How Audacious Is SAG-AFTRA’s Subscriber Fee Ask, Really?

Katie Kilkenny
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When SAG-AFTRA talks ended abruptly on Wednesday, Oct. 11, swiftly taking the industry’s high hopes for an imminent end to the actors’ strike with it, the most significant sticking point left on the table was the union’s proposal to charge a fee per streaming platform subscriber.

The ask, a revised version of a previous revenue-sharing proposal that the Alliance of Motion Picture and Television Producers had rejected, prompted hyperbolic remarks on both sides. “A bridge too far” said Netflix co-CEO Ted Sarandos, while SAG-AFTRA’s chief negotiator conversely deemed the adjusted proposal a “huge, huge concession.” The studios claimed the proposal would cost more than $800 million per year, while the union fired back that the aforementioned estimate was “intentionally misrepresented” by the companies and overstated by 60 percent.

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Not in dispute is the framework of what the actors guild is asking for. The current SAG-AFTRA proposal would multiply the number of global subscribers on a platform each quarter by the percentage of content viewed on that platform covered under a SAG-AFTRA agreement and by a cost factor of 27.6 cents per quarter. That ends up amounting to less than 57 cents per subscriber per year, the union maintains, as it does not cover all content on the platform (the studios claim the union proposed $1 per subscriber per year in the negotiating room and later cut the figure). The money generated by this arrangement would then go into a fund managed by representatives from both SAG-AFTRA and management, whose trustees would determine how to distribute the funds. It’s still to be determined whether viewership metrics would play a role in that distribution and which performers would be eligible to receive payment from the fund (for example, would stunt performers or background actors get a share?), which would be subject to negotiation.

Given the allegations of unreasonableness from both sides, how novel and audacious is the actors’ ask, really?

In financial terms, it’s a certainly bold. If 57 cents per subscriber per year ends up being the final figure, that would cost studios around $500 million per year. That’s nearly four times the $126 million in residuals paid out to SAG-AFTRA members in 2022 (studios value their current proposals package, without this provision included, at over $1 billion). In an interview with The Hollywood Reporter, Crabtree-Ireland says that 57 cent figure was never a “bottom-line number” and that he encouraged studio CEOs and AMPTP president Carol Lombardini to counter on this figure on Wednesday, before management walked. According to USC Marshall School of Business adjunct professor Sanjay Sharma, who teaches finance and business economics and management and organization, at 57 cents, this sum would not be the “untenable economic burden” that the AMPTP represented it as. “If you look at Netflix’s production costs right now, we are at about $16 billion. So from that perspective, $400 million is an Avatar[-type] production cost, or one blockbuster movie that did not work,” he says.

Still, the larger business context that entertainment companies are facing remains a major roadblock. “You’re putting a toll, a tax, on something which is already losing money,” Sharma adds, explaining that most streaming platforms are not yet profitable and that entertainment firms’ stocks are in the doldrums because of their structures. Moreover, studios are likely wary of creating a precedent with SAG-AFTRA’s contract that separate entertainment unions will ask for in future negotiations — like IATSE and the Teamsters, which have major negotiations with the AMPTP in 2024.

Maintains Crabtree-Ireland, “From our point of view, there ought to be a sort of base level compensation for the contribution that our members are making to the existence of these platforms, to building these platforms. And frankly, in light of their overall revenues, we think that this number makes sense in the context of the industry. And we think what’s being paid now in terms of streaming residuals is absolutely far too low.”

In the larger context of the labor movement, revenue share is certainly not unprecedented and exists in professional sports leagues: If teams do not pay a minimum amount on salaries and benefits for active players, the league will step in and close the gap. Still, “It’s true that there isn’t something exactly like this,” admits University of Illinois School of Labor and Employment Relations professor Michael LeRoy. The proposal, he says, suggests a form of piece-rate pay that rewards volume of work productivity, much like a system that unionized spinners and loom weavers worked under in the 19th century. LeRoy also points to Name, Image and Likeness (NIL) pay for college athletes, where “collectives” supported by booster groups raise money for specific programs and then allocate funds to individual athletes through various NIL opportunities, forming a third-party payer model. SAG-AFTRA “is essentially saying, we want some sort of metered rate of pay that reflects the intrinsic value of our work,” LeRoy says. “They are trying to wrap their arms around the streaming business and how hard it is to track this pay.”

The union didn’t refer to any particular past labor precedents to craft the streaming revenue share proposition because the entertainment industry and the position of SAG-AFTRA’s performer members is “so different” from other businesses, says Crabtree-Ireland. The initial proposal originated with SAG-AFTRA president Drescher, the feisty The Nanny star who ascended to the leadership role at the union in 2021 on the premise that she could unite the union’s warring factions and would “fight like hell” for members. (Drescher was re-elected in September, mid-strike, by over 80 percent of voting members.)

 “We felt like if we could attach even to a tiny percent of the revenue, then this would not be a battle we’d have to keep fighting every three years,” Crabtree-Ireland explains. “We could come up with something that the industry could agree to, that we could agree to, that would automatically grow as the streaming part of the business grew and would set us up for labor peace for a decade or more.” But once the studio side had clearly rejected the revenue share proposal, SAG-AFTRA negotiators pivoted to a formula attached to the subscriber count of the platform.

Labor historian and University of California Santa Barbara research professor Nelson Lichtenstein likens the proposal to a contract provision negotiated by former United Mine Workers of America president John L. Lewis back in the 1940s, as the coal-mining industry was facing a long period of decline: A royalty placed on every ton of coal mined would go to support the union’s first welfare and retirement fund, which was a major breakthrough at the time.

Even in its adjusted form, Lichtenstein argues that the union’s daring proposal could work, based on past precedent. “In American history, unions have been most successful and popular and supported [when] they have projected not just ‘we want more money’ or ‘we want this’ but had a new vision of how production and, then really, how life will take place in a given industry,” he says. “And I think that SAG-AFTRA is doing that. They’re properly putting forth bold proposals so that people can have predictable middle-class lives with technology and the organization of film production.”

It remains unclear whether, once both parties get back into the room after a period of cooling down, studios will accept the basic premise of the union’s latest proposal. Sharma suggests a potential solution to the deadlock: Provide SAG-AFTRA with “a token amount” within the proposed formula — say 10 or 20 cents per subscriber, as opposed to the 57 cents SAG-AFTRA says it asked for — “to be paid to the SAG for now to be reviewed like an inflation adjustment over the next few years,” he says. “Until the industry finds its footing in the new era.” But, so far, studios have signaled that any type of subscriber fee is a non-starter.

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