The SAG-AFTRA Verticals Agreement One Year On: What Changed and What Producers Got Wrong

On October 13, 2025, SAG-AFTRA announced the Verticals Agreement, a promulgated new media contract specifically created for the unique needs of serialized micro-dramas designed for mobile screens. The agreement covered productions with budgets under $300,000, set lead performer minimum day rates at $250, and included what were at the time the most specific AI and digital replica protections in any entertainment union agreement.

Nine months later, the picture is more complex than either the agreement's enthusiastic reception or its skeptics' concerns predicted. The Verticals Agreement has not transformed the vertical drama industry into a predominantly union production ecosystem. It has also not been ignored. It has done something more commercially interesting: it has clarified exactly which production decisions create guild compliance exposure, which producers have been operating outside the agreement's jurisdiction without knowing it, and which provisions have created practical production challenges that the successor agreement needs to address.

This post covers what changed, what did not, and what the experience of nine months of productions navigating the agreement reveals about what the format actually needs from its labor framework.

What the Agreement Actually Said

Before addressing how it has played out in practice, the agreement's specific terms deserve precise description rather than the summary version that circulated in the industry press at launch.

The Verticals Agreement covered productions with budgets under $300,000 and sunset automatically on June 30, 2026 unless extended. The $300,000 budget ceiling was calibrated to capture the format's standard production tier in the US market: a professional-tier vertical drama series shooting 7 to 10 days with experienced cast in Los Angeles or New York.

Compensation structure: Lead performers at $250 per day minimum, $468.75 for a 12-hour day including overtime. Supporting cast at $164 per day, $307.50 for a 12-hour day. Background performers at $144 per day under the Background Actor Employment Incentive. Pension and health contributions calculated at the full Television Agreement rate of 22% as of July 1, 2026, with no special discounted rate for the vertical format.

Production scope: A maximum 30-day shoot cap. The 30-day ceiling was set to reflect the format's typical production schedule rather than to constrain productions that would naturally fall within it.

AI, digital replica, and data protection provisions: The agreement incorporated all existing AI, digital replica, and digital alteration rules from the SAG-AFTRA Basic Agreement and added three provisions specific to the Verticals context. First, restricting the use of fully synthetic performers in place of human roles without bargaining with and obtaining consent from SAG-AFTRA. Second, prohibiting the use of audio/visual content captured under the agreement to train AI. Third, requiring more stringent custodial requirements for securing and deleting digital replicas.

The digital replica deletion requirement that the AI Voice Cloning post references, 90 days, comes from the agreement's custodial requirements combined with the Basic Agreement's digital replica provisions. A production company that trains a voice clone or visual character model from footage captured under the Verticals Agreement and retains that model beyond the completion of the production it was created for is in non-compliance regardless of whether the retention was intentional.

What Producers Got Wrong: The Five Consistent Errors

Nine months of productions operating under, around, or in ignorance of the Verticals Agreement have produced a consistent set of compliance errors. These are not errors that producers made because they were trying to avoid the agreement. Most of them are errors that producers made because they did not understand the agreement's scope or its specific provisions.

Error 1: Misunderstanding the Budget Ceiling

The $300,000 budget ceiling is a total production budget threshold, not a performer compensation threshold. Productions that calculated their performer-only costs against the $300,000 ceiling and found they were below it incorrectly concluded they were operating below the agreement's threshold.

The total production budget includes all production costs: locations, equipment, crew, post-production, and performer compensation. A production that spends $150,000 on performers, $60,000 on locations and equipment, $40,000 on crew, and $50,000 on post-production has a total production budget of $300,000 and falls within the agreement's scope. A production that treats only the performer line as the relevant budget for threshold calculation is likely misclassifying productions that should be operating under the agreement.

Guild jurisdiction is no longer a fringe concern. It is a budget line item, a scheduling variable, and increasingly, a distribution decision. The budget threshold calculation is a distribution decision because a production that discovers after delivery that it should have operated under the Verticals Agreement faces potential retroactive compliance obligations that can affect the series' distribution clearance.

Error 2: Treating the AI Training Prohibition as a Narrow Restriction

The prohibition on using audio/visual content captured under the agreement to train AI has a broader scope than most productions initially assumed. The assumption was that this prohibition applied specifically to creating AI-generated replicas of the specific performer captured in the footage. The practical application is broader.

The prohibition covers any use of the captured audio/visual content as training data for AI systems. A production company that uses footage from a Verticals Agreement production to fine-tune a character generation model, train a voice synthesis model on the actor's dialogue, or incorporate the production footage into any AI training dataset is in violation of the agreement regardless of whether the resulting AI output is used to generate the specific performer or a generic character that happens to resemble them.

This has specific implications for hybrid AI production workflows that use live-action footage as reference for AI character generation. The production footage can be used as a reference image in a generation session, where the model processes the image as conditioning input without training on it. It cannot be incorporated into the model's training data. The distinction is technically meaningful but requires production companies to understand specifically how their generation tools handle reference images versus training inputs.

Error 3: Misreading the Synthetic Performer Restriction

The restriction on using fully synthetic performers in place of human roles without bargaining with and obtaining consent from SAG-AFTRA was read by some producers as a blanket prohibition on AI-generated characters in productions covered by the agreement. This reading is incorrect.

The provision restricts the use of synthetic performers in place of human roles, meaning in roles that would otherwise be performed by union members on a production that has otherwise elected to operate under the agreement. A production that uses AI-generated characters in roles that are not human performer roles, environmental characters, background elements generated entirely through AI, or non-humanoid elements, is not using synthetic performers in place of human roles.

The provision also requires bargaining and consent, not automatic prohibition. A production that wants to use a synthetic performer in a role that would otherwise be a union role can do so if they bargain with SAG-AFTRA about that use and obtain consent. The bargaining obligation is the provision's mechanism, not the prohibition on all synthetic characters. Productions that read the provision as prohibiting AI characters entirely, and made production decisions based on that reading, may have constrained their production approach more than the agreement requires.

Error 4: Missing the Custodial Requirements for Digital Replicas

The more stringent custodial requirements for securing and deleting digital replicas created compliance obligations that most productions did not build into their production management workflows because they did not know those workflows needed to exist.

A digital replica created in the course of a Verticals Agreement production, a voice clone trained on the actor's dialogue, a visual reference model built from the actor's captured footage, requires specific custodial management: access controls limiting who can retrieve or use the replica, storage security that protects against unauthorized access, and a deletion protocol that removes the replica within the agreement's required timeframe unless a separate ongoing use agreement with compensation is in place.

Productions that created these digital assets without establishing a custodial workflow around them, without naming a custodial responsible party, and without a documented deletion timeline, are in technical non-compliance even if they never used the replica for a prohibited purpose. The custodial obligation is procedural, not only substantive. Compliance requires building the management workflow, not only avoiding the prohibited uses.

Error 5: Ignoring the WGA Parallel

While the SAG-AFTRA Verticals Agreement was being negotiated and announced, the WGA separately clarified that work on verticals and micro-dramas is covered by the Minimum Basic Agreement for writers. The WGA's position did not receive the same industry attention as the SAG-AFTRA announcement. Productions that understood their performer obligations under the Verticals Agreement frequently did not understand their writer obligations under the WGA's existing framework.

A production that operates under the SAG-AFTRA Verticals Agreement while engaging non-WGA writers for its scripts is operating under a compliance framework that covers one production category while potentially creating exposure in another. The vertical drama production company that is navigating SAG-AFTRA compliance correctly and WGA compliance incorrectly is building an exposure in its chain of title that will affect its distribution options as the format's guild oversight matures.

What Actually Changed in the Production Landscape

The Verticals Agreement's practical effect on the vertical drama production landscape in the nine months since its signing has been different from both the optimistic and pessimistic projections at launch.

The Compliance Conversion Was Partial

The agreement did not immediately convert the vertical drama production ecosystem into a predominantly guild-signatory market. The majority of vertical drama productions in the US market continued to operate on a non-union basis through the agreement's initial term. This reflects the agreement's structure: it covered only productions under $300,000, it was promulgated rather than collectively bargained, and the compliance obligations it created were new enough that the production community needed time to understand them before actively embracing them.

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. This observation explains the agreement's partial adoption pattern. Productions already paying experienced performers at or above the minimum rates found that guild compliance added process overhead without significantly increasing their cash cost. Productions operating on lower performer budgets found the minimum rates more constraining.

The Agreement Created Distribution Clarity

The most commercially significant practical effect of the Verticals Agreement has been in distribution rather than in production. The major streaming platforms that have begun licensing vertical drama content, most visibly through the Peacock-ReelShort deal, have chain of title review requirements that include clarity on performer rights, AI use, and digital replica management.

Productions that operated under the Verticals Agreement have cleaner chain of title documentation for the AI and digital replica provisions than productions that operated outside any formal framework for these obligations. As secondary licensing markets for vertical drama content develop, the productions with clear guild compliance documentation are in a better position for those licensing conversations than the productions whose AI and digital replica practices are undocumented.

The AI Training Prohibition Created the Most Production Friction

The provision that created the most practical friction in the nine months since the agreement's signing was the prohibition on using captured audio/visual content to train AI. This provision conflicted with production workflows that had developed organically in the pre-agreement period, where live-action footage was routinely used to build character reference packs, voice clone training sets, and visual style references for AI-assisted production.

Productions that had built their workflows around using captured footage as AI training material discovered, after the agreement's signing, that this workflow was explicitly prohibited for any production operating under the agreement. The adjustment required either separating the training workflow entirely from Verticals Agreement productions, using only pre-production materials captured outside the agreement's scope for AI training, or obtaining specific consent provisions at the talent booking stage that addressed the training use explicitly.

The productions that adjusted most efficiently were those that understood the training prohibition as a workflow constraint requiring pre-production planning rather than as a prohibition on AI use generally. The productions that struggled most were those that discovered the prohibition after production had begun and the training workflow was already embedded in their pipeline.

What the Successor Agreement Needs to Address

The Verticals Agreement's automatic sunset on June 30, 2026 created the framework for a successor agreement that addresses the nine months of practical experience that the initial agreement generated. Several provisions require revision based on what that experience revealed.

The Budget Threshold Needs Clarity

The $300,000 budget threshold produced consistent interpretation disagreements about what costs count toward the total production budget. The successor agreement needs a clearer definition of the budget calculation methodology: what costs are included, how co-production arrangements between US and non-US production entities are treated, and how AI-native production costs that do not have conventional production line item equivalents are categorized.

The format's AI-native production tier, which produces series at $60,000 to $100,000 total cost, falls well below the $300,000 ceiling. But the hybrid production tier, which combines live-action performer costs with AI post-production costs, produces a total production cost that may or may not approach the ceiling depending on how the AI post-production costs are classified. The successor agreement should provide specific guidance on hybrid production budget calculation.

The Synthetic Performer Provision Needs Precision

The restriction on synthetic performers in place of human roles has been productive in principle but imprecise in practice. The successor agreement should define synthetic performer more specifically, distinguishing between AI-generated characters that are generated from non-performer source material and therefore clearly outside the provision's scope, and AI-generated replicas of specific performers that are clearly within it.

The provision should also clarify the bargaining process: how does a production company initiate the bargaining obligation for a synthetic performer use, what does SAG-AFTRA's response timeline look like, and what constitutes consent for the purpose of a specific production's synthetic performer use. These procedural details were absent from the initial agreement and created uncertainty for productions that wanted to comply with the provision but did not know how.

The AI Training Prohibition Needs an Adjacent Provision for Consent-Based Training

The prohibition on using captured content for AI training without a consent provision pathway has created a situation where productions that want to build AI character consistency tools from their own productions have no compliant pathway to do so even when the performer would consent to this use and be compensated for it.

The successor agreement should create a specific consent and compensation framework for AI training use of captured content that mirrors the digital replica consent framework. A performer who consents to their captured audio/visual content being used for AI training in a specific, bounded production context, with specific compensation for that use, should have a compliant pathway to do so. The absence of such a pathway pushes training workflows outside the agreement's scope rather than regulating them within it.

The Deletion Requirement Needs a Clear Timeline and Process

The custodial requirements for digital replica deletion need to specify a deletion timeline, a deletion verification mechanism, and a process for retaining digital replicas under a separate ongoing use agreement. The current framework requires deletion within a timeframe derived from the agreement's broader digital replica provisions, but does not specify the timeline explicitly in the context of vertical drama production cycles.

The successor agreement should specify: the deletion timeline from the production's completion, the acceptable deletion verification documentation, the process for transitioning from production-use digital replicas to ongoing-use digital replicas under a separate agreement, and the compensation framework for ongoing-use retention.

The June 2026 TV/Theatrical Agreement and Its Implications for the Verticals Successor

In June 2026, SAG-AFTRA members ratified a new TV/Theatrical Agreement that builds on prior AI and digital replica protections with new terms that further restrict use of synthetics, giving added protection against AI replacing members' work. This agreement sets the framework within which any Verticals successor agreement will operate.

The TV/Theatrical Agreement's new synthetic performer restrictions are more specific and more restrictive than the provisions in the original Verticals Agreement. The successor Verticals Agreement will need to align with these more restrictive terms while maintaining the budget-tiered structure and production flexibility that made the original Verticals Agreement workable for the format's cost structure.

The negotiating challenge for the successor agreement is maintaining a framework that can be adopted by productions at the $60,000 to $300,000 budget tier without creating compliance costs that push those productions outside guild coverage entirely. The TV/Theatrical Agreement's synthetic performer provisions are calibrated for productions at significantly higher budget levels. A direct incorporation of those provisions into the Verticals successor without calibrating for the vertical drama budget tier would create compliance costs that are disproportionate to the format's economics.

Axis AI Studios Perspective

The Verticals Agreement represented the format's entry into the mainstream of US entertainment labor relations. Nine months later, the format is better regulated, more clearly understood in its guild compliance obligations, and more defensible in its distribution chain of title than it was before the agreement existed.

The compliance errors that the nine months revealed are errors that the successor agreement's clearer provisions will reduce. The AI training prohibition that created the most production friction is the provision most likely to receive clarification in the successor, because the friction was not the result of disagreement between producers and the guild about whether performers should be compensated for AI training use of their captured content. It was the result of a provision that created the obligation without providing the consent pathway that both parties would benefit from.

At Axis AI Studios, the Verticals Agreement's AI provisions informed our pre-production talent contracting from the agreement's signing. The talent agreements we execute for every production explicitly address digital replica consent scope, AI training use permissions and limitations, custodial responsibility assignment, and deletion timeline compliance. These are not provisions we added after the agreement forced us to. They are provisions that any production company serious about building a durable catalog should want regardless of the guild framework, because the chain of title clarity they provide is a commercial asset in every licensing conversation.

For production companies building their first guild-compliant vertical drama production or reviewing their existing contracts against the Verticals Agreement's provisions, qualified entertainment counsel is the correct first step. Reach out at business@axisaistudios.com for production partnership conversations.

FAQ

Is the Verticals Agreement Still in Effect After Its June 30, 2026 Sunset?

The agreement contained an automatic sunset provision effective June 30, 2026 unless extended. As of the publication of this post, SAG-AFTRA has not publicly announced an extension or a formal successor agreement. Productions that began under the Verticals Agreement before June 30, 2026 should confirm with qualified entertainment counsel whether their ongoing production and post-production obligations continue under the terms of the agreement after the sunset date, or whether a new compliance framework applies.

Does the Verticals Agreement Cover AI-Native Productions That Use No Live Performers?

No. The Verticals Agreement covers productions that engage SAG-AFTRA members. A fully AI-native production that uses no live human performers is not engaging union members and is therefore outside the agreement's scope. The synthetic performer provision, which restricts using synthetic performers in place of human roles without consent, is a provision that applies only to productions that have otherwise elected to engage union members. A production company that produces a fully AI-native series without engaging any union members has no Verticals Agreement obligations.

What Happens to Productions That Operated Outside the Agreement When They Should Have Been Covered?

Productions that were within the Verticals Agreement's scope, budget under $300,000, US production, use of performers in serialized micro-drama content, but operated without guild compliance face potential retroactive compliance obligations if a performer or the guild identifies the jurisdiction failure. The specific retroactive obligations and their commercial consequence depend on the specific production's circumstances and require qualified entertainment counsel to assess. The distribution implication is the most commercially significant: a production with unresolved guild jurisdiction questions in its chain of title may face challenges in licensing transactions that require clean chain of title, including secondary streaming licensing deals with major platforms.

Further Reading

For the AI voice cloning provisions that the Verticals Agreement's digital replica framework directly governs, the AI voice cloning guide for vertical drama ADR covers the consent documentation, deletion timeline, and disclosure requirements that the agreement creates for voice cloning workflows.

For the casting workflow that the Verticals Agreement's performer compensation rates apply to, the complete casting guide for vertical micro-dramas covers how the agreement's day rates interact with the format's 7-day shoot schedule and the talent booking process.

For the platform deal negotiation that chain of title clarity, including Verticals Agreement compliance documentation, affects, the guide to negotiating your first platform deal covers the terms that guild compliance documentation makes more or less defensible in platform licensing conversations.