Clarity Or Confusion: New SAG-AFTRA Advance Residual Payment Procedure Rattles Talent Reps

Nellie Andreeva
·6 min read

The hard fought SAG-AFTRA agreement with the studios is threatening to open a rift between actors and their representatives as a new provision designed to provide more clarity for actors on residual payments has created “an additional layer of confusion” among agents and managers, as one of them put it, stoking fears that the new rules could wipe out smaller agencies and make it harder for up-and-coming actors to find representation.

At the heart of the problem are the so-called advance paid residuals. That is a portion of a performer’s per-episode fee check, which counts towards future residual payments.

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For as long as anyone can remember, pre-paid residuals have been part of an actor’s initial compensation, which is negotiated by the actor’s agents; they were part of the performer’s “quote” before the salary history ban law was adopted in California in 2018.

How it works is, the actor’s episodic fee check is sent by the studio to their reps who process it, withholding their standard commission (typically 10% for agents), and then send the payment to the client.

That will change when the SAG-AFTRA tentative agreement with the AMPTP is ratified.

According to the summary of the deal released by the guild, starting 60 days after ratification, “all advance paid residuals shall be delivered to the union for processing and forwarding to performers.” The tentative agreement with AMPTP caps advance residual pay at not more than 15% of a performer’s guaranteed compensation for those earning less than $75,000 per week or per episode.

The rerouting of the upfront residual portion of the actors’ pay, done in a separate rider, has created a stir among talent agents who, in the new setup, would no longer be able to automatically commission the entire initial payment they had negotiated on behalf of their clients. The onus will now be put on them — if they want to commission the advance residual part, reps would have to invoice their clients which many don’t feel comfortable doing and those who do are not sure if the clients would be willing to pay, something they are not obligated to do.

“Needless to say if you convert upfront money that goes to the agency to an advance on residuals of up to 15% that goes directly to the union, most agencies are going to take a huge hit,” one rep said.

The potential 15% dent in commissions for talent agents and managers comes as they already are reeling from the impact of the seven-month-long production shutdown due to the double Hollywood strikes, making them feel “stabbed in the back,” one talent representative said.

“Reps were walking the picket lines, taking reduced or no salary during the strike,” an agent said. “Now SAG-AFTRA is putting money in the actors’ pockets, but at the same time screwing over the reps — who are actors’ advocates — after we stood by them during the strike.”

Added another, “Feels like the union and AMPTP bridged a gap at the negotiating table at the expense of the reps, leveraging the reps’ bottom line to improve the value of the overall new deal.”

We have reached out to SAG-AFTRA for comment.

Studios’ practice to bundle advance residual pay into episodic fees is a fraught one. A salary by definition should reflect an actor’s value as a performer and reward their work on a show. Instead, the actual monetary value of the performance is smaller as the episode fee includes a pre-payment for future residuals that has not been earned yet. (In the rare occasion of no replays for the show, the actor gets to keep the upfront residual pay.)

The common sense solution would be to eliminate advance residuals, with the initial payment being strictly a performance fee and the residual payments kicking in once a show starts reruns.

That’s not something studios would likely go for. Instead, with the new rules, SAG-AFTRA sought to bring clarity for performers on the issue.

“There is a critical distinction to make from the initial compensation part of the deal and the residual part of the deal,” one guild source said. “For many years, actors were confused what was initial pay and advance pay toward residuals, and this is making it very clear to our members.”

While the breakdown is clearly stated in actors’ contracts, it is typically not listed on the checks, which could lead to confusion for some thesps.

SAG-AFTRA handles all other actor residual payments so its staffers have likely faced questions from performers wondering why they are not getting checks after their episodes aired. (The advance paid residuals usually cover the first couple of reruns; for streaming shows the pre-payment could be for a show spending the first couple of years on the platform. Actors start receiving residual checks after the advance payment is fulfilled.)

The upfront residuals will be processed the same way SAG-AFTRA handles the traditional post-run ones, guild sources said. They will be added to the 4 million residual checks the union processes and sends to its members yearly.

Sources within the agencies note that residual payments are held up usually a couple of months by SAG-AFTRA due to the large volume while agencies process and send clients their checks within a day or two, getting them the initial payments (sans commission) far quicker than what the guild would likely do with the advance residuals amount.

The new level of animosity between SAG-AFTRA and the agencies adds to an already distant relationship between them. The guild has not had a franchise agreement with the Association of Talent Agents since its last one expired in 2002. SAG-AFTRA still has stipulations on which residuals are commissionable and which not but agency sources indicate that, in lieu of a franchise agreement, agencies are being governed by a general service agreement with the State of California which the sources say legally allows them to commission all residuals.

That doesn’t mean that agents, who don’t negotiate residuals, do it; there are various guidelines on what is considered an appropriate amount of residuals commissioned, it often spans the first three reruns.

Sources close to the guild argue that “what residuals are commissionable should not change based on timing of their payments.”

Still, there is a lot of fear about the hit that the new rules would have on mid-size and small agencies.

“It’s going to kill the middle class,” one agent said about the potential impact on smaller agencies’ revenue that relies solely on commissions.

Those boutique agencies play a crucial role in Hollywood’s ecosystem. They sign new talent and spend time developing their clients for no pay until the actors start booking roles and pay commissions, making every cent of those commissions vital to those agencies’ survival. If some of those companies disappear, “it’s very disconcerting because it would be hard for up-and-coming actors to secure agents.”

Financially squeezed, those smaller agencies may also not be as willing to take on performers who are green and would need a time investment before they can earn money and pay commissions thus making it harder for newcomers to find representation.

There would be a triple-down effect too because virtually all A-list movie stars at the major talent agencies started off in a smaller, boutique shop, so a threat to those companies is a threat to Hollywood’s pipeline of talent.

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