Which Hollywood Players Get Screwed When Films Skip Theaters for Streaming

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“It’s not a good business plan for our producer clients or our filmmakers,” one agent tells TheWrap


With movie theaters closed, some studios have sold their films to streaming platforms for a good chunk of change — but in reality, those deals aren’t always satisfactory and some people involved with the sold movie get screwed more than others. Despite streamers paying 20-30% above budget to give the studio some profit margin, multiple insiders told TheWrap that first-time filmmakers and producers, particularly producers who don’t have giant résumés or a bunch of credits to their name, get the worst deal when a film heads to a streamer. “We are actually not trying to encourage our clients to only go to the streamers… it’s not a good business plan for our producer clients or our filmmakers,” one agent, who has been involved with many of the theater-to-streamer deals this year, told TheWrap. “We don’t have a real system in place for what it means for agents and everyone involved when a film goes from theatrical to streamers. Disney and Warner Bros., for example, are not paying our clients what they should be when the film goes to streaming. It’s not like they get big buyouts as soon as they go to a streamer.”

He explained that when you make a deal with the streamer directly, the seller will recoup the production budget plus a fee and an additional buyout — but that buyout doesn’t imagine the film to be a huge box office success that would trigger backend payouts under the typical theatrical distribution model. Instead, the parties presume a middle-ground return.

“[Our clients] aren’t getting massive payouts, and they would do much better to wait,” he said.

To clarify: The budget is the hard cost spent to make the film; the fee is an added 20-30% paid to license the project; and the buyout offers to make up for the typical backend bonuses that key participants receive based on box office performance. One Hollywood producer agreed that streamers currently pay everyone’s backends that they would get if the film were a modest hit. So, if a film is predicted a modest hit but would have exceeded $1 billion at the box office had it gone down the theatrical route, the talent involved could potentially get a bad deal from the streamers. At the same time, he said, they have to pay out backends more generously to convince talent to accept the deal. These deals, he said, aren’t going to be as lucrative a year from now. “Producers, in general, don’t get great deals at Netflix or Amazon, at maximum a $200 million fee and a budget, with $1 million or $2 million buyout,” the agent said. “That’s a pretty limited backend for a producer who has worked for 10 years and if the film is good. That producer doesn’t get more money on Netflix. It’s not a good business plan for our producer clients.” But if you don’t have backend deals, you’re in an even tougher spot. “If you don’t have a backend — if you’re a beginner director or a non-backend producer — then you’re totally screwed,” the producer said. One other agent said that it extends to talent, as well: “All creative parties like the talent and producers get screwed because you’ve just lost a window of revenue. So your backend is potentially impacted (even though a streamer buys that out).” He explained that there may be fewer opportunities for filmmakers like Todd Phillips, who became an A-list director because of a low-budget, high-profit film like “The Hangover” that netted him a lot of backend money. However, one insider said that every deal is different and everyone in Hollywood has their own backend language, which is converted differently when you take a film to streamers and the upfront fee is calculated. The insider also said the deals really depend on an individual’s leverage, and it’s important to note that studio backends are sometimes paid over a long period of time. In this case, a streaming deal ensures a faster payout. Some studios, of course, have just been offloading films to their own streaming services, like Disney to Disney+ and Warner Bros. to HBO Max. But the producer said that’s not a good situation for producers either.

“The producers that have been complaining the most are ones with smaller movies with studios throwing it to their own streaming services,” he said, noting that those creators not only miss out on any potential box office-based bonuses but the possibility of a bidding war from competing streamers. “They say, ‘They gave us a little bit of a buyout but who knows what could’ve been if it had been taken to the open market, if it had been shopped to Netflix and Apple, and we took the highest offer.’ The studios are not letting the producers take their movies to other streaming services to get other offers.”

The first agent singled out Disney and Warner Bros. specifically for underpaying clients. “When Disney sells to Disney+, they say, ‘Here’s what we think your film and your salary is worth on Disney +. If you don’t like it, sorry.’ We’re trying to go to them to say, ‘That’s not right, you’re not valuing our clients appropriately,’” the agent explained. When Warner Bros. last week announced that its movies would debut in theaters and HBO Max simultaneously next year, producers told TheWrap they were concerned about their payment now that the film’s theatrical release was being limited. After all, backend deals and box office participation has yielded millions of dollars for actors, directors and producers. “Basically, if you’re a producer with any meaningful project whatsoever, why would you go to Warner Bros. going forward, because you can’t trust that they’re going to release it appropriately?” one frustrated producer who has worked with the studio told TheWrap. “Contingent compensation will go down for all these players. Why would you show up there again?” The producer added that with big-budget tentpoles like Disney’s live-action “Mulan” and Warner’s “Wonder Woman 1984,” the studios will most likely pay out the backend for everyone involved based on the assumption of a worldwide box office gross of $1 billion. But for smaller films like “The One and Only Ivan,” for example, that isn’t the case.

“Everyone who has a big movie wants to get what they can get,” the producer said. “It’s the best time for producers who have product that streamers want. But it’s not going to be like this forever.”

Likewise, first-time filmmakers also get the short end of the stick when a movie heads from theatrical to streaming, several insiders said. The first agent said that first-time directors whose films debut on Amazon or Netflix seldom get the career boost they normally would even for a modest theatrical hit. “There has yet to be a filmmaker that’s broken out of a streamer,” the agent said. “You had a Fox Searchlight or Focus where the next Sam Mendes came from, but it hasn’t happened yet that a movie has premiered at a streamer, and the town has decided that that’s the director they have to be in business with.” One factor in the lack of buzz around streaming-first films is marketing. Insiders said that unlike theatrical releases, on which studios spend tens and even hundreds of millions of dollars on promotion, streamers shell out only a fraction of that amount even for their starriest original films.

“None of these streamers put money into marketing these films,” the agent said. “Tom Cruise is not who Tom Cruise is if you don’t have the marketing money for every ‘Mission: Impossible’ movie where there’s a poster or trailer everywhere you look. That’s part of the movie star business, and none of it exists at the streamers.”

 

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