The Movie-Streaming Dilemma: What Does Success Mean in the Post-COVID Era?
While the parties have settled the suit privately,[1] the dispute highlights how Covid-19 prompted entertainment companies to move toward a streaming-based business model in order to survive.[2] Some studios have revisited contracts that were negotiated around box office performance before the pandemic hit.[3] While more recent contracts include provisions regarding streaming to project the future of entertainment, Johansson’s contract was finalized in 2017, before the creation of Disney+ and the proliferation of film streaming.[4]
As this approach becomes the new reality of film distribution, there are concerns about what is the “best model for paying talent.”[5] The traditional approach of negotiating contracts around box office sales benefited both studios and talent.[6] Media companies did not have to pay talent up front and risk the production not being a success, while actors, directors, and producers “could look at box office results to see exactly what their production was worth and get paid accordingly.”[7] The Netflix model, by contrast, pays talent a set fee and no profit participation (receiving a percentage of the film’s revenue depending on its profitability, also known as “backend” compensation), with the slight possibility to secure a bonus that is paid over time.[8] While Warner Bros. renegotiated Wonder Woman’s release after the pandemic hit and agreed to pay star Gal Gadot and director Patty Jenkins $10 million each to compensate for what they would have been paid with a traditional theatrical release, Warner announced the hybrid release of 17 additional movies without consulting or renegotiating with those films’ talent.[9] While its unclear whether Warner had a legal obligation to renegotiate the profit participation for these 17 films,[10] the move raises concerns similar to those stressed by Johansson.
The “Netflix” model typically employed for streaming makes it difficult to determine the value of a particular project because of the lack of transparency from streaming services on their performance data.[11] This makes it difficult for actors, producers, and directors to know if they are being paid their fair share and “advocate for themselves in negotiations” for future compensation.[12] While box office sales provided agents, managers, and lawyers a clear metric to determine a movie’s performance, it is unclear what success in the streaming world looks like, or how it is measured—is it based on “viewership numbers, new signups, repeat views,” or something else?[13] Not only do actors fear that the terms of their salary may be based on arbitrary metrics, some studios are selling the distribution rights “to streaming services and TV channels owned by the same corporate parent,” yielding concerns that services are paying below market rates.[14] For instance, Warner Bros. and HBO’s (Warner’s corporate sibling) licensing fee agreement under the WarnerMedia plan, which moved Warner’s entire 2021 slate to a hybrid release model, has been criticized as unfair self-dealing.[15] Not only is the value in the agreement not contingent to subscriptions or film engagement on HBO Max, but film agents believe that Warner should have made “a good-faith effort to see what prices other companies might have paid for the Warner Bros. movies before selling them to itself.”[16] Their failure to maximize value for profit participants may leave talent underpaid. This is not a new phenomenon, however, as the rise of media super-conglomerates in the 1990s has increased antitrust concerns as well as litigation over self-dealing.[17] Moreover, because a standard for financial success in streaming has not yet been established, each studio or platform is defining that threshold differently, further complicating the problem for talent.[18]
As studios continue to take different approaches to resolving these novel issues, one thing is clear: there must be greater transparency in the metric and data of streaming success, so that talent no longer feel that they are “walking into negotiations blind.”[19] And while the future of film release remains uncertain with the persisting pandemic and weak box office sales, it is not likely that studios will easily take away what has provided viewers comfort throughout their time at home—online streaming.
Footnotes
