New Directors Guild Deal Tradeoffs, Residuals Impact Revealed

TV Helmer Tommy Schlamme on Nurturing Diverse Talent - Getty-H 2017
Frederick M. Brown/Getty Images

Newly reported details of the pact, which is expected to be ratified, also include creative rights and safety provisions.

The Directors Guild of America sent its new three-year agreement out to members earlier this month for ratification, The Hollywood Reporter has learned. The move has not previously been reported.

Voting closes on Thursday at 6 p.m. PT. The guild’s board of directors voted unanimously to recommend the agreement to members, and ratification is expected. The current contract expires June 30.

“This is a strong agreement with important gains in key areas, including: dramatic improvements in our SVOD residuals and coverage; a significant increase in funding for our Pension Plan to secure our retirement promises now and into the future; healthy wage increases; and significant wins in television creative rights,” said DGA president Thomas Schlamme in a March 18 email to members.

As previously reported, the new pact features what the guild described as “a nearly 50 percent increase in residuals” for work on streaming video platforms such as Netflix and Disney+, as well as healthy compensation gains that effectively equal or exceed three percent per year, plus a one percent increase in pension plan contributions by employers.

But the email also included new details in a seven-page summary that THR has obtained. Among those details:

SVOD Residuals. For feature-length SVOD projects budgeted at least $13 million made for a service with 20 million or more domestic subscribers, the residual will increase by 29 percent in the first year of the contract to $162,812 for the first three years of use, and an additional 3 percent in each of the second and third years of the agreement. For pictures over $30 million, the DGA maintained the right to negotiate with the employer for better terms and conditions, including residuals and creative rights.

As previously reported, one-hour programs made for the largest streaming platforms will pay more than $73,000 for the first three years of use starting in the second year of the new agreement, which is up nearly fivefold from 2016 (when combined with gains made in 2017), and according to the union exceeds the average residuals earned from all markets for the most popular network series. Increases for half-hours and for programs on smaller platforms were not disclosed in the summary. The guild declined to provide a copy of the agreement itself and had no comment for this article.

In addition, the guild negotiated the end of grandfathering, which allowed new seasons of a series first produced under a prior agreement to retain the terms and conditions (including residuals) in place at that time, even after a new agreement with improved terms went into effect. Grandfathering will be eliminated on “nearly all series” by the second year of the agreement, according to the summary.

The above terms and other minimums apply to so-called high budget SVOD series, a category that the guild managed to expand by negotiating lower budget thresholds at which a show qualifies. For new half-hour series, the budget threshold will decrease from the current $1,300,000 to $1,000,000 per episode, and for one-hour series, from $2,500,000 to $1,700,000 per episode, with the thresholds subject to a one-time three percent increase in the third year of the agreement. In exchange for these improvements, the DGA accepted what it called a slight increase to some of the basic cable budget tiers.

In addition, provisions governing pilots, spinoffs, series without pilots, and series bonuses that apply to traditional television series will be extended to high budget SVOD series for the first time.

Basic Wages. As previously reported, minimum salaries will increase by 2.5 percent in the first year of the agreement and by an additional 3 percent in each of the second and third years of the agreement. However, as part of a compromise to obtain the increased SVOD residuals, the wage increases will be 0.5 percent smaller for directors of scripted network primetime programs, pay television programs, the highest budget SVOD programs and non-network, and non-primetime stripped programs (such as soap operas).

Benefit Plans. As previously reported, the employers’ pension plan contribution rate will increase by one percent, starting in the first year of the agreement.

“Although the Basic Pension Plan is currently well-funded on a current basis and remains the best funded retirement plan in the industry,” the summary explained, “it is not immune to the risk of lower investment returns, market volatility or reduced residual payments from traditional markets (upon which the Plan is dependent). As such, another major priority in this negotiation was to obtain additional income to further secure the Plan from these potential risks. The new agreement provides this greater security.”

The guild also achieved an increase in the cap on pension contributions for directors employed on theatrical feature films, television movies and closed-end series from $200,000 to $250,000. And assistant directors and unit production managers on a theatrical feature films with a work period that spans two years who make at least $200,000 on the picture will now receive pension credits for both years, rather than for just one year as was previously the case.

Other Residuals. The residual bases for foreign free television will increase 2.5 percent in the first year of the agreement and by an additional 3 percent in each of the second and third years, while the increase in residual bases for free-to-the-consumer ad-supported video on demand, network non-primetime, syndication and basic cable will be increases will be 0.5 percent smaller than those percentages, and the pay TV residual base and network primetime rerun fees will not increase at all.

In another residuals area, the DGA agreed to a concession.

“The Producers sought relief in the area of residuals for television series sold into broadcast syndication, which are currently based on a run-based formula that prevents many series from being sold into syndication,” the summary said. “Similar to what we have done in the past with respect to second sales to basic cable and secondary digital channels, and as part of the negotiation for the significant SVOD increases, the DGA agreed to replace the run-based formula with a residuals formula equal to 2 percent of Employer's gross (similar to the basic cable formula), for new licenses entered into after July 1, 2020.”

Said the summary, “This should allow the Producers to license series that might not otherwise be exploited, while at the same time ensuring that members will share in the gross revenues received by the producers.”

That may work for directors, but it might not for actors. Ordinarily, residuals formulas negotiated by one above-the-line union, such as the DGA, set a pattern for the other two, with a 3x ratio applied for SAG-AFTRA because numerous performers share in the residual. But even 6 percent of gross can result in small payments when divided up among numerous actors.

That may make SAG-AFTRA less comfortable with the compromise than the DGA was. On the other hand, in a world where series find afterlife on Hulu and Netflix, there’s so much less broadcast syndication happening at all that it may not matter.

Television Creative Rights. The guild achieved an overhaul of provisions relating to late scripts, improving the reporting, tracking, accountability and penalties for tardy scripts, including covering first-season shows, requiring fines be paid “in real time,” increasing the penalty amounts and providing that the penalty payments go, in part, directly to the affected director and first assistant director.

In other creative rights matters, the union obtained restrictions related to the continuous electronic transmission from the set in episodic television; new contract language protecting the director’s right to participate fully in the casting process, including participating in casting concept calls and improving the process when casting is conducted electronically; a one-day increase of the director’s cut period for pilots and first episodes of series without pilots; and an improved definition of “Producer/Director” and a revised set of guidelines addressing who can direct added scenes and retakes if the original director is unavailable.

The parties also agreed to form joint committees to address how directors can get electronic copies of their episodes to use for their reels and developing guidelines on directing intimate scenes, which may include working with an intimacy coordinator.

Safety. The parties agreed to a harmonized safety program that creates a single framework that makes clear the roles, responsibilities and chain of command of DGA members regarding safety.

Unscripted Programming. For the first time, associate directors and stage managers on “other than primetime dramatic programs” will receive a daily distant location fee of $55, which is in addition to per diem and any other location expenses that may apply. The maximum cap for production fees in a workweek for associate directors and stage managers employed on non-primetime entertainment programs will increase from $71 to $100 for any workweek, and will increase further by the wage escalators in the second and third years of the agreement. On certain basic cable shows, employers will now be required to pay overtime and premiums for work on sixth and seventh days and holidays.

In the last round of negotiations, the guild agreed to provide producers with a break in residuals for the first two years of certain lower budget syndicated unscripted series. To encourage more production of these shows and allow them to get started, the guild agreed to increase the budget thresholds for the shows that will qualify for the break.

Travel. The parties agreed that the local hire waiver that applies for some directors who travel to work in Los Angeles will not apply for directors who live outside of the U.S. and Canada, ensuring that the producers will pay for their travel, accommodations and per diem when working in L.A. The parties also agreed that coach travel, which has already been permissible for domestic flights less than 1,000 miles, will also be permissible for international flights of such length.