$2 Billion in Residuals Are Paid Annually — But How Much Gets Lost?

Tim Peacock

As SAG-AFTRA fields actor complaints over a "time-consuming" process, one source estimates that $300 million goes unpaid across five unions as producers and studios benefit.

About a year ago, Anne Schedeen realized she hadn't seen any residuals in a while from Alf, the hit '80s series in which she co-starred. That seemed odd to the actress, so she asked her husband, Chris Barrett, to give SAG-AFTRA a call. The response he got? "Oh," said a staffer, according to Barrett, formerly the head of Metropolitan Talent Agency. "That show hasn't paid residuals in four years."

Schedeen's story isn't unique. Robert Sherman, the son of comedian Allan Sherman, says he's been attempting to get SAG-AFTRA to obtain unpaid residuals on animated Dr. Seuss projects featuring his late father, who voiced The Cat in the Hat. "It’s 2-1/2 years, 60 emails and the resolution isn’t in sight yet," Sherman says. "There’s some lack of system to resolve these things. And the studios are not going out of their way to solve this." 

Across the five major Hollywood unions, entertainment residuals amount to about $2.1 billion a year (plus $750 million in commercials residuals), The Hollywood Reporter's research shows. One informed source estimates another 15 percent goes unpaid. If so, that's $300 million a year that falls off the table and into studio and producer coffers.

These aren't the most extraordinary cases either. In 2014, THR reported on an actor’s 3-1/2 year residuals runaround from Warner Bros. and SAG-AFTRA that threatened the actor’s health insurance eligibility and required the intervention of multiple private attorneys and media attention to unlock $200,000 in unpaid residuals for an entire cast.

"It simply takes time to do this work," says a SAG-AFTRA spokesperson. "Every situation is different and we handle thousands of cases every year so we really can’t estimate timing. Generally, claims on older product will be more time consuming and challenging to complete. Newer product usually doesn’t involve the same complexities and may be resolved a bit more quickly."

In fairness to the unions, residuals are mind numbingly complex, and are subject to hundreds of different formulas. What’s more, studios routinely supplement custom software with Excel spreadsheets and manual adjustments, increasing the possibility for error.

The result is enormous administrative costs for studios, producers and unions alike. SAG-AFTRA receives and processes 4 million paper checks a year, though it's now rolling out direct deposit. The union's contact center handles about 200,000 calls, chats and emails a year on a range of subjects including residuals, a spokesperson told THR. And the complexity has a larger cost: virtually every above-the-line strike since the inception of the guilds in the 1930s has been about residuals. The most recent, the 2007-08 WGA strike, dealt the Los Angeles economy an estimated $2.5 billion blow. 

"We do everything possible to proactively monitor and chase down residuals payments," notes the SAG-AFTRA spokesperson. The Writers Guild also says that it "actively police[s] residual payments."

But cases like Schedeen’s make observers wonder about a disconnect between words and deeds. "I’m not surprised," says attorney Neville Johnson of these cases. "SAG-AFTRA has a reputation for not being responsive." Johnson is currently suing the union on a different matter, and previously sued SAG, the DGA and WGA to force timely distribution of foreign levies, payments that are somewhat akin to residuals albeit distinct.

In rough terms, residuals can amount to as much as 40 percent of an actor's income, 30 percent of a writer's and 25 percent of a director's. Even when residuals are paid, they may not reach their intended destination. The unions have long lists of so-called "unable to locate" recipients — people who have moved or died, with whereabouts or heirs purportedly unknown. SAG-AFTRA says it's currently holding about $50 million in unclaimed residuals for about 100,000 people.

And what of the Alf residuals? As this story was going to press, SAG-AFTRA advised Barrett and Schedeen that their complaints had been resolved and checks would be provided imminently. A success story? Says Schedeen, “they were completely dropping the ball until a journalist got involved.”

A version of this story appears in the Nov. 19 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.