1. What are foreign levies?
Foreign levies are fees collected in some foreign countries to compensate rights holders for the copying, rental and retransmission of their films and television programs. The rights holders under foreign law include the “authors” of motion pictures and television programs.
2. Where do foreign levies come from?
Beginning in the 1980s, various European countries adopted laws imposing levies on blank videocassettes, recording equipment, home video rentals and cable retransmission to ensure that authors received payment for the private copying and use of their work. The levies have been extended over the years to other blank media such as DVDs. Since the start of the program, the Guild has collected foreign levies from 21 countries in Europe, Latin America and Asia.
3. Who collects the levies?
The statutes in each country authorize private “collection societies” to allocate and distribute the levies to the rights holders of films and television programs.
4. How are foreign levies different from residuals?
Residuals are a form of deferred compensation that companies are contractually obligated to pay under the WGA Theatrical and Television Basic Agreement (MBA). Foreign levies are not contractual payments. They are statutory assessments created by and collected under the copyright laws of certain foreign countries.
5. How many countries collect foreign levies?
There are now 18 countries in Europe (Austria, Belgium, Czech Republic, Demark, Estonia, France, Germany, Hungary Italy, Lithuania, Latvia, Netherlands, Poland, Portugal, Slovakia, Spain, Sweden, and Switzerland), one country in Latin America (Argentina), and one country in Asia (Japan) remitting levies to the WGAW.
6. How did the WGAW come to collect foreign levies?
Without the concerted efforts of the WGAW and the DGA to assert their interests with the foreign collection societies, no writer or director would have received any share of foreign levies. Originally, the major Hollywood studios asserted that they were the sole "authors" of the films and television programs that they had produced, and were therefore entitled to receive 100% of the foreign levies. The studios based this position on U.S. copyright law – notably, the "work for hire" doctrine under which employers are deemed to be authors of certain works – as well as on the “assignment” and “results and proceeds” clauses found in most personal services contracts with writers and directors. In 1988, the WGAW and DGA challenged the studios' claim to these funds, arguing that writers and directors were “authors” under foreign law and thus entitled to the authors' share of the foreign levies.
7. How was the dispute with the studios resolved?
Ultimately, the guilds and studios agreed to resolve their dispute over foreign levies. On June 1, 1990, they entered into the first Foreign Levies Agreement, which provided for the allocation of the authors' share of foreign levies among writers, directors and the studios. The Foreign Levies Agreement has been renegotiated several times in subsequent years and now provides that the writers and directors receive 50% of foreign levy collections – 25% distributed by the WGAW and 25% by the DGA.
8. How much money has been distributed?
To date, the WGAW has disbursed over $193 million in foreign levies, including almost $29 million to non-members and beneficiaries.
9. I received a foreign levies check. How do I know what the payment is for?
The voucher attached to the check contains the following information. The title of work for which payment has been received appears under the heading DESCRIPTION. In the column headed REFERENCE CODE, the following information appears: [paying country]—[type of levy]—[period of foreign use]. The Guild makes these payments based on information provided to it by the foreign collection societies. This information is sometimes incomplete, and multiple years’ payments are frequently bundled in a single remittance.
Abbreviations in the Reference Code section of the check voucher are as follows: Countries: Argentina (ARG), Austria (AUT), Belgium (BEL), Czech Republic (CZK), Denmark (DNK), Estonia (EST), France (FRA), Germany (DEU), Hungary (HUN), Italy (ITA), Japan (JPN), Lithuania (LIT), Latvia (LVA), Netherlands (NLD), Poland (POL), Portugal (PRT), Slovakia (SVK), Spain (ESP), Sweden (SWE), Switzerland (CHE) and United Kingdom (S007441). Type of Levy: cable retransmission (CR), educational recording (ER), private copy (PC), public performance (PP), rental levy (RL) and theatrical and TV levy (TH—Argentina and United Kingdom only).
10. Why does the Guild collect and distribute foreign levies for non-WGA works?
After the guilds and the studios reached their agreement, it became clear that certain foreign collection societies would not limit their remittances to works covered by a WGA or DGA collective bargaining agreement. For example, authorities in Germany, the largest European market, conditioned their approval of the settlement between the guilds and the studios on the requirement that levies on all American films and television programs would be distributed to the WGAW and DGA, whether or not it was a “covered” project or the writer/director was a member of the American guild. Although the WGAW agreed to this requirement, at no time has it claimed to represent these non-members or affirmatively sought to collect levies on their behalf.
11. What percentage of levies is for non-WGA works?
The number varies from country to country, but approximately 15% of foreign levy remittances received by the Guild are for non-WGA works.
12. Why is it difficult to find writers of non-covered works?
Writers who work under a WGA agreement are not strangers to the Guild. Most of them become WGAW members. They earn residuals and maintain current contact information on file at the Guild. By contrast, the Guild frequently starts with no information about the non-covered projects for which it receives foreign levies. The WGAW must first identify the writers of the work, then must locate the writers or their heirs so that the money can be distributed.
13. How does the WGAW find writers of non-covered projects?
Since the foreign levies program began, the WGAW has been building a data base of credited writers on non-WGA projects. The WGAW Foreign Levies Department has employees whose work includes locating the non-member writers or their heirs who are entitled to foreign levies. The WGAW has now launched an expanded website that lists the names of the writers who have not been located so that they, or anyone with information about them, can contact the WGAW.
FOREIGN LEVIES LITIGATION
14. What was the foreign levies lawsuit about?
In September 2005, a former member of the WGAW filed a class action lawsuit against the Guild entitled Richert v. Writers Guild of America, West, Inc., Los Angeles Superior Court Case No. BC 339972. The action alleged that WGAW was not authorized to receive foreign levies on behalf of non-members and had failed properly to distribute funds received from the foreign collection societies. The WGAW denied all allegations of wrongdoing, and while the lawsuit was pending continued to distribute millions of dollars in foreign levies to writers. Similar lawsuits were later brought against DGA and SAG.
15. What was the result of the litigation?
The WGAW, without admitting liability, entered into a settlement agreement that was approved by Superior Court Judge Carl J. West on June 2, 2010. The agreement is binding on a “settlement class” of approximately 17,000 writers of both covered and non-covered works (and their heirs) for whom the WGAW had collected foreign levies since the start of the program.
16. What does the settlement provide?
You can review the entire settlement agreement by clicking here. In summary, it establishes standards for how the foreign levies program will be administered in the future, including provisions for independent financial reviews, the publication of annual reports, and the dissemination of information about undistributed funds on the WGAW’s website.
17. Does the settlement guarantee that members of the class are going to receive money?
No. Because the WGAW did not stop distributing foreign levies while the lawsuit was pending, many writers were paid in full before the settlement was final. Unlike some class action settlements, this settlement did not call for a one-time payout to members of the class. Instead, it established ongoing procedures and resolved the status of certain undeliverable funds so the Guild can distribute money more quickly and completely.
18. What is the purpose of the KPMG report?
As part of the settlement agreement, the Guild engaged the international accounting firm KPMG to review the finances of the Guild’s foreign levy program from its inception in 1992 until the end of the 2010-11 fiscal year. KPMG was asked to verify, on an annual basis, the following items: (1) the amount collected by the program, including interest earned on those funds; (2) the amount distributed by the program to writers or their heirs; and (3) the amount of foreign levy funds held by WGAW at the end of each year. You may review the KPMG report here.
19. What are the annual reports?
Starting with the 2011-12 fiscal year, the finances of the FLP will be reviewed on an annual basis by the Guild’s regular auditing firm, Miller, Kaplan, Arase & Co. The annual reviews contain the same information and follow the same format as the KPMG report. You may review the annual report for fiscal year 2016-17 here. The questions and answers below will help you understand the information in the KPMG and annual reports.
20. Where do foreign levies come from?
The Guild collects foreign levies from 19 countries. A country-by-country breakdown of the amounts received through FY 2016-17 may be viewed here. These are a few historical facts about the Guild collections efforts:
- The Guild started its collection efforts in 1987, though the first remittances were not received until 1992.
- The first funds received in 1992 were from France and Germany from “private copy” and “video rental” levies.
- We continue to collect levies from 19 countries in Western and Eastern Europe, South America and Asia. Historically, Western Europe has accounted for almost 90% of total levies. Japan, the only Asian country in the program, first started remitting levies in 2009.
21. Where does the investment income come from?
Before they are distributed, funds are held in an interest bearing trust account. In FY 2016-17, these deposits generated slightly over $50,000 in interest income (net of bank fees), which has been used to defray the costs of running the program.
22. Why does the Guild charge an administrative fee?
In 2004, the Guild’s Board of Directors voted to assess a 5% administrative fee on all foreign levies distributed to writers, as an additional source of financial support to run the program. In FY 2016-17, fees assessed totaled $0.8 million.
23. What does the Guild do with the administrative fee and investment income?
These funds pay for the administration of the program, both the costs of collecting funds in 19 foreign countries and of distributing foreign levies, once collected, to writers. This includes expenses for personnel, database and software development, hardware acquisition, legal expenses and an allocated portion of the Guild’s normal overhead related to administering the operation from the Guild’s headquarters in Los Angeles. For the fiscal year ended March 31, 2017, the total cost of administering the FLP was $1.1 million, which exceeded the total administrative and interest income of $0.8 million by $0.3 million. In view of the current low interest rate environment, the Guild expects that the bulk of program expenses in 2018 and beyond will come from administrative fees rather than investment income.
24. To whom does the Guild distribute foreign levies?
Foreign levies are distributed to the credited writers of audiovisual works (or their heirs) based on “distribution schemes” received from the foreign collecting societies. Most—about 85%--of these payments are for movies and television programs written under a WGA collective bargaining agreement. The remaining funds are attributable to a wide variety of “non-covered” works, including news, sports, adult films and non-WGA animation, documentaries and reality programs. In fiscal year 2016-17, the Guild distributed almost $14.6 million.
25. Why was there $19.3 million still undistributed as of March 31, 2017?
Some of this money was simply “in process” as of that date and has now been distributed. At least half of the total, however, is funds that that the Guild has been unable to distribute, either because it lacks adequate information from the collecting societies or because the Guild has been unable to identify or locate the writers of the titles in question. The foreign levies website contains lists of levies that are undistributable because titles cannot be identified (click here) or writers or their heirs who cannot be located (click here). On the linked pages, writers or their heirs can claim funds currently being held on their behalf.
26. What will happen to the undistributable funds?
Some of the money will eventually be claimed by writers or their heirs, and will be distributed. The settlement agreement provides that, once reasonable efforts to distribute the money have been exhausted, certain of the funds will be paid to a charity, the Actors Fund.
27. Will the Guild report on the program’s finances in future years?
Yes, the Guild will publish an annual review as part of its regular audit at the close of each fiscal year.