Demystifying WGA Television Residuals

Under the Writers Guild of America Theatrical and Television Basic Agreement (the “Basic Agreement”), credited writers for television motion pictures, including episodic programs, are entitled to receive compensation for the reuse of their work, also known as residuals. Television residuals were first negotiated by the Writers Guild of American (the “WGA”) in 1953, under the theory that a rerun of an existing program reduces employment for new products. Consequently, residuals are payable for the reuse of a writer’s material, as opposed to the original exhibition. Though initially limited to programs made-for-television and to five rerun payments, residuals expanded over the years not only to include home video, pay television, cable, new media, and others, but also to payments in perpetuity.

Whether or not a television writer is entitled to receive residuals is ultimately governed by the WGA’s credit determination. Per the Basic Agreement, if the guild accords a “Written by” credit to a writer, such individual is entitled to receive one hundred percent (100%) of available residuals, while a writer that is accorded a “Teleplay by” credit can claim seventy-five percent (75%) of available residuals; if the guild accords only a “Story by” credit to a writer, he or she is entitled to receive twenty-five percent (25%) of available residuals[1]. Furthermore, for an episodic series, if a writer were entitled to Separation of Rights[2] and “Created by” credit on the series, such writer would be entitled to a residual on the creator sequel payment minimum payable for each episode of the series produced beyond the pilot.

For projects made-for-television, there are two forms of residuals calculations. For the first category, residuals for each exhibition are a set amount generally based on a fixed “residual base” as determined by the following factors: 1) duration of the program, 2) budget of the program, 3) contract year, and 4) number of reruns. Such calculation is applicable to reuse on ABC, CBS, NBC, FBC (collectively, “Network”), The CW, syndication market, High Budget SVOD and others[3]. Specifically, for new High Budget SVOD Programs, the initial compensation paid to the credited writer includes ninety (90) days of use worldwide on the original platform. For domestic use on such platform after the first ninety (90) days, the studio must pay a residual amount determined by the “residual base,” exhibition year percentage, and the subscriber factor[4].

The second type of residual calculation is a revenue-based calculation, where residuals payable is based on a percentage of revenues received by the studio or distributor. The second formula is applicable, among others, to reuse on basic cable, AVOD[5], and other than High Budget SVOD[6] programs.

With respect to reruns on basic cable television, residuals are generally calculated either on 1) a cable formula of applying descending percentages to applicable cable minimums, commonly known as the “Sanchez formula,” referring to the show “Sanchez of Bel Air” for which the formula was first used[7], or 2) a “Hitchcock formula,” named after the show “Alfred Hitchcock Presents,” which is one hundred twenty percent (120%) of the difference between the corresponding Network prime time minimum and the applicable cable minimum for twelve (12) reruns over five (5) years[8].

For AVOD reuses[9], a studio is initially entitled to a residual-free “streaming window” for a seven (7) consecutive day period, then for each twenty-six (26) week period following the streaming window, it must make five and one-half percent (5.5%), effective May 2, 2018, of the applicable other than Network Prime Time minimum (or Appendix A minimum, where applicable). Notwithstanding the foregoing, the streaming window is extended to a twenty-four (24) consecutive day period for the first seven (7) episode of a new series.

For other original new media programs (i.e. other than High Budget SVOD Programs), the first twenty-six (26) weeks are residual-free, but thereafter, a distributor must pay one and one-fifth percent (1.2%) of gross receipts. However, such obligation is only applicable if the budget for the program was at least twenty-five thousand dollars ($25,000) per minute, otherwise the payment of residuals is freely negotiable[10].

Although methods of WGA residuals calculation are varied and complex, they are a critical part of the entertainment industry that is responsible for compensating writers and inspiring the creation of television programs. Residuals payment obligation generally follows the program’s success; accordingly, residuals are quite positive for writer and studio alike.

[1] A writer that is accorded “Adaptation by” or “Narration written by/Narration by” credit also receives a portion of residuals

[2] See Basic Agreement ARTICLE 16.B.1.

[3] See Basic Agreement Article 15.B.

[4] See Basic Agreement, SIDELETTER ON LITERARY MATERIAL WRITTEN FOR PROGRAMS MADE FOR NEW MEDIA

[5] Advertiser-Supported Video-On-Demand

[6] Subscription Video-On-Demand

[7] See Basic Agreement, APPENDIX C, ARTICLE 2.b.(1)

[8] See Basic Agreement, APPENDIX C, ARTICLE 2.b.(2)

[9] See Basic Agreement, SIDELETTER ON LITERARY MATERIAL WRITTEN FOR PROGRAMS MADE FOR NEW MEDIA

[10] Id.