Follow the Money

Digital media platforms have not only revolutionized how viewers consume content, but they’ve also brought forward new challenges in the way performers’ residual compensation is tracked and calculated.

More and more consumers have been cutting the conventional cord and embracing the digital era of on-demand consumption. New Media, particularly streaming platforms including Netflix, Prime Video, and Disney+ are growing at an unprecedented rate.

According to estimates in Convergence Research’s most recent Couch Potato report, only 58 per cent of Canadian households still subscribed to a conventional cable, satellite, or telecommunications TV provider at the end of last year — a number expected to drop to 50 per cent by the end of 2026. Meanwhile, more than 80 per cent of households now subscribe to at least one streaming service.

Streamers are competing amongst themselves for subscribers and viewership. And their selling propositions are their catalogs including productions that are “exclusive” to their platforms. In addition to acquiring movies and series from third-party producers and distributors, they are also producing their own content. According to Ampere Analysis, an estimated $26.5 billion U.S. was invested by streamers globally in 2023 in original programming.

Traditionally, producers and distributors would sell to broadcasters a license to air their shows on television channels for a set number of years in a specific territory. But this is a brave new world.

It has also redrawn the boundaries of content sales. Traditionally, producers and distributors would sell to broadcasters a license to air their shows on television channels for a set number of years in a specific territory. But this is a brave new world.

“The Internet has opened the floodgates,” says economist Hugh Mackenzie, a principal at Hugh Mackenzie and Associates. “Conventional barriers to entry do not apply to the streaming platforms and they reach wider audiences globally. Content can be delivered to anybody, anywhere in the world at any time. Consumption patterns have also changed with the introduction of streaming platforms.

Conventionally, broadcasters managed when and what to schedule for viewing. However, streaming platforms removed these conventional viewing restrictions by making content available 24/7 for consumers. Consequently, consumption trends have transitioned from availability-based to on-demand.”

Streaming giants, in competition for viewership and subscribers, are often seeking longer terms of license as well as exclusivity.

“They also look for exclusive rights in the global market,” Mackenzie adds. “They may plan to distribute exclusively on their streaming platforms, but they also look to block out all other rights. This limits additional sales opportunities, which translates to less residuals for performers.”

The terms by which performers in English-language Canadian productions are to be compensated for Use fees are outlined in ACTRA’s Independent Production Agreement (IPA) with the Canadian Media Producers Association and Association Québécoise de la Production Médiatique. (B.C. is an exception, operating under a collective agreement negotiated by UBCP/ACTRA.)

The current IPA expires at the end of 2024, and ACTRA Performers’ Rights Society (ACTRA PRS) is focused on preparing for bargaining in the months ahead, says Marie Kelly, ACTRA National Executive Director and Chief Negotiator.

“The film and TV industry has been adapting to the rapidly advancing technologies and is always looking for opportunities to exploit the productions,” offers Kelly. “Our challenge is keeping pace, evaluating how those actually apply within the scope of the IPA and the impact they have on the residuals for performers.”

A key stumbling block is the streamers’ lack of transparency with their programming data, which producers have likewise complained about.

The sought-after information, Kelly says, primarily includes “total subscription base and/or viewership, and the total viewership of each production — in the domestic and foreign territories. This is the information we need to assess fair compensation.”

When a streamer acquires exploitation rights to a production, performers are compensated based on the license fee paid to the producer. For new productions, the producer (which could also be a streamer) has a couple of options for pre-paying Use fees. 

The Advance option sees the producer pay a percentage of the performer’s Net fees in addition to their daily fee. This non-refundable Advance paid at the time of production grants the producer unlimited worldwide use until the Advance is recouped from sales. Consequently, all sales must be reported to ACTRA PRS, and revenue is tracked against the Advance payments.

After the value of the Advance payment is recouped, the producer must pay performers a percentage of the revenue earned from the exploitation of the production, known as the distributor’s gross revenue (DGR) — at the prescribed percentage is tied to the Advance option elected.

Meanwhile, the Prepayment option has producers pay an additional 105 per cent to 135 per cent of the performer’s Net fees depending on whether it is a feature or TV production, with or without New Media use.

In this scenario, producers are granted four years of unlimited use. After that, they are obligated to pay 3.6 per cent of DGR, and those funds are then distributed to performers.

“But if they are not reporting to us on any activities, we can’t translate that into a Use fee payment for the performer,” Kelly says. This issue will only become more apparent as innovative technologies make further inroads, enabling more options for users to watch content that is readily available.

While Kelly says ACTRA PRS is continuing to pursue reporting and compensation from digital platforms, there was a positive sign stateside last November, when the streamers agreed to release ratings information to SAG-AFTRA.

Last year ACTRA PRS distributed more than $20 million to performers.

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Mark Dillon is a film and TV journalist covering the screen industries across Canada and in Hollywood.

Top photo, ACTRA stunt performer Jodi Stecyk (driving the bike) with Tory Dorchester in Christmas in Wonderland.