Actors spend years cultivating a career that increases their market value, only to find that value decreased substantially as they discover what they thought was pay for their performance is actually pay for the performance AND future exhibition.
The Residual, long the bulwark of actors’ careers, allows us to (among other things) stave off periods of non-work by receiving payments for continued exhibition. For years, we have allowed producers to credit monies paid above scale against those future payments, effectively reducing the actor’s salary.
REAL LIFE EXAMPLE
Suppose you are an actor receiving an SVOD offer for $20k/wk, you later discover that you are actually making $12,000 with $8,000 in prepaid residuals. The “Total Actual Compensation” ceiling ($4,139.83) would result in a residual of $1,862.92 after 90 days and $1,655.93 a year later, $1,448.94 a year after, and so on; but, they’d be absorbed by the initial $8,000 prepayment. In other words, you will not receive these residuals. The first time you will see an actual residual wouldn’t be until Year 8, at which point you would receive approximately $73. The Netflix Deal capped the allowable credit at 15% of initial compensation (For this example, only $3,000 could be prepaid residuals). This contract has no such cap.
Side Note: This is only on an SVOD platform with a 100% subscriber factor. If it’s a smaller platform, it will take even LONGER to burn through that prepayment. CBS All Access, for instance, is under 20 million subscribers so these residuals due would be calculated even lower.