I first posted this on November 5, 2007 when the Writers Guild was in the midst of a very long and nasty strike. It quickly became one of the five-or-so most-read and linked-to posts ever on this site. It's about residuals, a concept which often seems alien to folks who work in professions where there are none, nor are they appropriate.
In fact, I often find myself having to explain to people in other lines of work how my job is so very, very different from theirs. I do not mean better. I mean different. In recent years when certain comic book creators or their offspring have taken legal action to claim a share of Dad's work, there's always some guy on the 'net who sells aluminum siding for a living who tries to parse the lawsuit in terms of his own job and say, "Hey, they got paid for creating Superman! Why should anybody get a nickel more later? I don't when I sell aluminum siding!" Someone then has to patiently explain to this person that selling aluminum siding is not analogous to creating Superman. They don't reprint your aluminum siding over and over, they don't make movies about your aluminum siding, they don't sell model kits of your aluminum siding, etc.
I received the e-mail you're about to read and tried to explain why we get residuals. Based on how often this piece has been read and copied, I wish I'd gotten residuals on it…
Dave Bittner sends a question which others have asked in various forms and which piggybacks on my previous posting…
There's a fundamental aspect of this whole writers strike that puzzles me, and I'm guessing I'm not the only one. How did the whole residuals system start, and become the standard of what's considered "fair" in Hollywood? In most other industries, even creative ones, a person gets paid for doing a job, and that's it. There's no expectation of ongoing payments. If I sell my house, for example, I don't send a check to the original architect, even though his design work contributes to the ongoing value of the property.
No, but if a Harry Potter book goes into another printing, J.K. Rowling gets another check. I disagree with you that ongoing payments are not the norm in creative industries. I get payments if an issue of some comic book I wrote in the seventies is reprinted. I get payments if a song I wrote in the eighties gets played again. It is a generally-established principle that if you create something that has an ongoing value — particularly if its reuse competes with new product — additional compensation is appropriate. This is not to say it's always paid. Comic books, for a long time, didn't pay for reprints. A lot of animation work still doesn't pay for reruns. But that's because of the way the financial structure of those fields developed, with creative folks placed at an economic disadvantage and not having the clout to get reuse fees. I don't think it's because they don't deserve them.
Residuals exist for a couple of reasons. One is that they are deferred compensation. Let's say you want to hire me to write your TV special and there's no WGA and no residuals and we're negotiating out in the wild. I suggest $10,000 would be a rational price. You were thinking more like $5,000. I point out to you that this is likely to be a great show that will rerun for many years to come and that you'll be able to sell it again and again and again. If we could be certain it would be, ten grand to me wouldn't seem unfair but as you point out, we can't be sure that it will have all those resales. So how do we resolve this?
Simple. We invent residuals. We agree that I'll write the show for $5000 or maybe even a little less, and that I'll receive another $5000 if you can sell it for a second run and then maybe $2000 if there's a third run and $1000 for a fourth and so on. The reuse fees are not a gift to me. They're part of the deal…and by the way, this is not all that hypothetical a scenario. I've made deals with this kind of structure for animation projects where the WGA did not have jurisdiction. Even some pretty stingy cartoon producers were glad to make them because it lessened their initial investments to have me, in effect, share a little of the risk.
(A quick aside: The other day, I was talking to Lee Mendelson, who produced all the Peanuts specials. He's making a new deal for the early ones, including A Charlie Brown Christmas, which is probably the most often-rerun TV show ever produced. Every time he sells it again, he gets paid again, often at rates comparable to what a newly-produced cartoon special would cost. The thing has made millions and millions of dollars each decade since it was produced and it continues to earn. Would someone like to look me in the eye and tell me Charles Schulz never deserved a nickel after the first run? Lee sure wouldn't make that argument.)
That's a very mature, honest way of doing business. What wouldn't be honest is if we made our deal as per the above and then you did the following. You say, "Wait a minute! I don't pay my plumber every time I flush my toilet," (a famous quote from a studio exec fighting the concept of residuals) and you try to lop off the back-end payments and just pay me the initial $5000 or so. No. The $5000 wasn't my fee for writing the show. It was more like a down payment. I wouldn't have done it for $5000 without the other part of the contract. But every so often in Hollywood, some exec gets the idea that they can maximize profits by reneging on the back end of their deals, and we have these silly, periodic battles over residuals.
Anyway, all of the above is one rationale for reuse payments. Another is a tradition — not in every circle but some — that creative folks share when their work has ongoing value. The reason we have a Patent Office in this country is that we wanted to encourage people to invent new ideas and that means giving them a structure through which they can cash in on their brainstorms and not be excluded from the ongoing exploitation of them. Residuals are one way that writers and artists avoid being excluded.
Yet another is that they are compensated when the lasting value of their work preempts new production. A situation which has occurred quite often in the cartoon business is this: You're hired to do a show and you really do a fine job on it. Everyone does. You get 40 or 65 episodes done and they're so good that when they rerun, kids are eager to see them again and again and so the ratings don't go down much. At some point, the studio says, "Hey! These shows are so strong, we don't have to spring for the cost of any more. We can just run these over and over forever!"
And they lay everyone off.
You're out of a job because you did it so well. This has happened many times and it continues to happen. Reruns narrow our opportunities to work on new product.
So if I'm writing a new show…well, I don't want to sit there and think, "Hmm, I don't want to put myself out of work. I'd better not do too good a job on this." That's not healthy for my soul and it sure isn't the ideal situation for my employer. It's far better for all of us if I have that incentive to make the show as big a hit as possible. That means I have to have an ongoing financial interest if the show turns out to have an ongoing financial value. I won't mind getting laid off if I'm sharing. I will mind if all I've done by contributing to a success is put myself out of business.
There's a lot more I could write about this but I have to get a comic book written this morning and then go picket this afternoon so this will have to do for now. The last thing I'll add is that I've been a professional writer since 1969. I've written comics and cartoons and live-action shows and screenplays and songs and stand-up comedy and commercials and books and magazine articles and…well, you name it. Sometimes, I've been excluded from the ongoing value, if any, of my work. Sometimes, I haven't. The healthiest business relationships I've had have been those where I had residuals or royalties or some other financial participation beyond my up-front paycheck — and I mean healthy for me and for the entity that was issuing those checks. Inclusion is a very wise thing for All Concerned. It puts you all on the same team, working for the same goal.
In all those creative fields, I've never encountered any employer or producer or publisher who thought I, or others doing my job, didn't deserve that continuing share. I've met a number who thought they could get by without paying it and sometimes, they can. But since they get paid for the rerun of the TV show or the resale of the movie or whatever, they certainly understand and embrace the concept of getting paid when a piece of work has enduring value. It's just that some of them want to keep it all for themselves.
