Hollywood News Now: Residuals are a key issue for Hollywood strikers. Here's how they work.

As long as there have been strikes, those strikes have been about wages and conditions. The historic double walkout that ground Hollywood to a standstill this week is no exception.

But this movement is also tied to a modern phenomenon: the way streaming giants such as Netflix and Disney Plus have reshaped the entertainment industry.

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Leaders of Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) voted Thursday to join the Writers Guild of America (WGA), which has had a weeks-long strike against major studios, arguing that the streaming era has allowed them to cut workers out of profits.

SAG-AFTRA and WGA say this new age of entertainment has eaten into a significant portion of actors' and writers' income. And when it comes to money, the unions have one issue in particular on their minds: residuals.

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What are residuals?

When an actor books a TV show or a writer works on a movie script, they make a set amount of money. But what about when movies leave the theater and TV shows reach their finale? That's where residuals come in.

Residuals are the money some writers and actors earn when a work is reused, such as when a movie lands on a streaming platform, is released on DVD or airs on cable.

For example, Margot Robbie is getting a $12.5 million salary for her role as Barbie, according to Variety, but she'll make even more when the movie hits network TV and streaming services.

Residuals are a form of royalties, but the key difference is that residuals are union-mandated while royalties are a separate agreement between production companies and those they employ, according to City National Bank.

And not all actors and writers get residual checks; background actors and unnamed writers don't, and anyone working on a nonunion contract doesn't either.

The exact formulas that determine how much each worker makes in residuals are complex, but they take into account factors including how long the production took and in which market it appears.

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How has the streaming era affected residuals?

The advent of streaming has led to significantly lower residuals, according to SAG-AFTRA.

During the heyday of cable TV, near-constant reruns of popular shows meant big residual paydays for writers and actors. But the meteoric rise of streaming services such as Netflix and Hulu has upended that reality, and creators say residuals are shrinking.

Unlike cable reruns, residual payments for streaming services aren't based on the number of times an episode or movie is viewed. Instead, they're based on the number of subscribers the streaming service has, according to WGA. So writers and actors who work for platforms like Netflix make more than those who work for smaller streamers like Paramount Plus.

That means that regardless of whether a show is a flop or a cash cow, it makes the same amount in residuals. Writers and actors say that allows studios to profit off of their work without compensating them fairly for the success of a show. In short: Studios are making more off shows because of streaming, while writers and actors say they are making less. That, combined with inflation, has led to unfair compensation, SAG-AFTRA argues.

"You cannot change the business model as much as it has changed and not expect the contract to change too," SAG-AFTRA President Fran Drescher said in a Thursday speech announcing the strike.

But the Alliance of Motion Picture and Television Producers (AMPTP), the group negotiating on behalf of the studios, says that streaming has benefited actors and writers, giving them more opportunities to work and making it easier to earn income on shows that were canceled or unpopular. AMPTP says the actors' union dismissed an offer for "historic pay and residual increases," including the "highest percentage increase in minimums in 35 years."

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How important are residuals to workers' income?

Some writers and actors have had significant residual paydays for decades after their work premieres. USA Today reported in 2015 that Warner Bros. was earning $1 billion a year from the hit show "Friends," which ran from 1994 to 2004. Two percent of that amount - or $20 million - goes to each of the stars every year.

But "Friends" is a major exception. Residuals rarely amount to much, even for hit shows.

On the picket line outside Warner Bros. Studios in Burbank, Calif., on Friday, actor Sanaa Lathan explained how residuals can help actors pay their bills while they audition.

"At least when you worked back in the day, you saw residuals and you could pay your bills," Lathan said. "I think I got my SAG card doing a Secret deodorant commercial. I was able to pay my rent back then for a whole year while I was still a struggling actor going out for auditions. That would never happen today."

And even before streaming, the unions say residual checks for most projects were paltry.

"There's no 'Full House' money. I didn't own the show," Bob Saget, who played Danny Tanner on the sitcom, told PopEater in 2010. "You get nothing. Residual checks on shows are nothing. If you're doing a show and you're not an executive producer and own it, then you get residuals which can amount to checks from $2 to $2,000." (Saget died in 2022.)

And for some, $2 is overstating it. Workers often receive checks for pennies, a trend so well-known that Residuals Tavern in Studio City says it will give any actor a free drink for a residual check less than one dollar.

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How long have residuals existed?

Before the 1950s, actors were paid once for their work. Residuals were not part of the conversation.

But under the leadership of Ronald Reagan, the actor who would later become president of the United States, SAG successfully negotiated residuals for TV programs. AFTRA, a separate entity at the time, did the same, but movie actors still didn't get a dime when their work was licensed to networks.

That win for the unions came in 1960, the year after Reagan agreed to return to the SAG presidency. He presided over a historic five-week strike that led to residual payments for film actors. Hollywood actors struck alongside writers, just as they are this summer. That writers strike lasted 21 weeks.

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The Washington Post's Anne Branigin, Samantha Chery, Tamia Fowlkes and Lindsey Underwood contributed to this report.