra fee for, there would be no residual payment to actors.

The producers contend that pay-per-view showings are part of a film’s “primary market,” and thus no residuals are warranted. However, the unions believe that it is part of the “supplemental market” and that traditional residual payments should be made.

Extremely Lucrative

So far, there have been few pay-per-view movie showings. However, the unions anticipate that it could become an extremely lucrative market and do not want to give it up. Franklin of the Directors Guild said an analysis by a television industry expert is that pay-per-view showings will yield gross receipts of $500 million yearly by 1990.

While these thorny issues are being discussed at the negotiating table in Sherman Oaks, studio executives are growing increasingly worried that there will be a strike. Several studio officials said they have made plans in anticipation of a walkout.

In New York, Twentieth Century Fox is accelerating work on a Warren Beatty film “The Pick Up Artist” to beat today’s deadline.

“Some time ago, we were told in a production meeting that we had to get in gear,” said one Fox production executive who insisted on anonymity. “As it happened, we were lucky, because barring any acts of God, we will have everything finished before the strike.”

At Independent Empire Films, company president Charles Band said they just wrapped up two films and that they were watching negotiations closely.

Wait and See

“It’s a problem for us, because even though we make most of our films in Europe, we still can’t use the actors there if there is a strike. We just have to wait and see,” he said.

David Kirkpatrick, executive vice president of production at Paramount Pictures, said the studio arranged its production schedule with the possibility of a strike in mind.

“We’ve prepared for the strike by not preparing (movie) start dates until mid-August or late August,” he said. “We finished all movies in preparation for the strike. We anticipated the strike. We hope for the best and expect the worst.”

Times staff writer David T. Friendly contributed to this story.