Are all involved with the project (actors/director, etc.) paid upfront and Netflix or whoever gets the payments per stream? Or are royalties paid?
In: Economics
Netflix gets paid by it’s subscribers.
They buy shows to stream. Usually for a per viewing fee, but it depends how they negotiate.
Increasingly shows are produced with actors/composers etc demanding a per viewing fee, even for shows made directly by/for streaming services. To an extent this was part of the recent strikes.
This puts streaming services in an interesting position where they actually loose money every time you watch anything. So shows can be removed when they have finished drawing in new subscribers, even if the streaming service themselves commissioned it. Actually saves money to delete their own work.
Most of the people involved in the show are paid an hourly wage or salary like any other employee. The stars of the show, director, and/or producers may get both an upfront salary and entitlement to a percentage of the show’s ongoing revenue.
That ongoing revenue derives from how the shows are produced. A production company makes the show and owns the rights to it. The production company then sell those rights to the streaming service. The rights to a show aren’t always sold to a streaming service permanently – its more common that they’re sold for a limited period of time, after which the production company can resell the streaming rights to someone else.
Its also more common for a production company to sell streaming rights for a lump sum, rather than to include an ongoing royalty. IE, the streaming service makes a one off payment of $X and then gets to stream the show for Y years. That being said, in some cases there will be a royalty paid based on total streams watched.
Again, that money doesn’t go directly to the actors, it goes to the production company. If the actor is entitled to a percentage of the revenue that the show earns, then the production company pays the actor out of the money it receives from the sale of the streaming rights.
Short answer: you get paid a union rate, and then you may or may not receive a residual, which is a periodic payment that gets progressively smaller over time.
Everyone involved in TV and movie production is part of a union, so they get a guaranteed minimum rate from their union. Let’s say it’s $4,000 a week for an actor. The actor works for 2 weeks, and gets paid $8,000 and then they are out of work and have to start looking for a new job, or go back to their day job.
A few months later the project airs, and now the actor will start getting paid residuals. A residual is a payment that starts out big, and gets smaller and smaller over time. Let’s say your first residual is $1,000. The next one is $800, then $500 until eventually it’s a few bucks.
This residual structure was based on traditional television, where the advertising rates would correspond with viewership of the program. The first time an episode of a hit sitcom airs, they can charge a lot of money for ads. Same for the first rerun of that episode. But by the tenth time they rerun the episode, not that many people are watching, so the residuals are smaller.
For STREAMING, this entire structure has been turned on its head. Yes, the actor will still get a union minimum or better, but there are no advertisers and no ad revenue.
Remember the actor from before who worked for two weeks and then was out of a job? Well, in order for them to stay in Hollywood they need to have income. That’s why residuals were created; they understand that most jobs in show business are part time. As the TV broadcaster kept making money from advertising sales, they shared some of that with the actors. That’s what makes acting worthwhile; if you only work for two or three weeks a year, and get no residuals you’ll just give up on acting and fly back to Idaho.
Then the two million actors and writers that live in LA are no longer there and Hollywood can’t function.
The most recent WGA and SAG strikes were about residuals for streaming. Streaming companies (at that point) were NOT sharing their ratings/viewership with anyone. So you get paid once for a show, then it could be viewed eight million times or 3 times and you have no idea, and get no money for it. I remember someone saying “Having a hit streaming show is the same as having a flop” because there are no residuals or bonuses or DVD sales, or syndication.
I am not sure what the exact deal is now, but streamers are going to share their viewership data and start paying a small residual (think Spotify residuals) to actors and writers.
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