Streaming Reuse Residual Is Crucial to Labor Negotiations’ Next Round

As SAG-AFTRA and the Hollywood studios return to the bargaining table, tensions remain high over a guild proposal to reshape actors compensation for streaming content.

Netflixs Ted Sarandos infamously dubbed the proposal a levy on subscribers, but union leadership claims its a new formula, based on subscriber totals and viewership, and designed to allow actors to share in the success of all SAG-AFTRA-covered work on SVOD platforms.

Assuming this is accurate, the guilds formula would lead to higher payments for actors when shows such as Suits explode in popularity on Netflix. And guild residual models desperately need to address this issue, with licensed content again becoming a hot commodity in the streaming wars and the decaying cable TV ecosystem replaced by streaming as consumers destination for TV rerun viewing.

Whatever SAG-AFTRA achieves in these negotiations, however, the issue of a streaming reuse residual for licensed shows will still hang over the next round of guild bargaining come 2026. Because for all the uproar about the success of Suits on Netflix this summer, the Writers Guild of Americas newly ratified deal does nothing to compensate the shows scribes for that success.

The highly touted and indeed quite groundbreaking, albeit limited streaming residual bonus won by the WGA applies only to made-for-streaming series. Meanwhile, shows produced for traditional TV and licensed by SVOD platforms will still receive only 1.2 percent of the license fee paid to the shows producer.

Which is to say, no matter how much more viewership Suits generates on Netflix, it wont translate into higher residuals for its writers at least not directly. Producer NBCUniversal could very well negotiate a bigger licensing fee on the next go-round, which would result in more money flowing back to the writers. But there will be no success-based bonus and, indeed, no further payout at all until that next licensing term begins.

In a certain sense, this is the way the business has always worked. The new viewership-dependent residual bonus for streaming shows is the first of its kind, as TV residuals have never previously been tied to ratings.

Instead, writers, actors and directors under the major guilds contracts have been paid for reruns of their work on the shows original platform or in broadcast syndication or based on percentages of producers gross receipts tied to the series exploitation.

Under the WGAs previous agreement, for instance, a network show like Friends earned its writers 2 percent of basic cable licensing fees and 1.8 percent of DVD sales, among other sources of income. SAG-AFTRAs past compensation models were similar, albeit typically with larger percentages baked in.

It seems logical, then, that streaming would follow a similar percentage-based model derived from license fees. But looked at another way, streaming is a unique economic model that requires its own unique form of compensation.

Its difficult to determine the financial value any one title generates for a streamer, of course, but viewership data at least indicates a titles value in generating subscriber engagement. While this is not directly tied to subscription revenues, its the best metric available for gauging success on streaming and the primary measure of licensed shows overall value amid the deterioration of the linear TV and home video markets.

In other words, you dont judge the popularity of, say, Gilmore Girls based on CW reruns and DVD sales anymore but by its consistently high viewership on Netflix. Yet as any actor who worked on the show will tell you, the residuals they receive are not commensurate to the series popularity. An entire economic model that once allowed lower-level actors to make a living is fading away.

Broadcast is diminishing, year after year after year, and even if you do a broadcast show, your residual is going to be greatly cut, Bryan Cranston of Breaking Bad fame told Deadline. When we first started coming up in this business, a long time ago, we relied on residuals to be able to pay our bills. I mean, part of the equation of working [in film and TV] was residuals, international residuals, DVD sales and things like that. But those are gone.

Streamers would argue that the business has changed and that you cant simply bring back the old way of doing things. Certainly for most players in the streaming wars, SVOD is not generating, and may never generate, the profits pay TV once did.

But for Netflix which is more and more playing its own game in streaming licensed content, particularly licensed TV, is a key cornerstone of its value proposition, and Sarandos Co. know it. (We cant make everything, but we can help you find just about anything, the co-CEO said on Netflixs Q3 earnings call last week.)

And as its legacy-media competitors become more eager to loan out their content again, and as original content volume contracts post-peak TV, licensed titles will only become more significant in the overall content landscape. As the mid-strike success of Suits has shown, consumers are only too eager to embrace older series amid a drought in new viewing material.

This means allowing talent to truly share in that success is likely a matter of when, not if, for streamers especially Netflix. The business has changed, yes, but that means compensation models should change with it if the entertainment industry is to remain a sustainable career for its workers.