Blog Home

The Beginner's Guide to Film and Television Residuals

Important details every producer should know as they budget for their next project
July 7, 2021

Anthony De La Rosa

Greenlighting a project is the exciting time when you can hit the ground running and finally start pre-production! As you’re working to attach the right talent and get those cameras rolling, it’s important to understand all of the nuances that could impact your project for years to come. One of these nuances are the residuals.

Residuals are complicated and could have a huge impact on your budget. In an effort to greenlight your project, don’t forget to create a plan and hire the right financial analyst to manage paying out the residuals to your talent and crew members after the project is released. Doing your homework ahead of time and bringing on the right professionals to your team will help with structuring the residuals and staying current on Guild rules, so you aren’t stuck with financial penalties later on after the project is released. 

So, What Are Residuals?

Residuals are union-negotiated payments that writers, actors, directors, and others, receive from a studio, producer, or distributor, when a movie, TV show, or internet production (streaming services or titles released for free on consumer platforms - i.e. social media platforms - which are called advertising supported streaming), is rerun or reused in a different medium. 

It's important to note, however, that residuals are different than royalties as they are negotiated through the various unions in Hollywood at a fixed rate. Royalties, on the other hand, are independently negotiated and percentage rates can fluctuate depending on the caliber of the talent and the project.

Types of Residuals

There are two types of residuals that you should be familiar with:

1. Variable Residual (also known as a percentage-based payment):

This type of residual takes into account the gross income (not the profit) of a title that is sold by a company, studio, or distributor and then applies each particular Guild’s percentage rate to the gross income. That number then gets divided amongst the qualified talent on the project.

Typically, the DGA (Director’s Guild of America) and the WGA (Writer’s Guild of America) have equal percentage rates, while SAG (Screen Actors Guild) has about a 3x increased percentage rate because they include a larger pool of talent with actors.

Depending on which made-for market that a project is released on (Syndication, Basic Cable, Network TV, New Media) can impact the variable rate, based on the different rules in effect by the Guilds. For example, projects made for Basic Cable and then released on Netflix (New Media) can see a change in the residual rate.

2. Fixed Residual

This is a flat payment based on different criteria and a formula that has no relation to the income of a project. In some instances, a particular talent could have more fixed residuals than the money that was brought in by a project. When the studio, distributor, or producer submits the revenue for the project, then each Guild’s percentage rate gets applied to it and distributed to that particular talent, based on how much time they worked and how much money they were paid. These factors give them a greater share in the residual.

Every time a title reruns in a particular market (Syndication, Basic Cable, or Network TV), the fixed rate is applied with stipulations. Network Television has the highest percentage rate; Basic Cable and Syndication have declining scales, meaning the first rerun pays out the highest fixed percentage rate, and then declines in scale to a minimum fixed rate that goes into perpetuity.

Fixed residuals are designed for initial release in the made-for market, but once the project is released in other markets, usually become a variable residual.

Late Penalties

Late Penalties (LPLD) are applied if an employer misses a deadline to pay the designated residual payouts. SAG and DGA can charge up to 12% interest a year, and the WGA can charge up to 18% interest. Sometimes, grace periods are given, but not always. For instance, the DGA often begins charging interest the very next day if a residual deadline is missed.

New Media Platform Residuals

Because New Media allows viewers access to content 24/7, the residual percentage rate is structured differently. If a project is up on a streaming service, the percentage rate is applied for the first year, then continues to decline until year thirteen; from there, the smallest percentage rate is applied in perpetuity.

Newer platforms with smaller viewership numbers are given a discounted residual rate (i.e. Apple and Peacock), but as viewership increases, as in the case with longer established platforms like Netflix, residual rates significantly increase as well.

Who Receives Residuals?

  • Actors (with speaking lines), Voice Over Actors, and Stunt Performers
  • Director, Unit Production Manager (or UPM; they manage the budget), First Assistant Director (who manages scheduling), and the Second Assistant Director (who ensures that the particular talent are on time to set)
  • Credited Writers (meaning they have contributed to the story or teleplay, or combination of both in a significant way)
  • Musicians, usually in the form of a live studio band on a talk show (i.e, The Late Show with Steven Colbert, American Idol, or The Voice)
  • Below the Line (BTL) Crew Members, however, do not directly receive residuals. Rather, they are paid into a pension fund. Once a BTL crew member retires, they are able to tap into a health and welfare fund (applicable to BTL members in the Western thirteen states only). These are crew members who are the general members who work on the set directly or facilitate the production of a film (i.e., Costume Designers, Lighting Crew, Camera Crew, Prop Makers, Post-Editors, etc.)

The Future of Residuals

Today, New Media platforms are booming with the demand for more content high. With that, brings new complexity when it comes to structuring residuals. The only other time in history when residuals underwent such a significant change  was in the 1980’s when Basic Cable, Paid Home TV, and Home Videos hit the markets, but even then creating the rules was simpler. Since then, the Guilds have begun to renegotiate rates and put mandates on New Media markets every three years. These complex changes are requiring additional skilled financial analysts to create residual contracts and the industry is working hard to meet this demand.

Entertainment Partners acknowledges this gap, and thanks to EP Residuals Department, we are developing a training program to nurture and cultivate the next generation with the skills to structure residual contracts during this golden age of content creation.


To find out more about how the EP Residuals team can support you in your next project, visit our residuals page today!

Topic: Residuals

Related Content

Streamers and the Changing Landscape of Film Distribution

9/14/2021
Director/Producer Daniel Farrands on strategies for success in the time of VOD
More

Meet the Producer

6/15/2021
From concept to the red carpet, the producer is there to keep the production moving forward
Master Series Return to Work Agreement Panel

Understanding the COVID-19 Return-To-Work Labor Agreement

11/12/2020
EP's Legal experts explain the entertainment industry's safety guidelines
Pressing Play in Eastern Canada Panel

Pressing Play in Canada: From Nunavut to Nova Scotia, Production Returns to the Eastern Provinces!

10/29/2020
Producers from across Eastern Canada come together to discuss the exciting work coming out of the...

Meet the Paymasters

9/9/2021
The hard-working payroll professionals behind Hollywood's paychecks
Equity Financing Panel-thumbnail

Film Financing Explained: Equity Financing

7/15/2021
James Schamus and Michael Helfant join our panel to share expert advice on funding film and television...

The Beginner’s Guide to Equity Financing

7/15/2021
Expert advice to help producers secure funding for their next project
Celebrating Pride Month Panel

Celebrating Pride Month and LGBTQ+ Film and Television

6/24/2021
Celebrate Pride month with us as our panel of groundbreaking producers and activists discuss the past,...

Diversifying Hollywood Through Better Hiring and Training

6/22/2021
How new legislation and production incentives are promoting diversity and inclusion
Sarah Westman-liu and Jennifer Liscio

Canadian Incentives and Legislation News

6/10/2021
The latest updates on incentives, CRA guidance on COVID-19 related costs, and more!

Choosing the Right Production Incentives

6/2/2021
5 questions to ask when selecting your next incentive-based filming location

The Path to Better Diversity and Inclusion in Hollywood

5/25/2021
How production incentives are helping to promote inclusivity
Spotlight on Georgia Production Panel

Spotlight on Georgia: The Producers' Perspective

4/28/2021
A dynamic group of producers, industry experts, and incentive specialists discuss the state of production...

Innovations in Production Incentives

4/27/2021
How emerging local initiatives are driving productions to new jurisdictions

The Beginner's Guide to Production Financing

4/6/2021
What to know before starting your next film or television project
Producing through COVID women producers panel

Producing Through COVID-19: A Discussion with Six Prominent Women Producers

3/25/2021
Stories of navigating the entertainment industry and producing during a pandemic
Pantea Ahmadi and Joe Scudiero

SB 973's Impact on the Entertainment Industry

3/15/2021
How California’s new pay data reporting legislation, SB 973, applys to the entertainment industry
Topic: Legal
Watch
Melissa Lintinger NBCU

A Conversation with Melissa Lintinger, SVP of Production Finance, NBCU

1/7/2021
How television crews are getting back to work during COVID-19
Paul Steinke

A Conversation with Paul Steinke, SVP Production Finance at Walt Disney Studios

12/9/2020
Mark Goldstein and Paul Steinke discuss the state of the industry, emerging technology and more!
Nordic Countries Lead Production Return from COVID-19 panel

From Domestic TV to Mission Impossible 7: Nordic Countries Lead Production Return from COVID-19

10/15/2020
Lessons learned about producing through a pandemic, and how the Nordic countries got it right
All eyes on Florida panel

All Eyes on Florida: Spotlight on Florida Productions

10/1/2020
Producers and Commissioners from across Florida discuss production, crews, infrastructure and incentives
Identity Security Film Production-sq

Identity Security in Production

10/13/2021
5 Strategies to Manage Risk and Resist Cyberattacks in the Entertainment Industry
5 top payroll tax errors-Becky Harshberger

5 Top Payroll Tax Errors and How to Prevent Them

9/28/2021
Production payroll can be a daunting task, but it doesn’t have to be! Payroll Tax expert Becky Harshberger...
Christine Davila, Jairo Alvarado, Sonia Gambaro

Authentic Latinx Storytelling Starts with Inclusion

9/22/2021
Christine Dávila, Jairo Alvarado, and Sonia Gambaro work to amplify the talents of underrepresented...

How to solve a compounding problem?

9/8/2021
The perennial shortage of production accountants has been made worse by the competition for resources, but...

Film Financing Explained: Soft Money Financing

9/2/2021
Vivian Hua joins our panel of financing and incentive experts to discuss funding film and television...
Canadian flag

5 Things to Know Before Working in Canada

8/31/2021
Prepare for your next job in Canada with this checklist of payroll considerations
Topic: Canada
More

New Terms Under Return-To-Work Agreement

8/30/2021
RTW extension includes new two-part delineation, and the role of the vaccine
Topic: Legal
More
 John Hadity-Guide to Soft Money Financing-sq

The Beginner’s Guide to Soft Money Financing

8/25/2021
How filmmakers can capitalize on incentives, film funds, and more to finance their next project

Designing for Horror

8/13/2021
How filmmakers create fear through visual techniques
Paul Beyers prop master on set

Meet the Prop Master

7/28/2021
From script to screen, the creative mind behind the props from film and television

5 Things to Know Before Relocating for Your Next Job

7/20/2021
What production workers need to consider before moving to a new state
actors on set

Safety on Set Amid Changing COVID-19 Guidelines

6/9/2021
What productions should know as they head back to work

Meet the Production Accountant

5/18/2021
From budgeting, to billing, to payroll, the financial powerhouse behind every production

Meet The Costume Designer

5/4/2021
The artist behind a character's signature style

Editorial Spotlight: Dana Belcastro

3/30/2021
Producer and executive, Dana Belcastro, on how women are changing the way Hollywood does business

Editorial Spotlight: Nancy Savoca

3/23/2021
In celebration of Women's History Month, director and producer, Nancy Savoca, shares her experience in...

Women Impacting Hollywood

3/16/2021
From Storytelling to Set Design, Female Voices are Shaping Entertainment

Diversity and Pay Reporting in California

3/6/2021
Your guide to understanding SB 973 and its application to the entertainment industry

SB 973, California Pay Data Reporting Law FAQs

3/6/2021
The new pay data reporting law and its impact on the entertainment industry

Returning to Production: Hair and Makeup Teams Apply COVID-19 Protocols to Life on Set

2/26/2021
Getting back to work: a look inside set life during COVID-19

The Beginner's Guide to Production Incentives

2/17/2021
EP helps filmmakers navigate the complex world of film and television incentives
Pantea Ahmadi and Alan Wu

California & New York Employment and Privacy Legislation Changes in 2021

1/27/2021
EP's Legal team breaks down important legislation changes impacting production hubs
Topic: Legal
Watch

How Television Crews Are Getting Back to Work

1/12/2021
A Conversation with Melissa Lintinger, SVP of Production Finance, NBCU
Becky Harshberger and Neddy Alonso

Preparing for 2021 Payroll Tax Changes and the New Form 1099-NEC

12/10/2020
EP's payroll tax experts walk through the 1099-NEC and other important changes
Christy Guilbault, Annette Martinez-Novo

EP Cares — The Industry's Leading Health Insurance Program

11/24/2020
Learn how to get your production company on the industry’s leading health insurance program for non-union...

Film Tax Credit Programs Face Uncertain Future

8/31/2020
Tax incentive programs draw high profile productions, cautious optimism for California
Subscribe now

Be an industry insider with EP's
newsletters and alerts

LegalPrivacy NoticeSecurity