It’s been a month since Jeff Sagansky’s fiery speech at a NATPE event proclaimed that “we are in a golden age of content production and the dark age of creative profit sharing.” It put the prominent media investor and producer and former top entertainment executive at the center of a conversation about the adverse impact the proliferation of the streaming-driven “cost plus” business model has had on profit participation and ways Hollywood producers, agents and guilds can mobilize and fight to restore backend for creative talent. The issue of vanishing backend, to the tune of as much as $1.5B of lost income a year for creative talent, is expected to be front and center in the looming WGA and other unions’ negotiations with the studios on new a film and TV basic agreement.
I caught up with Sagansky to discuss the Hollywood response to his speech and what he would like to see happen next. Once again he did not mince words, speaking of a “backend theft” and “predatory behavior on the part of the streamers” and calling for immediate action to end the new streaming business model that is “inherently wrong.” He used the “cautionary lesson” of the 1997 DVD deal costing creatives billions of backend dollars to urge them to fight now because in a year or two it may be too late.
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“The fight is now,” he said.
DEADLINE: What has been the reaction to your NATPE speech? Do you have any further thoughts on the new streaming business model?
SAGANSKY: Let’s start by reviewing what we know. First and foremost, the streaming services are going to represent an increasing percentage of the total production spend going forward. Today I would estimate that two-thirds of the total TV series spend is being made by the streamers, and that will increase every year as consumers unbundle and the cable and broadcast businesses are increasingly challenged.
Second, all the streamers, maybe save for Apple, have coalesced around the same business model-de minimis backend for the above-the-line talent. This backend theft happened very quickly: in less than 18 months and during Covid. I think the streamers/studios were so surprised that they could get away with this — eliminating 50 years and more of backend profit sharing — that they all piled aboard as quick as they could.
Third, this is potentially going to affect every writer, producer, actor and director because we never know where the next hit is coming from. Some people have said that this issue is only one affecting brand-name talent. But from Stranger Things to The Witcher and Bel-Air, the streaming services are filled with shows for whom this may be the creative talent’s first big hit. So all creative talent is potentially affected by this predatory behavior on the part of the streamers.
But there are many others affected as well. The talent agencies, whose clients are being ripped off, are also going to suffer the consequences. And more importantly, the communities in which the talent lives and works; most specifically Los Angeles and New York. The backend participation has supported so many facets of these communities — schools, restaurants, real estate and taxpayer-supported services. Many of the streamers are based in places which don’t have the same vested interest in the health of L.A. or New York, which will be negatively impacted at a time when these communities are already facing so many challenges.
DEADLINE: What would you like to see happen in the coming months as we head to the next film and TV contract negotiations between the studios and guilds?
SAGANSKY: The single most important thing I have learned these last weeks is that the fight is now. The longer that this new “business model” is allowed to operate, the harder it will be to change. I often think about how 25 years ago the introduction of the DVD became a cautionary lesson in when you choose to fight. In 1997 the DVD was introduced based on a Sony Philips format, and soon thereafter the AMPTP negotiated that only 20% of the DVD net profits would be counted in the backend definition of participation profits. The alliance argued and convinced the guilds that this was a “new technology” and needed the investment and nurturing of the studios. This new technology became a $30 billion annual business very quickly. But the 20% attribution never changed. The creative participants gave up billions of dollars of backend because they agreed to this formula early on. Even to this day, when the DVD has been supplanted by streaming, the backend attribution is still only 20%. Arrayed against the creative community are some of the largest companies in America and the world — Amazon, Netlfix, Apple, Disney, Comcast, Warner Discovery. These companies will not be hurt by sharing the backend with the talent that creates all these shows, without which there would be no studios and no streamers.
So this new streaming business model has to be relegated to the dust bin. Not in a year or two but now. And to win this fight will take every guild, every agency and the leading names among the actors, writers, directors and producers. We will see very shortly who has the courage, perseverance and leadership to take this fight on. I have been heartened hearing from my many friends in the creative community, at the agencies and even at the studios and streamers.
Many of these studio executives serve two masters — the company that they work for but also the community that they live in. They know that this new model is inherently wrong.
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