SAG's Ultra Low Budgets: Producer Beware
Think before You Jump at SAG's Low Budget Agreements
Jun 12, 2009
At first glance, SAG’s Ultra Low Budget Agreement seems like a great idea. Actors for $100 a day! But this 2005 agreement has plenty of traps for the independent producer. Some are clearly written out, but most are hidden where you can’t see them.
While no residuals are due from an initial theatrical release, (which 99.99999% of independent producers will not get) SAG members are entitled to residuals between 4.5% and 5.4% of the gross revenue from video/DVD and 3.6% from pay and free television. On the surface, even that doesn’t sound too bad. “Five percent, that's not too bad.” Then Billy Mays pops up and says, "But wait! There’s more!"
Residuals
SAG assumes that for international sales, 15% comes from theatrical, 65% from video/DV and 20% from pay/free television, (which is actually pretty accurate). In effect, this means that SAG will want residuals from 85% of a film’s international gross revenue. That’s based on 85% of what the distributor in Poland made, not what they paid you or your investors as the “minimum guarantee.” (aka, all you’ll ever see anyhow) Because SAG gets a piece of the gross, it’s entirely possible that SAG will make good money from your movie and you’ll never make a cent. There are many cases of filmmakers who ended up broke and owed SAG for residuals.
The Typical Scenario
A few days before principal photography begins, (when you’re the most vulnerable) SAG will shut you down by suddenly demanding a cash residual deposit of say, $20,000.00. That is, they require you to pay them up front for money you haven’t even made yet! Later, if you’re lucky, perhaps you and SAG will negotiate an agreement and you can start all over again. Maybe your cast and crew are still there, maybe not. SAG’s unwritten policy, (like any tough business operator) is to wait until the filmmaker is weakest and then nail him.
Other Conditions and Agreements
SAG will also require that any distributor who sells your film sign a Distributor’s Assumption Agreement to bind the distributor to your agreement with SAG. The major studios always sign, but most independent sales agents will simply laugh in your face. Unfortunately, this will make you personally liable for residuals.
The Laboratory Pledgeholder Agreement. This is just like a Laboratory Access Letter, (which allows your distributor to make copies from your master to sell). Except with SAG, it's just the opposite. Nobody has access to your negatives or digital master until SAG says okay.
SAG also may require a Collection Agreement. All of your money must go into an escrow account and you’re last in line - again.
This is in addition to what’s called the UCC, a sort of legally-binding mortgage on your film, (forever) which you must sign and is registered with the Secretary of State for good measure.
You’ll always be required to make a cash Salary Deposit in addition to what you’ll pay the actors – even if all of their salaries are already placed in an escrow.
If an actor gets a better offer during your shoot, they can leave any time they want.
You must pay pension & health, (about 15%) payroll taxes, (17-20%) etc., and 3.6% of any Internet monies directly to the actors.
In general, you must follow all the other rules and regulations of the Basic Agreement except those excluded or modified by the Ultra Low Budget Agreement.
In fact, if you put a pencil to it, SAG’s regular Television Agreement is a better deal for even the low budget independent producer!
Of course, the SAGIndie folks will never mention any of this to you during their helpful monthly workshops. They know that if you knew the facts you’d never deal with SAG.
In Conclusion
These loathsome agreements have been created to suit the major studios and the way they do business. Let’s face it, the independent producer of a film budgeted less than $200,000.00 has nothing but the residual markets to look to for any potential profit. If you can’t make money in these emerging markets you won’t be making too many films in the future, will you?
To be fair, SAG is simply enforcing the existing rules and trying to make sure their actors are paid the residuals they are guaranteed by their contract. Fact is, if it weren't for the big name stars and familiar character actors there would be no SAG at all.
Just remember you can hire all the SAG and non-SAG actors you want with Financial Core. AFTRA should be strongly considered as an option as well.
Additional information:
The Indies New Battle: SAG Residuals A Holdover From Old Hollywood (A legal perspective)
