By: Rahul Soni, Business Analyst - BFS & M&E, LTI

Someone has rightly said – Entertainment is a serious business. Media and Entertainment business enterprises have become global organizations, where media selling to cross-continent affiliates and partners have got aided by widespread broadband adoption. As the entertainment industry is thriving hard to find newer sources of revenue, box office collections and TV ratings, the impact of guilds are heard loud and clear on the day-to-day business of the production house.

Each production house has to make sure that the residuals are paid to the guilds on timely manner, as negotiated in the collective bargaining agreement. The guilds, in turn, pay to the talent or its beneficiary. Any delay in the payout can lead to penalties and revenue loss.
Residual calculation is complex and depends on various factors including guild membership, initial compensation, time worked, basic minimums, territories like domestic or foreign, type of production (e.g. DVD, Subscription Streaming, and Network TV), etc. Additionally, residuals change a lot based on guild contracts, which is renegotiated in every three years.

Current Challenges

Most of the production houses do not any sophisticated software to handle such complex calculations, nor do they have scalable solutions to meet the newer demands. The entertainment business is also very dynamic and newer markets are getting introduced day-by-day, due to which the guilds are also negotiating newer terms and conditions for the residual payout. Many production houses are still relying on their legacy system, where they are using manual processes to capture data, develop new rules and finally generate the calculations and send the checks to the guilds. Moreover, there is a huge challenge in maintaining a product library and keeping a track of residuals payouts.

Due to these operational challenges, the production house has to invest a lot in manpower to handle the residual business. There is a leakage of revenue and lack of operational efficiency in maintaining this business.

Solutions

Production houses are maturing over time and they are realizing the need to invest in this area to achieve operation efficiency, and meet future demands from the guilds for newer markets. A robust, scalable and effective solution is need of the hour.

Looking at the complex nature and association of residuals payout until product life time, there is a need to implement newer, reliable & scalable technologies like blockchain, exchanged external rule engine, etc. in this area. Systems can be custom-built to cater to the specific demand of the production house using latest technology, where all the parties including guilds, talents and production house can keep a track of the residual throughout the life cycle of the product. This will save cost and avoid any arbitration in future. A bold step is very much needed to ride the current technology stream and secure the future business.