Greg S. Bernstein
With the dollar at record lows against most currencies, plus many US states providing rebates and other incentives equal to 20, 30 even 40% of your production spend, not to mention getting some of the most experienced crews, keys, visual effects, labs, post houses and other below the line goods and services at really affordable prices, most producers around the world should be looking at shooting their films in the United States, regardless of the ultimate venue for the film. And don’t worry about that potential actors strike!
Despite all the great reasons to come shoot in the United States, most international producers are still not flocking to the US. Could it be the potential actor strike? Could it be that many producers are stuck in the old paradigm of shooting in their local country because of local incentives, local crews, local language, and tradition.
The potential SAG strike (as of the time of the writing of this article it was still a possibility) is really a non-issue for independent producers. SAG has announced that for independent films, they will enter into an agreement that essentially says that if they go on strike against the studios, independent films can keep shooting. All you have to do is agree to abide by whatever the final deal is with the studios (like you have a choice anyway? No, you don’t. You get stuck with the studio deal whenever you sign up with the guilds. No negotiation. So no real loss). As long as your comfortable with the existing deal the studios have, you know its not going to change that much, strike or not, so go for it More on this later.
So with the potential strike a non-issue, International producers need to consider shooting in the US just as US producers moved production overseas a few years ago to take advantage of lower costs and incentives. Back then, US producers shot wherever in the world the costs of production and incentives made it feasible. Today, that place is unquestionably shooting in the US. I am not just talking about shooting your typical English language star driven film in the US, but I am including shooting non-English language, non-US star based films shooting in the US instead of Europe, Asia, etc!. Crazy? Not really. Why did US producers shoot films in Romania, or S. Africa, or Morroco, or say Toronto instead of New York, when their film could have been shot in the US? Because it was cheaper to shoot elsewhere when costs of production and incentives were taken into consideration.
Consider this example. If a film would cost 5 million Euros to shoot in say France or Germany, it may only cost 2 or 3 million Euros to shoot in the United States, depending upon which state the shoot takes place. Yes, you might not get that 15-30% local Euro subsidy, but when you combine the low dollar and incentives, you could be looking at a benefit of closer to 60% or 70% for shooting in the US instead of only 15-30% shooting in Europe. Also, if SAG has not settled, actors will not be working on studio films, so they will be available for indie films, probably at lower rates then usual.
But, you say, strike or not, there are still those darn pesky unions to worry about, right? Well, yes, and no. One misconception most indie producers have is that just because they shoot in the US that all of a sudden they are subject to SAG, DGA, WGA etc. Not so.
Simply shooting in the United States does not require that you become a union film, whether for SAG, DGA, WGA or other unions. In the US, in general, no union has the right to force a company to become a signatory company, but there may be ways to pressure a company to sign up. SAG, DGA and WGA have jurisdiction over their members, worldwide, not based on where a film shoots. (A member of the guild who works for a company that is not signatory to a guild agreement can be suspended, fined or even booted out of the union. So most will not work for you unless you do sign up with the union) So, if you came to the United States to shoot and did not need to employ a director who was DGA or actors who are with SAG, there is no reason you have to sign up to the guilds. That said, most of the time you want to use actors who are members of SAG. But then, if you were going to shoot in say Europe and not use SAG actors, why not do it here in the US the same way, bring your actors here, and do it cheaper! (You might have to sign on to some of the unions for crew, depending upon where you are shooting, as you may not be able to get crews that are not union, but that only causes a slight increase in cost).
So what about the situation where you need SAG, DGA or WGA and have to become a party to a guild agreement (this applies whether you are shooting in the US or elsewhere). By becoming signatory to the guild agreement, this means that you agree to pay the talent the required minimum pay rates, pay into the pension, health and welfare fund (approximately 13-15% of wages with certain caps) and to pay residuals.
Residuals are, for theatrical films, a percentage of revenues that are additional compensation to the guild members, above and beyond their daily wage (if you have all three, WGA, DGA and SAG, you are looking at about 9-10% of gross income other than from theatrical on most indie films.) Residuals are not based on whether the film has made a profit or not (given that most indie films do not make a profit, it can really be an insult to injury, as they say). Many times, residuals can exceed the wage that was paid to the talent in the first place.
Because residuals are so valuable, It is residuals that have been the sticking point in negotiations between the guilds and studios this past year (and other years), not wages. The wage increase (about 3%) is always quickly agreed upon. Funny how most unions strike for better working conditions, or higher wages, but here actors and writers are fighting for something more akin to a life long annuity for working a few days or weeks on a film (what industry can you work on something and get paid for it for the rest of your life! Does the riveter on a building get a piece of the rent from that building forever? No. How about the architect who designed it? Or the designer of a new model of car? Could you imagine if you worked the assembly line on the first Hummer for the military and got residuals for when it went to a consumer version, or all those derivative works like the H2 and H3! Nope, its unique. )
So what were the guilds fighting for if they already have residuals? Well, they wanted a bigger piece of DVD revenues, a piece of electronic sales (video on demand, electronic sellthrough, streaming), a change in the way DVD residuals were calculated, and, in the case of the WGA, jurisdiction over writing shows for the web (and residuals for those shows).
And what did the WGA and DGA get in terms of increased residuals under their new contracts? (WGA struck the studios for 3 months, but DGA worked out essentially the same deal without a strike. The studios have announced that they intend not to increase anything for SAG over what they have already agreed to give the other two guilds.) For the most part, residuals for showing theatrical films on TV and for video don’t really change much. The unions tried but did not get the changes on DVD that they wanted. But the biggest area they fought for, they did get something. That was in the area of “new media.”
For those that remember my article from last year, I mentioned the fact that video under most distribution agreements that are more than a few years old is defined to mean videograms (physical units like cassettes and DVD’s), and would not include electronic delivery. The same was true under the various guild agreements for calculating residuals. Residuals applied to TV and video (as in videograms) only. So the guilds were not going to get residuals on what may eventually be the biggest revenue stream (electronic distribution), unless there was a change. (In my 2007 Cannes article I predicted that DVD would be gone in 5 years or so, depending upon the timing of certain technological changes). The studios, of course, want to make sure that as little as possible is paid for residuals on these new areas. While the studios offered residuals on “new media” similar to what had been done in the 1980’s when video was new, the guilds felt there were mistakes made by them in the agreement on video residuals that they got stuck with for the past 25 years, and did not want to make the same mistake with new media (video residuals were calculated on the net to the producer rather than on the distributor gross).
So the deal worked out with WGA and DGA provides for percentages of distributor gross receipts from downloads and on line rental (VOD), as well as various payments for ad based streaming (think free TV on the Net), as well as clips or short snippets from films that are web broadcast, other than as the promotion for a film (there were also issues with re-broadcast of network TV shows on the net, and that was covered as well, but is a little irrelevant to this article).
But if WGA and DGA worked out a deal, why is SAG balking? SAG believes that the rates and calculations for residuals for new media that the WGA and DGA got are not good enough. Moreover, if what happened with residuals on video in the 1980 guild deals is a guide, the deal may become a standard for future negotiations between the studios and the guilds. Given that history, SAG likely believes that agreeing to something now might lock them in for the future, and with the recent WGA strike, maybe now is a good time to push the envelope since no one wants another strike. Whether they are right or wrong on that, only time will tell. Hopefully, by the time this article is published we will know the conclusion to this story. But, either way, it’s a great opportunity for international production in the United States.
Reprinted with permission by The Business of Film
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