The Writers Guild of America West (WGA West), which represents the interests of thousands of screenwriters in the U.S., has announced that it has won its arbitration against Netflix. Hundreds of screenwriters who worked on more than 100 theatrical Netflix films will receive an additional 41 million euros ($42 million) in unpaid residual fees. WGA West and WGA East are also suing Netflix for about 13.2 million euros ($13.5 million) in interest that the streaming giant owes the screenwriters for the late payment of these residual rights. In a message to their members, the two WGAs said their victory came "from an arbitration regarding Netflix's underpayment of the screenwriters' residual rights for the film Bird Box." Netflix argued that the WGA had to accept a formula that was lower than the standards the company had negotiated with the Directors Guild of America (DGA) for directors and SAG-AFTRA (Screen Actors Guild - American Federation of Television and Radio Artists) for actors and actresses. After a hearing, an arbitrator ruled that the licensing fee should have been more than the gross budget of the film. He ordered Netflix to pay the Bird Box screenwriter a total of 831,000 euros ($850,000) in residual rights as well as interest of 342,000 euros ($350,000)." The WGA announces that as a direct result of this decision, 216 screenwriters of 139 other theatrically released Netflix films will receive an additional $42 million in unpaid residual rights. The WGA is now suing for approximately $13.5 million in interest that Netflix also owes the writers for the late payment of these residual rights. In 2016, Netflix began producing and streaming motion pictures written by members of the WGA (also known as "the guild"). Under Netflix's minimum basic agreement with WGA West and WGA East, the initial fee covers theatrical exhibition of the film. The guilds informed their members Thursday: "When a theatrical film is licensed or released in another market - such as streaming, television or home video - residual fees must be paid on revenues earned in those markets. The typical residual for the credited screenwriter is 1.2% of the license fee paid to the producer for the right to exploit that film. If the license is between related parties - for example, where Netflix is both the producer and distributor of the film - the minimum basic agreement requires the company to charge a license fee based on arm's length transactions between unrelated parties for comparable pictures - for example, a Sony film licensed to Netflix. This essential definition, negotiated as part of our strike resolution in 2008, protects against undervaluing license fees through self-dealing." Rather than follow the definition established by the minimum basic agreement for related party transactions (which also exists in the DGA and SAG-AFTRA' s agreements with the Alliance of Motion Picture and Television Producers (AMPTP)), Netflix negotiated new agreements with the DGA and SAG-AFTRA that allow Netflix to pay residual rights on an amount significantly less than the cost of the film. Netflix then tried to force the WGA to accept this "standard" agreement. Since it was clear that the new formula negotiated by the other Guilds undervalued these "imputed" license fees, the Guild preferred to take the dispute to arbitration. During arbitration, the Guild demonstrated that when Netflix obtained comparable theatrical films from third-party producers, it almost always paid a license fee above budget. The industry calls this model 'cost-plus. The Guild argued that Netflix should apply this model to its own films and charge license fees above budget in order to pay residual fees. The arbitrator agreed with it and ruled that the licensing fee should be 111 percent of the film's gross budget." According to the guild, this arbitration decision has been applied to 139 other Netflix films. "Including the additional residual rights awarded as a result, the 216 writers of these films have now received a total of €62.5 million ($64 million) in residual rights, €19.5 million ($20 million) more than they would have received under the agreement agreed to by the DGA and SAG-AFTRA." The WGA noted, however, that Netflix is so far refusing to pay interest on overdue residuals for films other than Bird Box, so the Guild is pursuing arbitration for the $13.5 million in interest still owed to these writers. The WGA said that in the Bird Box arbitration, Netflix attempted to employ the AMPTP's decades-old strategy of reaching substandard agreements with other unions and then trying to impose the 'model' on screenwriters. In this case, Netflix failed because the WGA was willing to fight for what was owed to screenwriters under the minimum basic agreement (MBA), rather than accept the DGA/SAG-AFTRA model. "As studios increasingly engage in self-determination on their own streaming platforms, we need to ensure that writers are paid properly," the WGA said. "Netflix, which has only a decade of experience employing writers, has quickly become one of the worst violators of the DGA, requiring the Guild to deploy significant resources to protect the writers who work for the company." The guild also noted that "the upcoming negotiation of the 2023 Minimum Base Agreement (MBA) challenges us to address the industry's rush to use the growth of the streaming model to reduce wages and working conditions for Hollywood talent. We hope that screenwriters and all Hollywood workers receive their fair share of the value we create together." The WGA West statement sent to members was co-signed "in solidarity" with WGA East. Sources: https://deadline.com/2022/08/wga-wins-netflix-arbitation-multimillion-dollar-case-over-self-dealing-1235085371 https://www.latimes.com/entertainment-arts/business/story/2022-08-04/lat-et-ct-wga-netflix-film-residuals https://variety.com/2022/film/news/wga-wins-42-million-arbitration-netflix-1235333822/ https://www.hollywoodreporter.com/business/business-news/wga-netflix-residuals-42-million-writers-1235192877/