Netflix Must Pay Writers Residuals of $42 million

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The Writers Guild has scored a $42 million arbitration award against Netflixfor unpaid residuals.

The arbitration involved the Sandra Bullock feature Bird Box. The picture was released for a brief theatrical run before moving to the streaming service. The Guild asserted that this triggered theatrical residuals under the WGA Agreement. Under this formula, the writer gets paid 1.2% of the producer’s gross receipts from licensing the picture to another medium, including a streaming service.

Bird Box was both produced and distributed by Netflix so the license fee for streaming rights to the film was not the result of arms-length negotiations but an internal accounting attribution. In such cases, the WGA requires that the imputed fee be set at market rates for comparable films. The arbitrator determined that this fee should be 111% of the film’s budget. This cost-plus formula is consistent with the approach the WGA has taken for other Netflix movies.

Applying this formula, the arbitrator awarded the writer $850,000 in residuals plus $350,000 interest for late payment. Based on this award, 216 writers on 139 other Netflix films will receive an aggregate $42 million over what was already paid, according to the WGA. The Guild is also claiming a right to $13.5 million in interest. Netflix has resisted this additional payment, and the Guild has commenced a new arbitration to collect it.

This could all be a harbinger of a tense 2023, when the WGA Agreement comes up for renewal along with the DGA and SAG-AFTRA basic agreements. Up to now, the directors and performers have cut a break for Netflix on residuals. Netflix tried to apply a similar favorable formula to the Bird Box writer, without success. The WGA has a history of breaking ranks with the other two above-the-line unions. They are clearly signaling now that they intend to pursue significant improvements in terms for streaming exhibitions.

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