Big Fish DVD coverAccording to The Hollywood Reporter, Big Fish sold 2 million DVDs in its first week of release. Many thanks to all of those who bought a copy. Or three. And if you haven’t bought one yet, you can click the pretty picture to buy one through Amazon.

The screenwriter averages about five cents in residuals for every DVD sold, so that works out to $100,000. That’s a solid amount of money — enough to convince otherwise rational Americans to humiliate themselves on reality TV shows, for instance. So before I launch into an explanation about why DVD residuals are too low, understand that I’m not so jaded as to think a hundred g’s is a pittance. It’s a lot, and I’m grateful for it.

The issue of DVD residuals (and video-on-demand, the technology that will one day supplant it) is one of the primary topics of the current WGA negotiations. I won’t go into a long history here, but the formulas used for home video residuals are based on videotapes, which are relatively expensive to produce, and sell for a fairly low price. Technology changes. DVDs are cheaper to produce, and sell for a higher price. But the formula for paying residuals is still locked into the old paradigm. Studios make a hell of lot more on each DVD they sell, but the writer (and actor, and director) still get the same amount.

residualsA recent campaign by the WGA East does a graphical breakdown of the numbers, but let’s take Big Fish as an example. According to Video Business, its MSRP is $28.95, but most people will pay less than that. Let’s say $20, which is what you’d pay on Amazon. And Amazon is still pulling a 25% markup at that price; it buys the DVD wholesale at $16.

How much does it cost to manufacture, package, distribute and market each DVD? On average, $5.45. So the studio is making a profit of $10.55 on each DVD sold. For Big Fish, that means Columbia/TriStar has made $21.1 million profit in just one week. Of that, the writer gets the “point-one.”

I’m certainly not faulting the studios for having found a great business model. I love DVDs. But whenever writers, directors or actors ask for a greater chunk of residuals, the studios cry poverty, which is absurd. True, fewer movies are earning their investment back in their initial domestic run, but that’s largely because of inflated production and marketing costs. The box office is still incredibly strong, and distributors have never had a cash stream like DVD.

The other arena in which DVDs are crucial is television. TV writers used to make their real money in syndication. Increasingly, series are sold on DVD, which greatly cuts down on the syndication life of a show. After all, who wants to watch an old Smallville at 6:00 p.m. with commercials, when they have a pristine copy sitting on the shelf? Since DVD residuals for TV shows are much lower than syndication residuals, the writer loses.

So how much should the writer get for residuals? Per unit, one percent of the wholesale price. It’s a nice, easy-to-understand figure, which works out to 16 cents per copy. This will never happen. But it would be fair.