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Residual Payment: Meaning & Definition in Film

A residual payment is a royalty paid to performers, writers, and directors for the reuse of their work in markets beyond its original exhibition.

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Compensation for Reruns and Reuse

Residuals are long-term royalty payments made to creative talent when a film or television show they worked on is exhibited again after its initial release. They are a cornerstone of the financial structure that allows actors, writers, and directors to sustain a career in a largely freelance industry. The initial salary a person receives for a project pays for their work during production; residuals are the payments for the continued use of that work in the future.

These payments are not a bonus; they are a form of deferred compensation, negotiated and administered by the major creative unions and guilds—primarily SAG-AFTRA, the WGA, and the DGA. The unions’ collective bargaining agreements with the studios (represented by the AMPTP) contain complex formulas that determine the amount of a residual payment.

A History Forged by Labor Action

The existence of residuals is a direct result of decades of labor strikes and tough negotiations. Each time a new technology has emerged for re-exhibiting content, the unions have had to fight to ensure their members would be compensated for this new revenue stream.

  • Sale of Films to TV (1950s-60s): The first major fights for residuals were to ensure actors were paid when old movies were broadcast on television.
  • The Home Video Boom (1980s): A major WGA strike in 1988 was fought over establishing a residual formula for VHS sales.
  • The Rise of Streaming (2000s-Present): This has been the most significant and contentious area of negotiation in the 21st century.

The Modern Streaming Challenge

The traditional residual model was based on transparent revenue data, such as advertising income from a television broadcast or a per-unit royalty from a DVD sale. The subscription-based model of streaming services like Netflix, Amazon Prime Video, and Disney+ has created an opaque system. It is difficult for the unions to determine how many people watch a specific show or film, or how much revenue it generates, making it challenging to calculate a fair residual. The fight to establish new, transparent, and equitable residual formulas for streaming content has been a central issue in the major Hollywood strikes of the 2020s.

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