Directors Guild of America Board Approves New Three-Year Contract

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The agreement includes enhanced residual formulas for programs made for subscription video on demand.

The national board of the Directors Guild of America has approved new three-year contracts with the Alliance of Motion Picture and Television Producers, DGA president Paris Barclay announced Thursday. The contract covers motion picture and television work with the major studios and most producers.

The new deal, which is set to take effect July 1 pending likely ratification by the full DGA membership, includes wage increases of 2.5 percent in the first year of the agreement (plus a 0.5 percent increase in employer pension contributions) and 3 percent in the second and third years — with certain director-category exceptions as well as an outsized wage gain for directors employed on one-hour basic cable programs. Those 3 percent increases have become the normal increment since the end of the recession.

But the guild pointed to enhanced residual formulas for work done for high-budget subscription video on demand — such as programs made for Netflix or Amazon Prime — as the agreement’s most significant achievement. 

Calling the new agreement an “excellent deal,” Barclay said, “When it comes to our major gain, SVOD, our approach can best be summed up by the famous words of hockey great Wayne Gretzky: ‘Skate to where the puck is going. Not where it has been.’ Protecting our future is the goal of all our negotiations, and the end result is a stellar contract with substantial gains.”

In terms of SVOD residuals, the new contract establishes new subscriber tiers to account for subscriber growth. According to the DGA, the agreement more than triples residuals for members working on original content in the highest subscriber tier, while also allowing new entrants to pay lower rates as they grow and develop their market. The contract also establishes, for the first time, a share of high budget SVOD residuals for unit production managers and assistant directors and, also for the first time, residual payments for related foreign SVOD services.

The DGA did not release the memorandum of agreement, which contains the actual contract language.

In announcing those changes, Thomas Schlamme, who co-chaired the DGA’s negotiating committee along with Michael Apted, working with the DGA’s chief negotiator, national executive director Jay Roth, said, “Much like in 1981 with pay TV, this is a groundbreaking, important deal – with SVOD now moving toward converging with the subscriber-based pay TV formula established by the DGA.”

That’s a reference to the formula that applies to reruns of pay TV shows, such as programs made for HBO or Showtime. Although most residuals formulas are similar from guild to guild, the pay TV formulas are not — and the DGA got the best pay TV deal of the three above-the-line guilds. Their formula ties residuals to the number of pay TV subscribers, which grew dramatically from humble origins. The SAG and AFTRA (now SAG-AFTRA) formula is based on a percentage of the license fee, while the WGA formula, considered the worst of the lot, is a fixed dollar amount that declines year to year.

Schlamme added, “In the future we’ll look back and give thanks for the flag that the DGA planted in 2008 establishing jurisdiction in New Media.” That may strike a slightly sour note for WGA members: the Writers Guild sought new media jurisdiction in 2007 and went on strike for it, only to see the DGA and AMPTP do a deal in January 2008 while the writers were still on strike.

Added Apted, “In addition to pension and wage increases, our new high budget SVOD residuals formula is a tremendous gain. Whereas three years of reuse of original content on a high-subscriber SVOD platform would yield less than $15,000 in our current formula, that same three years of reuse more than triples to $50,000 under this new contract. That’s a real, measurable, and meaningful increase that goes a long way toward addressing how people make and consume television content these days.”  

As noted, the new contract also contains a 0.5 percent increase in employer contributions to the DGA’s pension plan, bringing the total pension and health rate to 16.5 percent. The DGA will also have the right to allocate up to 0.5 percent of the negotiated increases in salary rates in the second and third year of the agreement to either the pension or health plan.

Other changes in the guild’s residual formulas include: increases in “nearly all” residual bases; a residual, established for the first time, for basic cable high budget variety programs; an unspecified modification that “creates more opportunities for members’ work to be monetized and exhibited theatrically”; and increases in the residuals formulas for the reuse of television programs on ad-supported free streaming services.

The DGA also sought to improve opportunities for those looking to pursue a career as directors by addressing the practice of “gifting” first-time directing opportunities to individuals who are not serious about pursuing a career. The new contractual provision has no real bite, however: it simply requires all first-time TV directors — who have no previous directing experience or who have not completed or enrolled in a studio-sponsored TV director development program — to attend an orientation program provided by the DGA before their employment begins.

The existing DGA agreement had been set to expire on June 30, as does SAG-AFTRA’s contract. That union is expected to begin negotiations in the spring. In practical terms, the basic wage increases secured by the DGA will set a pattern for the actors, as well as for the Writers Guild negotiations, which are likely to begin in or around March, ahead of the May 2 expiration of that guild’s current contract. Similarly, the new and modified residuals formulas agreed to by the DGA and the AMPTP — which is comprised primarily of the major studios who act on behalf of a wide range of producers — will likely set a pattern for the other two unions as well. 

Dec. 29, 1:53 pm Updated to include additional details regarding residuals and other matters.