IPA 101: Residuals

By Gail Haupert

In light of recent media reports highlighting the shockingly low residuals SAG-AFTRA members are receiving for the use of their work from streaming platforms, we thought this would be a good opportunity to review ACTRA’s residual payment models and how things work in Canada.

First, let’s talk about what a residual payment is. You may have heard of terms such as buyouts, residuals or royalties – they all refer to the same thing. Under ACTRA’s Independent Production Agreement (IPA), they are defined as Use fees.

A Use fee is a payment a Producer pays up front to Performers. It allows the Producer to acquire additional Use rights regarding the exploitation of their Production in other residual markets for a specified length of time.

The IPA offers Producers two different residual models – Prepayment or Advance – to fairly compensate Performers for the use of their work at the time of production. Both models ensure Use fees are paid promptly to Performers and allows the Producer to account for the cost in the Production’s budget.

Prepayment

Under the IPA Prepayment model, a Performer receives an upfront payment (see B501 of the IPA) based on a percentage of their Net* fees, which gives a Producer unrestricted Use rights, either inclusive or exclusive of Theatrical and/or New Media, for a consecutive four-year period from the date of first exploitation in any residual market.

This means Performers will not receive any additional Use fee payments until after the four-year Prepayment period has expired. The only exception would be if the Production is used in a media that is not covered under the Prepayment option declared by the Producer. In this case, the Performer would receive an additional Use fee payment for the use of their work in this other media.

Once the four-year Prepayment period expires, the Producer must report to and pay ACTRA Performers’ Rights Society (PRS) a percentage of the Distributor’s Gross Revenue⁺ (DGR), which then gets distributed among the contracted Performers.

Advance

Under the IPA Advance model, the Performer receives a non-refundable upfront payment (see B501 of the IPA) based on a percentage of their Net fees, BUT the Producer is allowed unlimited Use of the Production worldwide (i.e. there is no set timeframe for Use).

Any revenue from the sale of the Production must be reported to ACTRA PRS from the first day of exploitation in any media. Revenue is tracked against the total amount of Advance payments paid to Performers for that Production. Once the Producer’s revenue from sales of the Production surpasses the Advance payment amount, the Producer is obligated to pay contracted Performers the corresponding DGR percentage for the declared Advance Use. The smaller the Advance, the higher the DGR percentage paid to Performers.

It is important to note that it is up to the Producer to identify which additional Use fee model they will be selecting for a specific Production. While there are certain benefits to a Producer under each residual model, ultimately, either scenario ensures Performers are paid for Use upfront at the time of Production, with the potential for additional residual fees depending on the success of the Production. A successful Production means more money in the pockets of Performers.

*Net fees = fees earned by a Performer on days during which Performers work in front of the camera or behind a microphone (A427 of the IPA). The minimum 8-hour workday, Rehearsal, makeup/hairdressing/wardrobe, and overtime are included in the calculation of Net Fees.

⁺the Distributor’s Gross Revenue, or DGR, includes all revenue earned from the exploitation (or Use) of the production. ACTRA PRS collects a specified percentage of the DGR and distributes it to eligible Performers based on the number of units the Performer has accumulated under their residual category and the dollar value calculated for said residual category.

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