The WGA said today that it has prevailed in a major arbitration against Netflix that claims hundreds of writers on 100 Netflix movies will receive an additional $42 million in unpaid royalties. WGA West and WGA East say they are now seeking about $13.5 million in late payment of those balances that Netflix owes writers.
In a notice to their members, the unions said their victory “comes from an important arbitration over Netflix’s payment of writer’s royalties for the Bird Box theater. Netflix argued that the WGA should have accepted the poor formula the company negotiated with the DGA and SAG-AFTRA. After a hearing, however, an arbitrator ruled otherwise: that the licensing fee should be greater than the film’s gross budget. He ordered Netflix to pay the writer a total of $850,000 as a balance, plus $350,000 in full interest.”
“As a direct result of this ruling,” the WGA added, “216 writers on 139 other Netflix films are receiving an additional $42 million in unpaid residuals. The Guild is now seeking approximately $13.5 million in residuals that Netflix also owes the writers for being late.”
In 2016, Netflix began producing and releasing theatrical films written by members of the guild. Under the streaming giant’s minimum master agreement (MBA) with WGA West and WGA East, the initial compensation covers the film’s theatrical release.
The guilds told their members on Thursday:
“When a play is licensed or released in any other markets – such as streaming or television or home video – royalties must be paid on the revenue earned in those markets. The regular writer’s residual is 1.2% of the license fee paid to the producer for the right to show that film. is
“If the license is between related parties (eg, when Netflix is the producer and distributor of the film), the MBA requires the company to charge a license fee based on unrelated party transactions for comparable pictures, such as a Sony film licensed to Netflix. This critical definition, Negotiated as part of our strike settlement in 2008, it protects against the undercutting of license fees through self-dealing.
“Instead of following the established MBA definition for related party transactions (which is also contained in the DGA and SAG-AFTRA agreements with AMPTP), Netflix negotiated new agreements with the DGA and SAG-AFTRA that allow Netflix to pay significantly less waste than the cost of the film. Then Netflix tried to force the WGA to adopt this “model” agreement.Since it was clear that the new formula negotiated by the other Guilds underestimated these license rates, the Guild took the matter to arbitration.
“During the arbitration, the Guild showed that Netflix almost always paid a license fee that exceeded budget when it delivered comparable theatrical films from third-party producers. The industry refers to this model as ‘cost-plus.'” The Guild argued that Netflix should apply this cost-plus model to them to his films and that he must attribute over-budget license fees to pay the residuals. The arbitrator agreed and ruled that the license fee should be 111% of the film’s gross budget.”
According to the guild, that arbitration decision has been applied to 139 other Netflix movies. “Including additional residuals awarded as a result, the 216 screenwriters of these films have received a total of $64 million in residuals, which is $20 million more than they would have received under the settlement approved by the DGA and SAG-AFTRA.”
The WGA noted, however, that Netflix “has so far refused to pay interest on late residuals for films other than Bird Box, so the Guild is seeking arbitration for the $13.5 million in interest still owed to those screenwriters.”
The WGA said in the Bird Box arbitration that Netflix “tried to use the decades-old AMPTP strategy to negotiate underhanded deals with other unions, then try to force the ‘model’ on the writers. In this case, Netflix failed to make the WGA willing to fight for what the writers were owed under the MBA. instead of accepting the DGA/SAG-AFTRA model.
“As studios engage in self-dealing on their streaming platforms, we need to make sure writers are paid appropriately,” the WGA said. “Netflix, with only a decade of experience employing writers, has quickly become one of the worst violators of the MBA, requiring the Guild to expend significant resources to protect the writers who work for the company.”
The guild also stated that “The 2023 MBA negotiations challenge us to use the growth of the streaming model to address the industry’s rush to reduce the wages and working conditions of Hollywood talent. Our hope is that writers and all Hollywood workers receive a fair share of the value we create together.”
The communique to WGA members was signed in “Solidarity” by WGA East and WGA West President Meredith Stiehm, Vice President Michele Mulroney, Secretary-Treasurer Betsy Thomas and all members of its board of directors.
