Producing : Ask Me Anything (AMA) 1/25 to 1/26 by David Zannoni by David Zannoni

Hola David,

Great article! My question is: how can you estimate residuals when designing a finance plan during the development stage?

From the beginning of the project, we want to figure out what our sales need to be in order to generate profit. However, if a portion of sales (or, in some cases even the budget) needs to be set aside for residuals, we need to take it into account in the finance plan. At this stage of the project, we may have no distribution or sales deal, but we probably do know which positions are going to be guild, and which guild tiers our budget will fall into. Is there a way to estimate residuals based on this?

¡Gracias!

Thanks for having another AMA, David Zannoni. Does CAM affect writers?

Hi Maritere, good question, thanks. The actual amount of residuals payable, depends on several factors, like the number of guild-members involved, the sort of production, hours on set, but also, when paid from revenues, on the so-called media allocation (between theatrical, TV, DVD and new media). I would say there are two options: (1) a rough estimate of actual residuals payable based on input from a payroll house, whereby any portion shown in the finance plan and recoupment schedule is purely indicative and final numbers may change, or (2) just stick to the percentages of the standard rates for the residual set-aside, being SAG-AFTRA 6.2%, DGA 1.8%, WGA 1.8%, or all three guilds together 9.8%, of all revenues, and include these in the plans, whereby the actual residuals will not supersede these figures and any surplus in the set-aside will flow towards the next items, which could be the equity investors. It is indeed important for producers and financiers to be aware that payment of residuals comes in 1st position, prior to recoupment of equity investments.

hi Maurice, CAM can absolutely be of benefit to writers as well. This can be in case as a writer, you have a deferred fee payable from revenues. Also, as a WGA member, you may be entitled to receive payment of residuals. In both cases, you will benefit if the production sets up a collection account, as both your deferred writers fee, as well as residuals (for the latter through the payroll house as they will cut the checks), will be payable from the collection account by the neutral 3rd party, the CAM.

Thanks for the in-depth answer, David Zannoni! It's definitely helpful.

My pleasure, Maurice.

Hey David Zannoni! Thanks for doing an AMA - I have a BIG question, so maybe just do an overview, but I know residuals from streaming sites is a big topic for WGA writers right now. Could you explain the crux of the issue (you don't have to solve it lol)? Thanks!

Hi Emily, that is indeed a big topic. Typically, the studios, bigger independent distribution companies and more recently, the streamers, negotiate overall deals with the guilds with respect to calculation and payment of residuals. That goes for all windows. How I understand it, in the case of Netflix, there was a deal with SAG-AFTRA and DGA, but not with WGA. It ended up in disagreement about the rates and the case even got to litigation. Because streaming is a relatively new window, it takes a while before industry standards are set and negotiated, and applied in practice. I believe this is the issue you refer to. This goes by the way beyond the functionality of a collection account, as in case of productions controlled or picked up by the streamers, they pay residuals directly, before revenues are received in a collection account.

HI David, thank you for joining us for an AMA! Fascinating article. How does CAM affect actors in SAG? Are rates determine by individual contract between actors and the production company?

Thanks David Zannoni!

Hi GiGi, I am happy you liked it! The calculation of residuals is based on the basic agreements, which are collective bargaining agreements, not on individual deals with production companies (exceptions for studios, streamers, bigger indie distributors, who have the leverage to negotiate direct deals). Then the actual residuals payable depend on a combination of factors, which includes the size of the film, hours on set, media allocation, and others. The actual residuals payable, are calculated by a payroll house, which is specialized in residuals. The CAM definitely benefits actors, in that the CAM sets aside, off the top, from every dollar, a percentage which is kept in the collection account as a reserve for payment of SAG residuals. Once the CAM receives an invoice from the payroll house of the actual amount of residuals payable, it pays the amount from the reserve to the payroll house, that then cuts the checks and pays each individual SAG-actor. The percentages for the residuals set aside are indeed fixed, and for SAG-AFTRA, the percentage is 6.2% of all revenues received in the collection account. This is just a reserve - for all practical purposes, you can assume that the actual, total amount of residuals payable is always less than the reserved amount.

Thanks for doing this AMA, David. You’re always such a wealth of knowledge and I learn a lot from your answers to everyone’s questions. Appreciate you!!

Echoing what Sam said, really appreciate you doing another AMA David! Reading your blog and going through your answers is my favorite. I learn so much about this essential but less discussed area of filmmaking.

Thanks Sam & Sam. The pleasure is really mine, for me it is extremely valuable and educating to chat with filmmakers and discuss & understand daily topics, concerns and issues people deal with and run into. If I can contribute to making things a little more understandable from my perspective, that is a big win for me.