It’s like how Peacock paid NBCUniversal $500M for The Office, even though Peacock is owned by NBCUniversal. Or how HBO Max paid Warner Bros $425M for Friends, even though HBO Max is owned by Warner Bros.
If a studio owns a streaming service, how exactly is that streaming service paying that studio for the content? Is the studio just paying itself? How exactly does that work and why do they have to do it?
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It is complicated. TV shows and movies have things like syndication rights and some of the actors are due payments from selling these rights.
Friends, for example, is a series where the main actors have contracts stipulating that they get some percentage of the payment received by the studio selling these rights. So there would definitely be major legal proceedings brought by the actors if HBO Max didn’t pay Warner Bros. The actors would definitely claim that Warner is trying to avoid paying them their cut.
These kind of contracts are very common (actors, directors, screenwriters especially famous ones negotiate them). So firms try to have “arms length” contracts even between related entities.
Even within a big company, there are divisions and typically each division is held to their own financial goals. The head of one division is not likely to subsidize the operations of another division.
There are issues of taxes. Especially when it comes to subsidiaries that have operations in multiple geographies. Although a parent company may elect to file a single tax return, this isn’t necessarily tax efficient. A company wants to report profits separately especially if taxes in foreign jurisdictions are lower than domestic ones. This gets complicated very quickly.
Then there is long term strategy – the parent company might want to spin off subsidiaries in the future. This could be to have a separate IPO or to bring in money from a separate investor. In that case, keeping relatively separate accounts helps tremendously.
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