months after settling the actor/writers strikes, streamers want to rip up the compensation structure for talent
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Netflix, Amazon and Apple plan big changes to Hollywood’s pay model
In recent weeks, Apple Inc.’s Hollywood studio has told its business partners that it wants to change the way it pays talent. After years of compensating people as though all their projects were successful, Apple will soon begin basing pay on how a series or movie performs.
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Apple has already met with talent representatives to propose a new performance-based compensation regime, according to a memo that we’ve seen and conversations with several people involved. Talent would receive bonuses based on a points system; the size of the bonuses will be based on three criteria: the number of people who signed up for Apple TV+ to watch, how much time they spent viewing and the cost of the program relative to the size of its audience. People with one of the top three shows could share up to $10.5 million for a season.
This plan isn’t final. Apple has asked people for feedback. It also doesn’t apply to every show on Apple – just those the company produces in-house. But the tech giant, along with Amazon and Netflix, is in the early stages of an experiment that will make the streaming business look a little bit more like the Hollywood of yore.
Netflix and Amazon have both spent months developing new plans for performance-based compensation, though neither one has gone public with the model just yet. Amazon still needs to pick the most relevant data point, like what percentage of a show’s viewers finish it, and both companies need to determine how they will pay people. They aim to try out the new models in the coming months.
Streaming services are changing the system to better align pay with performance, something many people in Hollywood say they want. Producer Jason Blum and United Talent Agency chief Jeremy Zimmer have both made similar arguments; when you get $10 million whether your show is good or bad, you have less incentive to do it well.
Many top producers and talent representatives are skeptical. They believe these companies are just trying to save money. These latest proposals still don’t offer real ownership or a share or profit. Apple and Disney are both offering bonuses.
But Zimmer and others still see progress.
“The good news is everyone is thinking about it and talking about it,” Zimmer told me Friday. Media companies do need to bring the cost of production down, and they can do so by reducing their upfront payments. In order to get talent to buy into such a change, they need the carrot of a bigger payday down the line.
The current system began, as with so much in Hollywood these days, with Netflix. Netflix offered lots of money up front — treating every show as a modest hit — because it was the new kid in town; it needed to offer bigger sums to win projects. It could guarantee a season (or two) and pay well over the cost of a show.
Netflix also had no plans to license its programming to third parties and wanted to control the rights all over the world, so it was in effect buying out any potential rewards in the future (what’s known in Hollywood as back-end).
Netflix built on that model when it started making more shows in-house. It offered top TV producers lucrative long-term contracts so they wouldn’t work with the competition. Overall deals weren’t new, but Netflix offered unprecedented terms and sought complete ownership of a show.
Everyone loved the Netflix way at first. Writers got paid even when a show they created was unpopular. Producers and big stars received so much money up front that they felt like they were making more money than ever before. Netflix transformed into the most powerful TV network in the world, and every other major company had to follow along or risk losing their best writers.
Yet in recent years, many people in Hollywood have begun to think these deals aren’t always in their best interest. The average worker felt like they were doing more work for less money, which is a big reason for the two strikes of last year. Writers and actors secured more viewership data and higher pay, but they didn’t alter the fundamentals.
TV producers, writers and stars aren’t thrilled either. They used to earn generational wealth. They were paid every time an episode was rerun and every time a show was licensed to another TV network in the US or abroad. There are writers who still earn tens of millions of dollars a year for shows that no longer air new episodes.
Yet today at Netflix you can create the most popular show of the year and get paid like it was just a modest hit. Now, the stars and producers of hit shows like Stranger Things and Wednesday can still make pots of money. when they renegotiate their deals for new seasons.
As media companies seek to rein in costs and boost profit, they too have begun to question the system, which they worry leads to excess. When waste doesn’t hurt a producer’s take-home pay, there is little incentive to bring in a show under budget.
Industry experts worried about the soaring cost of producing TV seven years ago, and it’s only gotten worse since then. Under the Apple model, your bonus shrinks if the show goes over budget.
The situation is a little different at every company, and it’s quite different in movies. Netflix isn’t rushing to change its payment model in TV; it’s more focused on film.
Netflix isn’t the most powerful movie studio, and the company needs to offer some upside to compete for projects. Most film studios still release their projects in theaters, which means a producer, actor or director can still make a lot more money. Christopher Nolan will eventually earn more than $100 million from Oppenheimer, and will never work at Netflix.
If you are directing a $5 million horror movie, you can release it through Warner Bros. or Universal and make a killing if it grosses $100 million. If you release it on Netflix, you might get $1 million on top of the production cost. Which deal are you taking?
As soon as Dan Lin started his new job as the head of film at Netflix, he started telling everyone about his plan to change the way the streaming service pays talent. Agents and producers have heard this before. Lin’s predecessor, Scott Stuber, also tried to overhaul compensation, to no avail. But Lin has the support of his bosses, co-CEO Ted Sarandos and Bela Bajaria, chief content officer. Bajaria’s team had been looking into this before Lin arrived.
Netflix is expected to test the model with a few projects. It won’t apply to every movie.
The biggest question in all of this is whether companies will disclose more viewership data to help talent and their representatives understand the decisions. While Netflix will likely equate performance with viewership, which it discloses, it’s not clear that any other service is ready to do that. Apple says partners will be able to have its rankings audited, but it’s not going to share raw data with anyone.
“If we’re going to have a new system, they have to give us real numbers,” Zimmer said.
And yet, streaming services are unmistakably inching toward a world of greater transparency. The more data they share, the easier it will be to tie pay to performance. Just give it a few more years.
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