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SAG-AFTRA Verticals Agreement: Five Key Aspects You Need to Know

Here's what SAG-AFTRA's Verticals Agreement actually covers.

By: Ryan Wedell and Zach Dai, Sheppard, Mullin, Richter & Hampton LLP

SAG-AFTRA's Verticals Agreement has quietly become one of the most consequential compliance questions facing U.S. vertical drama producers. As the microdrama format scales, guild jurisdiction is no longer a fringe concern, it's a budget line item, a scheduling variable, and increasingly, a distribution decision.

Background: The Verticals Market and Growing Guild Attention

Vertical micro-dramas (often called “verticals”) have moved from a niche format to a meaningful source of work opportunities for U.S. performers, especially as traditional film and television production has slowed. These programs are typically shot in portrait orientation for mobile viewing, released in rapid-fire chapters that are 1-3 minutes in length (90-120 minutes total), and built to keep audiences clicking from cliffhanger to cliffhanger.

The format took off in China during the pandemic and is in the midst of an aggressive expansion into the U.S., where U.S. revenues reportedly reached $819 million in 2024 and are projected to rise to approximately $3.8 billion by 2030.

Against that backdrop, the three major Hollywood guilds (SAG-AFTRA, WGA and DGA) have advised their members that work on verticals is within the jurisdiction of the respective guild agreements and so must be contracted with signatory producers. However, SAG-AFTRA took the additional step of promulgating a “Verticals Agreement” that is narrowly tailored to this format in an effort to make it more cost effective for vertical producers to become a signatory and engage SAG-AFTRA members.

Five Key Aspects of the Verticals Agreement

The Verticals Agreement is promulgated by SAG-AFTRA rather than collectively bargained with the studios, so it is a living, breathing document that is periodically updated and whose terms can potentially be negotiated with the guild on a project-by-project basis. With that being said, here are five key aspects of the Verticals Agreement as currently offered by SAG-AFTRA:

1. Eligibility and Scope
The general requirements for eligibility are as follows:
- Program budget of up to $300,000 (or $350,000 if background actors are covered);
- Program shot entirely in the United States;
- Program has no more than 30 consecutive shooting days;
- Program is made for initial and primary release in new media via mobile phones in a 9:16 format; and
- Program chapters are approximately 3 minutes or less.
If the program is not eligible for the Verticals Agreement or ends up being initially distributed in traditional media (e.g., theatrical, television, home video, etc.), then it would be subject to SAG-AFTRA’s more onerous basic agreement.

With respect to the scope of the Verticals Agreement, notably it does not require coverage of background actors. However, if the signatory producer agrees to cover background actors, then the budget limit for eligibility purposes is increased to $350,000.

2. Minimum Compensation and Pension/Health Contributions
Minimum scale compensation is established on a daily basis, with tiers for lead and non-lead performers based on 8 or 12 hour days with standard overtime rules. The applicable minimum compensation for a lead performer (currently $250 for 8 hour and $468.75 for 12 hours) is approximately twenty percent (20%) of the SAG-AFTRA minimum daily rate for film and television. For purposes of determining applicable SAG-AFTRA money/schedule breaks, all chapters of the program (including credits and ad breaks) are treated as a single long-form motion picture.

Pension and health contributions are calculated and paid at the full rates set forth in the SAG-AFTRA Television Agreement, so there are no special discounted rates or contribution caps for the Verticals Agreement.

To put the compensation numbers in context: on a $200,000 production — a common budget range for a U.S. vertical drama shoot — cast typically accounts for roughly 20–22% of total spend, or approximately $40,000–$44,000. Under the Verticals Agreement minimum, a lead performer working a 10-day shoot on 8-hour days would be owed $2,500 in scale wages, plus pension and health contributions at the full Television Agreement rate (22% as of July 1, 2026). Across two leads and a supporting cast, the guild-compliant cast floor on a $200,000 production is meaningfully lower than what most non-union productions already budget for experienced performers — which explains why the agreement has gained traction among producers who were already paying at or above that range informally.

3. Exclusivity and Consecutive Employment
Consecutive employment rules–which generally require payment for unworked days during the employment period—are relaxed for vertical producers and only enforced if the performer is working on a distant location or if the performer had agreed to hold an unworked day available. In exchange for these relaxed rules, the performer must be non-exclusive during photography, though the performer has a loose obligation to provide the vertical producer with 36 hours advance notice of any conflicting engagements, and as stated above the performer can agree to hold a day available if the performer is paid for such day. The result of all this is that vertical producers have flexibility to schedule performers’ services non-consecutively without incurring significant costs, though doing so could create availability challenges unless the producer separately pays for the performer to hold later days available.

4. Residuals and Promotion
If the program is original and budgeted below $25,000 per minute, no residuals are due for exhibition of the program in new media. In all other circumstances (e.g., non-original, more than $25K/min, exhibition in traditional media), the vertical producer must negotiate with SAG-AFTRA and residuals are likely to be owed.

With respect to reuse of photography/clips from the program outside of the program (other than promotion), if a performer is included therein then the vertical producer must obtain that performer’s written consent (via a document separate from the performer’s employment contract) and negotiate for additional compensation payable to the performer. Additionally, any requirement for a performer to render promotional services on a non-work day must be agreed to by the performer in writing for additional compensation.

Accordingly, while vertical producers are unlikely to be burdened by residuals for programs that are only exhibited in new media, they will face additional consent and payment requirements for other uses of the program and for certain promotional services of performers.

5. AI, Digital Replicas, and Data Protection
In addition to incorporating all of the existing AI, digital replica and digital alteration rules in the SAG-AFTRA Basic Agreement, the Verticals Agreement goes several steps further by: (a) restricting the use of fully synthetic performers in place of human roles without bargaining with and obtaining consent from SAG-AFTRA, (b) prohibiting the use of audio/visual content captured under the agreement to train AI, and (c) requiring more stringent custodial requirements for securing and deleting digital replicas.

Takeaway

The Verticals Agreement offers a workable path to engaging SAG-AFTRA members, but it requires careful planning to understand how guild compliance can impact the budget, schedule and distribution plan for the program. For vertical producers operating in the U.S. market, understanding these five dimensions before entering production — rather than after — is where the compliance calculus begins.

About the Authors

Ryan Wedell and Zach Dai are entertainment lawyers in Sheppard Mullin's Entertainment, Technology, and Advertising Practice Group. Ryan specializes in scripted production and Hollywood guild regulations, with credits including Yellowstone, Tiger King, 1883, and The Summer I Turned Pretty. Zach focuses on global transactional matters and advises vertical micro-series platforms on production legal needs.