Residuals Hard to Understand but Are Worth the Fight

It was the Writers Guild of America that called the strike of its 9,000 members 21 weeks ago, but the economic lives of every writer, director, actor and musician in the nation’s television and theatrical film industry have been at stake in the dispute.

The critical issue has been residuals--the extra payments made to creative talent when the films or shows they develop are repeated on television or are sold by the studios for videocassettes and pay-TV or in foreign markets.

For many outsiders, residuals are just one in a confusing muddle of terms that have emerged during the strike. But the importance of the issue is apparent in the impact of the fight over it.

For most Americans, the effect is more and more repeat shows. The strike has shut down most television and theatrical film production in the United States, meaning there are few new TV shows now or for the fall season and almost no films have been prepared for theaters next summer.

Many who work in the industry have suffered. Thousands of non-writers have been put out of work by the strike, creating some inter-union bitterness.

The importance of writers to film production is something of a surprise to many people. It is almost impossible to replace them with, say, executives from corporate suites or strikebreakers hired off the street. Without them, the industry doesn’t work.

Many outside the industry might wonder how presumably intelligent men and women could squabble so long and so furiously about seemingly small sums of money when they live and work in what is so widely, but wrongly, perceived as a glamorous world of wealthy, beautiful and internationally famous people.

Actually, most of those in the industry are in low- or middle-income brackets.

The film and TV folk argue about the same things that can divide most other workers and their employers: basic wages and fringe benefits such as pension and health insurance.

But those issues aren’t so simple when you deal with actors, writers, directors and musicians who are called “creative” employees and are represented by “talent guilds,” as distinguished from plain old unions.

In addition to arguing over commonplace matters, the talent guilds fight endlessly with their bosses, and with each other, over such esoteric issues as the size and placement of their names on film titles and in advertisements--name recognition often means more jobs.

But mostly they fight about residuals, which for more than 35 years have been at the root of almost every dispute and strike by the talent guilds.

Film moguls, some of whom are awash in money themselves, have hated residuals ever since they lost the first battle over them in 1952. Money, at least in the short run, doesn’t seem as important to the companies as the principle of residuals.

For instance, the Walt Disney Co. is making record profits. One man, Michael Eisner, Disney’s chief executive, picked up a handsome $6.7 million in salary and bonuses last year, plus $31 million from stock options along with a lavish expense account.

Yet Disney has fought harder than almost any other company against a compromise with the writers.

One industry chief fumed that paying talent guild members more money when the product they make is used again “is like paying the plumber something extra every time I flush the damn toilet he installed.”

The remark drew laughs, but it was a rotten analogy. Actually, residuals in the film industry are comparable to royalties paid to writers of books.

Authors usually get an “advance,” a sort of down payment, when the publisher buys a manuscript. Then the author gets additional money, or royalties, based on the number of books that are sold.

Even though residuals have multiplied over the years and have become very important to many talent guild members, few of them are rich. Often forgotten is the fact that most talent guild members cannot find enough work in the industry and so don’t make their livings as actors, writers, directors or musicians.

And even those who do are mostly in low- to middle-income brackets, though there are many exceptions who are world-famous millionaires, and they create the impression that everyone in the film industry eats strawberries with cream and rides around in limousines.

The total income for actors working in television and theatrical film production last year was $488 million, and a full one-fourth of that came from residuals.

Residuals provided writers with $57 million out of their estimated total earnings of $360 million.

When tens of thousands of talent guild members are unemployed or under-employed, as they often are, they rely almost entirely on residuals if they cannot find jobs outside the industry.

No wonder that management would like to gut residuals and that guild members want to hold onto them--and expand them, if possible.

The film industry began to cut residuals in 1984, taking away substantial sums by pressuring the unhappy talent guilds to “clarify” the way residuals are calculated. The writers’ guild estimates that “clarification” has already cost writers $58 million, or about the same amount they received in residuals last year.

In 1986, the industry, swollen with profits, made some further, but very limited, inroads into the residuals of members of the Screen Actors Guild.

Management pressured actors into slashing residuals they get for performances in shows that are difficult to sell for re-use in the syndication market, which is made up mostly of TV stations in local communities.

The companies argued that if residuals were reduced, prices of the hard-to-sell shows could also be reduced and then they could be sold again more easily.

The companies stressed the problem of selling what they like to call the “dogs,” meaning TV films that had been sold once but now are just sitting on a shelf with no buyers in sight.

However, the actors were able to put meaningful limits on their residual reductions. Cuts will be made only on films that have a shelf-life of at least two years and are available to the companies only until June 30, 1989, when their SAG contract expires.

Then last year, the Directors Guild of America agreed to residual cuts for the hard-to-sell-again shows, but it did resist even more massive cuts that had been demanded by management, probably as a bargaining ploy.

The directors, though, agreed to drop the limits wisely imposed by the actors. Gone were the two-year shelf-life requirement and a fixed termination date of the cuts.

The writers’ strike was triggered by management’s demand that the writers follow the directors’ direction.

On the surface, it doesn’t sound like a bad deal. Any residual, no matter how low, would be better than none at all from a TV show sitting unsold on a shelf.

The guilds all agree with that obvious point. But they want limits on the residual slashes. And, in return for making changes in their hard-won residual system, they want to increase the very small residuals that now come from the increasingly profitable foreign market.

If the writers surrender on these critical issues, then the actors will be hard put to avoid further concessions next year.

The dispute over these elemental questions about residuals are made more difficult to understand by arguments over how to calculate their size. Should residuals be fixed, based on guild salary scales, or should they float, and vary with the income from a show?

Residuals seemed such a simple but brilliant idea when they started in 1952. Then they were paid only for the first two times a TV show was repeated. Gradually, though, they were improved, after many heated battles and several strikes.

Now residuals are paid on all TV repeats, on all movies made after 1960 and sold to TV, on the booming videocassette business, on pay TV and, in a very limited way, on sales to the potentially massive foreign TV market.

The fact that they are no longer simple to understand doesn’t dim the brilliance of the idea that residuals are a sensible way to help reward those in the talent guilds.