For director/producers of low-budget independent films, the answer to that question could be you, if you're not completely informed before you sign.
If you are producing your film, payment of residuals obligations should be part of any decision you make about the distribution of your film when it makes its way from theatrical release to other media such as broadcast and pay television, home video and DVD.
Residuals are an important part of a DGA member's compensation. On average, during the course of its lifetime, an independent film will generate between $100,000 and $150,000 in residuals, with some lower and some higher. The DGA crew and Pension Plan as well as the director, receive shares of this revenue.
Once you as producer become a signatory with the DGA, you are subject to the provisions of the Basic Agreement which require that residuals must be paid in perpetuity, and that all of your distributors must assume this obligation. If your low-budget film is picked up for distribution by one of the major studios you can expect that this obligation will be assumed by the studio, but only for the markets where the studio has distribution rights. However, it is still your responsibility to ensure that the DGA's Assumption Agreement(s) have been executed and delivered to the DGA in order to transfer the residuals payment obligations on to the distributor. But, with so many new distribution venues opening, you can not assume that a distributor's assumption agreement ever will be in place.
According to DGA Signatories and Reports Compliance Administrator Patricia O'Brien, "All signatory companies bear the responsibility for delivering to the DGA assumption agreements from their distributors. It is a responsibility that you accept when you become a signatory company. Further, you are also obligated to deliver to the DGA distributor assumption agreements from sub-distributors. The difficulty is that these distribution agreements may be negotiated very late in the production schedule. Because of this residuals payment obligation, you must be very careful in structuring your agreements with the distributor."
She added that this obligation also applies in the same way when a signatory company enters into an agreement with a sales agent. As the director/producer, you must be sure that the DGA obtains an agreement from the distributor which clearly binds the distributor to the DGA residuals obligation in perpetuity within the distribution agreements.
DGA Executive in Charge of Residuals Teri Benton stressed that, "The small producer of independent films must be aware that there is this residuals obligation, and if they don't plan ahead, that obligation could come to rest on their shoulders."
Benton said there are some foreign distributors and video outlets who have refused to sign an assumption agreement, thereby placing the burden of residuals payments on the low-budget independent signatory producer. "A lot of our members can tell horror stories about how they not only lost their own residuals, they were on the hook and ended up owing residual payments to their crew and to the Pension Plan," she said.
O'Brien said that when a distributor refuses to sign an assumption agreement, the DGA can work to set up a residuals reserve or collection account that will ensure a percentage of the licenses come directly to those accounts to meet future obligations, before the money goes to the distributors.
"The system works very well if you plan ahead," Benton added. Both Benton and O'Brien advised that before entering into any distribution agreement, contact the Guild. Remember, residuals are due on all non-theatrical exploitation and licenses you may make. This is how the Guild ensures that directors and members of their teams receive what they're entitled to receive.
