Q: Both the WGA and SAG-AFTRA have now ratified deals with the AMPTP which include a new success-based streaming residual. What were the main complaints levied against the existing residuals model?

Residuals are an inheritance from the traditional linear broadcast landscape, and the product of an era of content distribution when content windowing was the norm. Writers and actors would be compensated for their work in the long term, receiving residuals payments every time a show or film was re-aired or re-licensed following its first release. They also stood to benefit from physical sales of a title released on DVD, Blu-Ray, etcetera. 

However, as streaming has reshaped the content landscape the traditional measures used to determine how residuals payments were owed—the number of airings and licence deals the title received—became less and less relevant, especially as so many streaming platforms were focused on building catalogues of exclusive content at launch, limiting long-term licensing activity. 

Q: How do the success-based streaming bonuses agreed upon by the AMPTP, the WGA and SAG-AFTRA address this?

Residuals were always inherently tied to the success of a title, with how widely a piece of content was distributed and the number of times it was repeated reflecting its value within the content marketplace. The success-based bonus models agreed upon by the major streaming-invested companies are intended to recreate this aspect of writers’ and actors’ compensation within the streaming space. 

Residuals for made-for-streaming content already exist, but in the form of fixed annual payments which decrease over time, with high-budget Scripted titles qualifying for greater compensation than low-budget fare. But from January 2024, a further success-based bonus will be paid on top of the fixed residual on those made-for-streaming titles which are viewed by the equivalent of 20% of a platform’s domestic (i.e. US) subscribers in the first 90 days of release. In the case of the SAG-AFTRA deal, 75% of the generated payment will go to the principal actors concerned, with the remaining 25% set aside in a newly created fund intended to distribute residuals more widely across the union's members.

Q: How might these new bonuses impact streaming players’ evolving content strategies?

When judging the impact on the streamers themselves, we have to be mindful of several key caveats. Of course, streaming platforms will have to factor these potential additional backend pay-outs into their content strategy, but the reality is that this affects only a small portion of their catalogue: Only high-budget Scripted made-for-SVoD content will be eligible for the new success-based bonuses. 

In practice that means that the majority of Originals will be ineligible for such payments, as will all content made exclusively for ad-supported services and all acquired content licensed by the platforms. Furthermore, this isn’t a recurring residual but rather a one-time additional payment to writers and principals on those projects which meet the criteria. Along with a boost to fixed residuals, it improves the level of compensation accessible to writers and actors working for streaming providers, but it doesn’t tie those providers into regular pay-outs to a significantly longer-term degree than previously. 

If anything, certain aspects of these deals have the potential to only accelerate existing trends, such as the degree to which global players are refocusing on key international markets like APAC for further growth potential. These bonuses have been agreed with domestic guilds and are entrenched in the domestic (US) market in terms of their implementation, so players with a more localised international strategy, like Netflix, will only be incentivized to lean more heavily on generating engagement with non-domestic content. 

Meanwhile, mature streaming services’ domestic content strategies are now far more focused on subscriber retention than acquisition. Hit Originals with the potential to qualify for a residual bonus will continue to be key to this, but as platforms target profitability they are increasingly looking to find more cost-effective ways of holding onto subscribers—acquiring long-running shows with a hefty back-catalogue of episodes to keep them engaged, for instance. Making a global success of older content acquired for a licence fee becomes an even more financially attractive proposition when considered against the prospect of paying additional residuals on successful new content.