Scary Article about SAG Ultra-Low Budget Agreement

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Kevin McCallister

Well-known member
Found this while tooling around on the Web today: http://www.easy-budget.com/articles/articles.asp?article=ultralow

Not sure if it's ever been posted here before, but man, did it scare me in regards to using the SAG Ultra-Low Budget Agreement ($200K budgets and under).

I know that some people on here have used SAG actors. Has anyone used the SAG Ultra-Low Agreement? Can you corroborate or refute any of what this guy is saying?

I'm looking towards my next film, which will have a $200k budget, and I wanted to use SAG, but after reading this, I'm really feeling like I'm between a rock and a hard place.
 
You want to use SAG- non-SAG actors no offense- basically suck. Well I take that back- they don't all suck but let's just say your pool of available talent will be greatly reduced if you take SAG off the table, that coupled with a low budget you'll be offering salary-wise and you'll have very few choices for decent acting. And if you're going to spend $200K on a movie it will be a solid investment to have good acting in it. That said, if you ever decide to take your movie beyond the festival circuit and free screenings, you'll be on the hook with SAG for their (more than IMHO) fair share. So keep that in mind. If this is a movie for profit you'll owe a *lot* to SAG if the movie does turn even a slight profit. If it's just a calling card movie with no realistic chances of selling as most indies in the 200K (sadly) are, then move forward without worries.

The part in that article about a residual deposit is a little dubious, I never had that issue come up during filming. They do expect their actors to be paid as stipulated in the contract and up front but not the residuals...

Noah
 
Thanks Noah.

I've already had great national and international distribution success with my film "Plasterhead", which I produced at the $20,000 budget level, and which went straight to DVD. I got a great upfront payment for domestic, some more upfront money for foreign, and I came out with more than I spent and with a film in stores all over the US and in four countries. That film was non-union, of course.

I was hoping to duplicate that success on the $200,000 budget level and again go straight to DVD, but this time using the Ultra-Low Agreement. I've read so much muddled information, on here and elsewhere, about various step-up fees for going direct to DVD. I'm really not sure I understand how it works. I know that people have been saying that SAG wants 4.5% of the Distributor's Gross Receipts...but how can that possibly be?

For example, if I sell my movie to a distributor for $50,000 up-front, and then they make $1 million in DVD sales, I owe SAG $45,000? Or am I wrong? I know that there's something about getting a distributor to sign a "Distributor's Assumption Agreement", which means that they'll handle paying the royalties to SAG, but if that doesn't happen, then what?

I'm really looking for a clear mathematical picture of how I'd fare. Can anyone lay out for me, for sake of example, if I sold my film to a distributor for $50,000 up front, how much I'd owe SAG? It would make sense, in my mind at least, that I'd owe them 4.5% of THAT figure (the $50,000), and that, I'm fine with. But 4.5% of the first million in Distributor's Gross Receipts? That sounds crazy!
 
Kevin McCallister said:
I'm really not sure I understand how it works. I know that people have been saying that SAG wants 4.5% of the Distributor's Gross Receipts...but how can that possibly be?
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You understand clearly exactly what they're saying. You're committing to pay money that you may never receive. And if the distributor doesn't report to you what their receipts are, SAG can "estimate" them, and send you a bill for 4.5%. So yes, by the way the contract is written, let's take an extreme example:

You make a $15,000 movie called "Paranormal Effect" and you want good SAG actors, so you sign the ultra-low-budget agreement and pay them $100/day. Then you take it to festivals and you do well, and someone decides to buy it off you and they give you $50,000 cash. Hey, you tripled your money, cool, right? So you pay the actors 4.5%, so basically you split a couple grand with them. The distributor says no way will he sign your distributor's assumption agreement, so the offer is $50,000 with no signature, or nothing and you lose, so you take the money.

He then goes on to start a viral marketing campaign and makes $200,000,000 with it, off of theatrical and DVD release. You think that'll fly under SAG's radar? I don't think it will. So SAG looks up the current signatory, which is still you, and says "we need our 4.5%, so here's a bill for $9 million." Made out to you. Not to the distributor. You.

So you take it to the distributor and say "hey, pay up!" Do you think the distributor, who has no legal obligation to, will give you a dime? I don't think so either.

This was the situation, as of the time that that article was written. I do not know if it is still that way; SAG made some producer-friendly changes to their contracts after that was written.


For example, if I sell my movie to a distributor for $50,000 up-front, and then they make $1 million in DVD sales, I owe SAG $45,000? Or am I wrong?
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You're not wrong.

I know that there's something about getting a distributor to sign a "Distributor's Assumption Agreement", which means that they'll handle paying the royalties to SAG, but if that doesn't happen, then what?
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Then you know exactly what. You are screwed six ways from Sunday. If SAG decides to collect, then YOU pay.

Of course, you could always tell the distributor "no, you can't have the film unless you sign the distributor's assumption agreement." And the distributor might say "oh, okay, you win" and then you're totally off the hook. Or, far more likely, the distributor might say "screw that, I'll just give my $50,000 advance to one of the other three thousand starving filmmakers out there, one of 'em will take my agreement, and I will not be under the thumb of SAG or their distribution royalties."

So yes, you're left in a position of where you might have to turn down money because it would actually cost you more than you get.

If it's a major distributor like one of the major studios, they'll sign -- they need and eat and sleep and breathe SAG, they can't afford to tick them off, so if you got Warner to buy your film, you'll be okay. But if it's a smaller distrib, why on earth would they sign that contract? That's YOUR contract and YOUR obligation, not theirs.

If there's a bidding war for your film, then sure, you can make that be a condition and maybe they'll agree. But the far more likely scenario is that you'll get a nibble, and if you tell that nibbler that you're going to require them to sign the SAG DAG, well, imagine you were the distributor -- what would you do? Especially in this economy, with the film distribution puzzle as it is now?

I'm really looking for a clear mathematical picture of how I'd fare. Can anyone lay out for me, for sake of example, if I sold my film to a distributor for $50,000 up front, how much I'd owe SAG? It would make sense, in my mind at least, that I'd owe them 4.5% of THAT figure (the $50,000), and that, I'm fine with. But 4.5% of the first million in Distributor's Gross Receipts? That sounds crazy!
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It is crazy. And you're reading it right.

Go to SAG and ask them. I haven't bothered since I researched this all a few years ago and came to the conclusion that it's fiscal suicide. Now, it's possible that they've decided to revise the contracts and remove some of the absolutely prohibitive provisions; I had one of my companies sign as a SAG signatory for the short film agreement for one of our films and everything went swimmingly well with that, because they really adapted and made it workable. Maybe they have a realistic low-budget contract now. But if you want straight answers you'll have to talk to SAG, or to an accountant who handles low-budget filmmakers.
 
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Wow, Barry, excellent response. Thank you so much. There's so much misinformation out there, more people need to read what you just wrote. They really need to see the effect on the numbers.

I certainly plan to reach out to SAG and confirm all this, but I don't think the agreements have changed much since 2005-06. If they would just revise their contracts to take a cut of what the actual FILMMAKER gets in the distribution deal (and maybe take a slightly larger percentage, say 10%), I'd be on board and I think many others would as well.

The next question is, how does this affect self-distribution. If I sell $100,000 worth of DVDs, I owe SAG $4,500? I did read somewhere about "wholesale" prices, but the information was unclear.
 
That's my point -- there's no way, under any scenario, that I will sign a contract that binds me to pay money that I don't even receive. But that's how the contract read. When I asked SAG about it, the response I got was "don't worry about it, that won't happen, the distributor will sign, don't worry." Anytime anyone tells me to "not worry" about a contractual obligation, I worry. My response would be "well, if it's not gonna happen, let's just strike that clause, okay?"

The contracts did change in the last few years, you'll definitely want to look at the latest ones to see if they've addressed some of these issues.

Self-distribution means that you're the distributor, and whatever gross revenues you receive are what you would be paying the residuals on.
 
Aha, another piece of the puzzle. Thank you Ryan for that contribution.

Barry, if you read the quotes that Ryan pulled carefully, it SOUNDS like the "Distributor's Gross Receipts" actually IS the amount that YOU receive from the distributor when you sell the film. If that's the case, hey, that's awesome, but then why would SAG call that money the "Distributor's Gross Receipts"? That name has no relation to what they're actually defining in those passages. A more apt name would be the "Producer's Gross Receipts", no?

So, given this information, and assuming that it means what I'm interpreting it to mean, say you sell your film to a distributor for backend-only profit participation and then, thanks to "fuzzy math" on the distributor's part, you never see a dime. Then you don't owe SAG anything, correct?
 
Don't count on it for a second. Taking one sentence out of a (what is it, 500+ pages?) contract may not be telling the whole story. In an industry fraught with "fuzzy math", what's to stop one entity from "selling" the film to another entity (that they control) for pennies, specifically to skirt the SAG residuals? I'm pretty sure in an organization as big as SAG, with the lawyers they had on hand, they've protected themselves six ways from Sunday.

So if you sold it to a distributor, and that distributor refused to sign the distribution assumption agreement, I sincerely very much doubt that just saying "hey, I sold it to that guy, go collect from him" is going to hold any weight whatsoever.

What is more likely a proper interpretation of this clause is that, knowing that producers are worried that they won't be able to make payments based on whatever the other distributor actually receives, have been concerned that they'll be held liable for that. And so SAG is saying that the part you pay is based on what you receive, and the part the other distributor pays (after he signs the distribution assumption agreement) will be due based on what he receives.

But if you just give away the film to this other entity, and that other entity won't sign the agreement, don't think that your obligation for SAG residuals will just disappear. If the other distributor won't pay, they will come after the folks who signed a legally binding contract with SAG -- and that's you.

The SAG system works if the distributor signs the agreement, that's how it's set up to work. There is (or, at least the last time I looked into it, there WAS) no provision for what happens if you DON'T get a distributor to sign. It just leaves you on the hook. You are signing the entire contract with SAG. Not just the little "ultra low budget" amendment, but the entire MBA. You are obligated. Part of your obligation is to get the distributor to sign the distributor's assumption agreement. If you fail to successfully do that, that doesn't let you off the hook in any way! As far as SAG is concerned, selling the film to a non-signatory distributor is breaking your obligations.

Now, again, if anyone has news to the contrary, please post it.
 
SAG Financle Core is the way to go. The actors are SAG but not really so they can be in anything as long as they pay their dues. But these guys aren't cheap either. (In terms of Hollywood they are but not in terms of indy productions where every dime counts).

-Nate
 
Good points, Barry.

Looking at it in a broader context, it does seem highly doubtful that SAG would say "Hey, if you can get the distributor to sign the assumption agreement, great, we'll take the residuals from their large amount of gross profits (say, $1 million), but hey, if they won't sign it, we'll be more than happy with just our cut from the much smaller lump sum you made up front (say, $50,000)."

When I look at it like, something doesn't smell right. Ryan, have you used the SAG ULBA? Can you confirm or deny any of this? Anyone else?
 
Nathyn, from what I understand, SAG Fi-Core is a really great idea in principle, except that very few "name" actors are actually Fi-Core. For example, Charlton Heston and Erik Estrada are probably the most "famous" Fi-Core members. Oh, and Barry Williams from "The Brady Bunch". If that's the top of the crop, then you have slim pickings, indeed.
 
Financial Core is a whole 'nother topic. If an actor has declared Financial Core status, then you can use them in a SAG production or a non-SAG. Fi-Core lets actors work when there aren't enough SAG productions to go around. But Fi-Core threatens the very viability of SAG as a collective bargaining agent, so you pretty much won't find any of the upper tier who've gone financial core. Jon Voight is one, but there are very few.

Financial Core means that an actor has actually resigned from SAG, they are no longer a member of the union. They still have to pay dues to the union, and they are eligible to work on SAG productions due to a Supreme Court ruling that says unions cannot prevent a member from earning a living (meaning, if there isn't enough SAG work to go around, you can resign from SAG and take non-union work, but keep paying your dues and keep your SAG card to let you work on union jobs too). It is very much frowned upon by SAG. Producers love it because it lets them avoid all the SAG entanglements, but those actors who benefit from SAG's actions and collective negotiations will not resign and go financial core, so basically if you want the best, you have to go SAG. If you want day players you can frequently find pretty good ones who are fi-core.

SAG exists to benefit the actors who are members of it. The best actors become SAG members. If you want the best actors, you become a SAG signatory, and everything that that entails (including residuals and the distributor's assumption agreement.) That's how the system works.

If you don't want to deal with SAG and calculating hours and paying per diems and keeping time sheets and worrying about meal penalties and providing dedicated dressing rooms and paying for first-class airfare and hotel accomodations and factoring door-to-door travel time against your work days and paying them an hourly rate while they sit in a taxi or wait for their flight or while they're in the air, if you don't want to pay residuals and have to keep your books open for potential audits, and if you don't want to be responsible for enforcing the signing of the distribution assumption agreement, then don't go SAG. But just understand that the best actors join SAG, and Global Rule One of the screen actor's guild is "thou shalt not work non-union." Doesn't mean that some actors won't break that rule, but -- well, look -- you get what you pay for. If you can't afford to pay for it, don't think that you can have it too. If you sign with SAG, you're signing the MBA, and you're obligated to every provision of it (excepting those provisions that are modified by the Ultra Low Budget agreement letter or other modified agreement letter).
 
Sure the 'best' actors are SAG, but there are a ton of great actors who aren't. I think it's all about casting. Personally, the ULTRA agreement is still too much of a pain to contend with if you're trying to do it all by yourself, but that's my 2 cents.

I'm in Austin, which has a ton of indie film actors who aren't SAG and a superb theater scene with some incredibly gifted people. That being said, I'm a little spoiled.

If you're in... let's say Idaho (no offense) then SAG might be the way to go to make sure you draw the talent you need to make a good piece. If you're in any major metro area, I think you have a shot at getting the caliber of actor that you need.

IMHO, most of the weight falls on you as a director to get the best performances out of people anyways. Of course, talent and experience matter, but those two factors fall by the wayside when coupled with poor directing.

While SAG has made an attempt with the ULTRA budget it still is grappling with making use of that contract easier and more feasible while still protecting its members.
 
Being a member of a guild or union does not automatically mean you're more committed to your craft or are better at what you do than non members.

SAG exists to wring as much dough out of a booking for their members as they can, and to ensure their members are treated in a certain way. As such, as mentioned, it becomes really a dicey proposition to hire SAG talent when you're attempting to produce an Indie, especially a low budget Indie.

I've shot under the old experimental contract with really hungry SAG talent who didn't make waves about the little things that they could have on a production because they were super happy to be in a film.

Besides the post release monetary obligations as per SAG contracts, it can be very much not worth it on a stretched budget to attempt to use SAG talent in the first place. I work with SAG and non SAG actors and I really don't see any difference between great talent on either side.

I'd LOVE to be able to use certain SAG actors, but SAG makes it really hard to do on low budgets.

.
 
I didn't really want to turn this into a "SAG vs. non-union actors" debate, so I'll try to re-clarify my intent:

The fact of the matter is, and I can tell you this as someone who was lucky to get his low-budget, non-union movie distributed, the distribution world has changed so much from even two years ago. When my movie got picked up, in mid-2007, that was really the tail end of the direct-to-DVD market as we know it. Even then, the head of my distributor told me, point-blank, that hundreds of submissions go unwatched. This jives with other articles I've read about 99.9% of films not getting distribution.

Now, as we stand at the end of 2009, on the precipice of 2010, things have changed so much since I released "Plasterhead." DVD is dying, we're in the middle of a horrible recession, and attendance at last year's AFM was 1/3rd of what it normally is (who knows what it will be like next week). On top of that, there's still no viable digital distribution model.

The point of all that talk is that, in order to sell your movie in today's market, you NEED name talent. And with that, you need SAG. What I'm trying to figure out is if it's at all possible to produce a modestly budgeted movie ($200k-$500k) with SAG actors and still stand any chance of making a profit, or if SAG completely pulls the carpet from underneath you and prevents any feasible scenario from emerging. I've felt the "glory" of seeing my movie on store shelves, so right now, I just want to make money.

It's funny, because I see movies within this budget range pop up all the time, and I wonder "How in the hell are they doing it? Are they making any money?" One example is a horror movie called Blood Night: The Legend of Mary Hatchet, which I've been following for a while. They have a great website (www.bloodnightmovie.com), good production values, and Danielle Harris from the Halloween series. I believe the budget was at or close to $1 million. It's most likely not going to go theatrical, so how are they making this a profitable venture?

EDIT: It looks like, upon further examination of the Blood Night: The Legend of Mary Hatchet website, that the film is now out and that they are SELF-DISTRIBUTING. Looks like they're selling it through Amazon.com and their official website. I'd love to talk to the producers and see how profitable it's been and how they painted the picture for their investors.
 
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Kevin McCallister said:
The point of all that talk is that, in order to sell your movie in today's market, you NEED name talent. And with that, you need SAG.
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Well... there IS that. Unless you want to try an be the one-in-a-thousand film that makes a dent with NO names.
Kevin McCallister said:
It's funny, because I see movies within this budget range pop up all the time, and I wonder "How in the hell are they doing it? Are they making any money?" One example is a horror movie called Blood Night: The Legend of Mary Hatchet, which I've been following for a while.
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They might not be making money at all. At least not for a while I'd guess, if at all. But aren't horror films sort of a phenomena unto themselves? Seems like that genre is made for rental, and production value isn't really what they're about.

I also wonder how well self distribution would work for a non-genre film with no name actors? Probably not too well, I'd imagine, which is a bummer because there are some nice little films out there that will never see the light of day.

.
 
Ryan Paige said:
From the SAG MBA:

"If distributor is not the Producer and is not owned or affiliated with the Producer, the "Distributor's gross receipts" shall be one hundred percent (100%) of the fees received by the Producer from licensing the right to distribute such picture by cassette." ("Cassettes" are defined earlier in the MBA to include DVDs, etc.)

AND

"In case of an outright sale of the Supplemental Markets distribution rights for the entire world, or any territory or country, the income derived by the seller from such sale, but not the income realized by the purchaser or licensee of such rights, shall be the "Distributor's gross receipts"."
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That seems pretty clear to me. You pay 4.5 percent of what you get paid for it. Which still sucks on one hand in terms of recouping your costs first. But does not seem to lead to this situation where you are on the hook for a percentage of the money the distributor makes.

QUESTION: This is 4.5% divided among the actors obviously. Not 4.5% per actor - seems obvious I know, but accounting is not my thing / just trying to wrap my head around how it works.

NoahK said:
You want to use SAG- non-SAG actors no offense- basically suck. Well I take that back- they don't all suck but let's just say your pool of available talent will be greatly reduced if you take SAG off the table, that coupled with a low budget you'll be offering salary-wise and you'll have very few choices for decent acting...
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Noah, I'd say this is not necessarily true depending on where you're talking about.
If you are in a right to work state lots of actors stay SAG eligible or avoid SAG because they get most SAG benefits except for first class air fair and it allows them to work on anything they want - such as the stuff Barry and I just shot for which we paid SAG low budget wages but did not do a SAG contract because of this stupid 4.5% of gross thing.

As an example. I called SAG to complain / get info about the low budget shorts agreement (which has the same 4.5% clause), and offhandedly inquired about the fact that I had one line of dialogue in a Tony Scott movie 4 years ago but had never seen any residuals. They looked me up and they found they had been holding 4 years worth of residuals for me in trust because they had a bad address for me. (nice to get it as a lump sum) But anyway, they took out pension and all that stuff for me and held on to my paycheck for me until I got in touch with them, etc.

Now - you will be restricting yourself to your region (and I guess actors you know in other right to work regions) but if you are in a small film market community like Wilmington, New Orleans, or Austin you kind find good actors. Some roles may be tough to cast depending on what's in your area. (Young good looking leads often have already moved to L.A.)

Also - having said that - pretty much resolved that this is an unavoidable evil for a $200K + production. Not so much because I couldn't cast it with good actors, but because you'd likely want a small name or two.
 
Jack, it does seem pretty clear, you're right. But I'll reiterate my earlier question:

Doesn't it highly doubtful that SAG would say "Hey, if you can get the distributor to sign the assumption agreement, great, we'll take the residuals from their large amount of gross profits (say, $1 million), but hey, if they won't sign it, we'll be more than happy with just our cut from the much smaller lump sum you made up front (say, $50,000)."

It just doesn't seem logical that SAG will so easily settle for SIGNIFICANTLY less residuals if you can't get the distributor to sign the assumption agreement. I mean, does it? If that was the case, then why would ANY distributor ever sign that agreement, aside from the ones that already play nice with SAG? Wouldn't they all just say, "Screw that, SAG ain't touching my portion of profits, let the filmmaker/producer pay them"? That's why I really feel that, despite what Ryan posted, there's a missing piece of information here somewhere.
 
I guess for me the question is what is the 200k being spent on. I'm a strong believer of making it quick and dirty in the digital age. 200k for me would be mostly advertising for a self distributed film. I would probably shoot the film for $50,000 of that budget. There are SAG FI-Core actors that have strong followings overseas.

-Nate
 
Hmm

Hmm

This is concerning, I mean I'm planning on shooting about a $140K feature film next year, and obviously I want to make my money back or at least I'd like to make half of it back, I could "live" with that if it was a successful film, as far as being very good, well done, getting me places, etc. As my company is potentially on the verge of having good success in the corporate world, something like that would be a nice thing for me to have on my resume and open some doors hopefully down the road *that I would not be depending on* because I'd already have nice revenue from my primary business, which is ideal.

If this was the case, and it's just too difficult to sign that agreement then sell to a distributor, I suppose self-distribution could be one way to go. Because of our script, the way this film works and what it's about, it would be probably the only idea I have for a film that you COULD actually sell it online and do very well. Nothing else I've thought up would succeed whatsoever with that marketing model, in my opinion, way too risky unless it was a $20K film or something. This particular film has strong ties to the Internet and viral marketing within the plot even, incorporating people who have pull and a lot of viewers (a lot of potential customers) online, so selling directly to them would work to an extent. Could you make all of your money back? Eh, not sure about that. But it wouldn't be at total wash.

Still, I'd rather sell to a respectable distribution company.
 
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