The actors' strike in Hollywood looked certain to be averted even as their existing contract expired at midnight on Saturday. Talks continued yesterday, with both sides indicating that agreement was near, thus averting a strike which many had earlier predicted would start today and close down the film industry.

Talks broke off late on Saturday night when the Screen Actors Guild issued a statement saying that negotiations had been adjourned.

"After a week of intense negotiations, the parties agreed that the remaining issues would be better addressed beginning in the morning," said the statement. The president of SAG, William Daniels, best known for his role as Dustin Hoffman's father in The Graduate, had earlier left talks to attend his 50th wedding anniversary party in Santa Barbara.

Agreement between the Alliance of Motion Picture and Television Producers and the actors' unions, SAG and the American Federation of Television and Radio Artists (AFTRA), has always seemed more likely since the writers' union agreed terms on May 4. The slowing economy and the growth of reality TV are also factors that have motivated both sides to reach a deal.

The deal is likely to increase pay for lower-paid actors currently earning between $30,000 and $70,000 a year (£21,000-£49,000) by shifting some of the pay from higher-earning actors. The studios have complained that they are limited in their ability to pay lesser-known actors by the high fees of up to $20m a film demanded by stars. Minimum pay will probably rise at the rate of 3.5%.

Actors will be better paid when television shows are sold to foreign markets but they are likely to lose their battle for an increase in a share of video and DVD sales, one of the key issues in the dispute. Whatever is agreed by negotiators will have to be put to a vote of the 135,000 union members.