But the pay-offs time periods are shorter due to the plethora of viewing options and consumers' shorter attention spans. JL
Joe Flint reports in the Wall Street Journal:
Consolidation and desire of big media companies to keep content in their own ecosystems will make success for creators more difficult, especially if they lack clout. Even successful shows are likely to have shorter runs because of rising production costs and the difficulty of keeping audiences’ attention. Content for Disney+ costs $15 million per episode. A few years ago, an expensive TV show cost $5 million per episode. Netflix popularized upfront payments for talent. Studios “are paying more for writers and producers than ever before,” (but) looking for more flexibility to put shows on whichever platforms they choose, including streaming.
When Walt Disney Co. recently struck a big production deal with Dan Fogelman, creator of the hit drama “This Is Us,” it tore up the usual playbook for signing up TV talent.
Normally, a TV producer’s biggest paydays come after a show has run for a long time, when it sells reruns. But Mr. Fogelman’s new deal, valued at between $100 million and $150 million, according to a person familiar with the pact, is frontloaded. He won’t get any profits from reruns down the road, for “This is Us” or other shows, but in lieu of that he gets an unusually big check right away.
Behind the new model: Netflix Inc., which popularized upfront payments for talent.
The entertainment industry is going through its most dramatic period of change in decades, as Hollywood’s traditional players, fortified by megamergers, launch new streaming services—selling programming directly to consumers online for the first time. They’re spending hundreds of millions of dollars to secure high-quality programming, and in the process are fundamentally reimagining how they do business with talent. Many of Netflix’s tactics are becoming the industry norm. Industry titans like AT&T Inc. ’s WarnerMedia and Disney are locking up the biggest creators, from “Star Wars” veteran J.J. Abrams to “Riverdale” producer Greg Berlanti in lucrative multiyear deals. Studios are looking for more flexibility to put shows on whichever platforms they choose, including their nascent streaming outlets.
On the creative side, even successful shows are likely to have shorter runs—as is increasingly the case on Netflix—because of rising production costs and the difficulty of keeping audiences’ attention given a plethora of viewing options. For consumers, that means more shows they love will run their course within three or four years instead of seven or eight. For the talent, it means moving on to new jobs more frequently.
Luring TV’s biggest stars to jump into streaming, if they already haven’t, is a high priority. Kaley Cuoco has had a charmed life in broadcast TV, most recently starring for 12 years on CBS’s hit comedy “The Big Bang Theory.” She plans to take up her next role in a drama for HBO Max, the upcoming WarnerMedia streaming service that will bring together HBO and the rest of the Warner empire.
“I’m one of the guinea pigs,” Ms. Cuoco said of her deal to star in and produce “The Flight Attendant,” a thriller series based on the novel of the same name. “It is a little scary.”
The new streaming launches are around the corner. Disney, which already controls Hulu, in November will debut a new low-cost service, Disney+, which will feature its major Marvel and Star Wars franchises and a bevy of kids content, some of which is coming from outside suppliers, including “Diary of a Female President,” from CBS Studios. Apple Inc. around the same time is launching with a handful of premium shows featuring big stars. WarnerMedia’s HBO Max and Comcast’s Peacock will debut next year, adding to the already fierce competition between Netflix, Amazon.com Inc., Hulu and CBS’s “All Access.” In just the past several weeks the companies have collectively committed several billion dollars to secure deals with top producers and rights to popular old shows.
Upfront Money
For decades, the formula for producers to make big money in TV was for a show to stay on the air long enough to have 100 episodes or more—enough to sell reruns to other TV networks. The bulk of the profits for production studios and show creators have come from those “syndication” deals, not the initial fees to produce and air the show. The creators of “Seinfeld,” “Friends” and “The Simpsons” made hundreds of millions of dollars this way, as stakeholders who were entitled to a cut of the profits.
“Television used to be about bulk and volume and you fought to keep your show alive to get to that magic number,” said producer Josh Schwartz, whose credits include the teen drama hits “Gossip Girl” and “The O.C.”
Netflix did away with that model when it started wooing superstar producers to make content exclusively for the service, including “Grey’s Anatomy” creator Shonda Rhimes and “Glee” producer Ryan Murphy. Netflix paid nine-figure upfront fees to Ms. Rhimes and Mr. Murphy. Netflix doesn’t sell reruns of its shows to other platforms, so there weren’t any syndication profits to be had for the producers, and the producers wanted a bigger check to work for Netflix.
Now, Warner Bros., Disney and other studios are embracing the Netflix approach with some of their top producers. When Warner Bros. signed Mr. Berlanti for $300 million last year, the deal was structured similarly to those Netflix pacts. He gets a large amount of upfront money that essentially buys him out as a “profit participant”—or financial stakeholder—in the shows he has made with the studio, a person familiar with the deal said. He will also receive bonuses based on how long a show runs.
Messrs. Berlanti and Fogelman declined to comment on their deals.
These ideas aren’t just being applied to the superstar producers. At Disney, the TV business unit has developed a new set of standard deal terms that gives producers big upfront fees but no back-end profits. The stakeholders can be rewarded during a show’s run based on ratings, longevity and even awards, an executive familiar with the system said.
“This is a massive switch in the business and we’re seeing that all over right now,” said Ari Greenburg, president of the talent agency WME. New buyers are driving up costs and traditional studios “are paying more for writers and producers than ever before,” he added.
In traditional TV deals, creators face the risk that their show might not live long enough to get into syndication—or, even worse, they could create 80 or 100 episodes of a show, but never get a big financial payoff because there wasn’t a market for its reruns. Mr. Schwartz, who is making shows for Disney’s Hulu and WarnerMedia’s
HBO Max, said that was the predicament after he produced the NBC comedy “Chuck” for five seasons.
By guaranteeing creators a good amount of money early on, those risks go away, he said. On the other hand, there are possible downsides. If a show becomes a monster hit and does generate a windfall in profits from reruns, “you’re probably leaving a lot of money on the table,” he said.
In essence, it’s a hedge.
All in the Family
As part of its model, Disney can put a show that it has produced on whichever platform it chooses without renegotiating with the producers who created it, the executive familiar with its system said. Warner has a similar approach on some deals. This could be important if either entertainment giant want to steer TV projects produced by its in-housestudios to their own homegrown streaming services.
This represents a change to the usual way of doing things in Hollywood. Studios like Disney’s typically sell the shows they produce to whichever network or streaming service will pay the most, even if it is owned by a rival. If they didn’t, the talent could sue the studio for not maximizing profits. Under the new deals, those suits wouldn’t be as much of a threat. By getting that fat paycheck in the beginning, the creators would essentially be bought out of having a say.
Producer Mike Schur, whose credits include “The Office” and “The Good Place,” is very concerned about the model Disney is using.
There’s a deal you make when you create a show. You guys own most of it, but I own some of it. Together we’re going to go out into the marketplace and sell it to the person who offers the most money,” Mr. Schur said. “The most strident capitalists in the world are the ones opposing a free market,” he added.
A Disney spokesman declined to comment on Mr. Schur’s remarks.
Mr. Schur’s current pact iswith NBCUniversal’s studio and is a traditional contract, but he expects down the road all the big media companies will embrace the new model.
“We’re all going to be swimming against this tide,” Mr. Schur said, adding that this will be the “big struggle” for the creative community in the next 10 to 20 years.
Imagine Entertainment Co-founder Brian Grazer said the consolidation and desire of big media companies to keep content in their own ecosystems will make success for creators more difficult, especially if they are unestablished and lacking clout.
“Sure you can get a show made but would be at the right place? Would the compensation make sense? Those things will be more challenging,” Mr. Grazer said.
So far, the big Hollywood studios have been careful to allow flexibility for their talent to continue to pursue projects elsewhere. Mr. Fogelman’s Disney deal, for example, gives him freedom to work outside the Disney bubble and does not include a mandate to create for Disney+, a person familiar with his contract said. The sheer volume of content needed by the new streaming services will make it difficult for anyone to rely solely on in-house producers.
Sarah Schechter, president of Mr. Berlanti’s outfit, Berlanti Productions, said Warner isn’t pressuring the firm to produce content for its streaming service. “There hasn’t been a monopolistic mandate. It’s more of an opportunity as far as we’re concerned,” she said.
When Warner Bros. signed J.J. Abrams, committing to projects for HBO Max was part of the deal, but he also has the freedom to make shows elsewhere.The deal is valued at $275 million but may exceed that, a person familiar with the matter said.
Both Disney and WarnerMedia are spending heavily on their streaming services. The Marvel Entertainment content for Disney+ costs as much as $15 million per episode, people familiar with the matter said. A few years ago, an expensive TV show cost $5 million per episode. The Disney family shows earmarked for the streaming service are more expensive than what the company spends for programs on its Disney Channel and Freeform outlets, says one executive whose company has a show on Disney+.
‘Three Is the New Five’
It’s always been tough to create long-running shows in television, but under the new economics of Hollywood it will get even tougher. There won’t be financial incentives to get up to 100 episodes. The old ideal of at least five seasons, with 22 episodes per season, is becoming a thing of the past.
“Now it feels like three is the new five and 10 is the new 22,” said Mr. Schwartz.
Some producers say that from a creative standpoint, they prefer the flexibility of doing fewer episodes. “I would rather work in the 10-episode medium for the rest of my career. It gives a novelistic approach to the telling of it,” said Janine Sherman Barrois, a veteran producer and showrunner of the TNT drama “Claws” whose upcoming HBO Max show “Crime Farm” attracted Nicole Kidman as an executive producer.
Ms. Cuoco has a production deal with Warner Bros., which made “The Big Bang Theory” for CBS and is also part of WarnerMedia. In a sign of how projects can move around within the big conglomerates, she thought of “The Flight Attendant” for TNT, a WarnerMedia cable channel, and brought it to Sarah Aubrey, the executive in charge of programming there. When Ms. Aubrey was tapped to oversee content for HBO Max, the project went with her.
She knows the chances of repeating the success of “Big Bang Theory,” which was TV’s No. 1 show for years, are slim, in part because the industry has changed so much and there is so much competition for viewers.
I don’t think that sort of situation, that kind of money, that kind of attention for 12 years is even possible,” said Ms. Cuoco, who got her start 25 years ago in an episode of ABC’s “My So-Called Life.”
She said there is something “very enticing about being on the ground floor” with the HBO Max service, though she still plans to be in the mix when broadcast TV shows are being cast in the spring. “I need to be out for pilot season,” she said.
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