How Netflix created a $1 billion arms race for TV writers
Earlier this month, when Sam Esmail, the showrunner behind the critically-acclaimed television shows Mr. Robot and Homecoming, signed an overall deal with Universal Content Productions that will pay him $100 million over four years, the news was dutifully reported by the trades. But it was in no way the kind of headline news that sent shock waves through the entertainment industry.
Since when did a nine-figure deal for a writer with two shows become ho-hum?
In the last 18 months there have been so many jaw-dropping deals with the people who dream up TV shows–and the numbers for those deals so staggeringly high–that reports of another TV writer getting piles of cash thrown at him or her by a network, studio, or streaming company has become almost numbingly de rigueur.
The starting gun that set off this phenomenon can be traced back to Netflix’s announcement in the summer of 2017 that it was poaching Grey’s Anatomy and Scandal creator Shonda Rhimes from her longtime home at ABC in a deal worth $150 million. Rhimes has hinted that the four-year pact, which has her developing eight exclusive series for the streamer, is actually worth much more than that figure.
Why do reporters always say writers were “lured”? Like we’re children following a trail of candy. I created a $2B+ revenue stream for a major Corp with my imagination. I do not follow trails of candy. I am the candy. https://t.co/3qGZKI4bhf
— shonda rhimes (@shondarhimes) December 20, 2018
Either way, it far exceeds the $10 million a year that ABC was paying her to create that purported $2 billion revenue stream, and it sent eyebrows shooting upwards all over Hollywood.
Netflix didn’t stop there. It next signed up Glee and American Horror Story showrunner Ryan Murphy in a five-year deal worth $300 million, which was quickly dubbed “the richest producing deal in television history.” Then the company nabbed Black-ish creator Kenya Barris for $100 million over three years.
With the specter of all the talent setting up shop at Netflix, last June Warner Bros. TV entered the arms race, signing prolific writer-producer Greg Berlanti (Arrow, The Flash, Riverdale) to a $400 million deal that lasts until 2024.
A new era for TV showrunners had officially arrived, one that is sending TV studios and streaming companies scrambling to line up their own proprietary stables of talent. What’s causing this mad dash for TV creatives is twofold. One, with deep-pocketed streaming companies like Netflix and Amazon–and now Apple–eager to build up their own original content libraries as studios and networks pull back on their licensing deals, the amount of money being thrown around has reached an all-time high. In 2018, Netflix had 700 original TV series on the platform. Two, as Hollywood consolidates through mergers like the one between Disney and 21st Century Fox, and the one expected to happen between Viacom and CBS, there are fewer and fewer significant buyers of TV content.
As one agent puts it: “We’re very shortly going to live in a world with seven buyers. And those buyers are all so-called walled gardens that want to control the talent in-house. Because if they don’t, then someone else will.”
The value of showrunners, as opposed to, say, actors or directors, is that they’re the ones who dream up IP–or, intellectual property, the Hollywood buzzword for franchises like Star Wars and The Avengers that can be blown out across various distribution platforms (movies, TV shows, digital series) and be licensed ad infinitum for consumer products and theme parks. Owning IP has become ever more crucial as Hollywood studios fend off competition from streaming companies by doubling down on their own digital video platforms. Disney, WarnerMedia, and NBCU are all launching streaming apps later this year, and they will need content to feed them.
“It’s the Wild Wild West out there,” says one manager. “And the scarcity objects are the showrunner types that can create worlds. That’s what everyone wants: worlds.”
Hence the value of someone like Rhimes, who created two very lucrative worlds for ABC with Grey’s Anatomy (now in its 15th year) and Scandal, and oversees How to Get Away With Murder, which was created by one of her proteges. Chris Silbermann, ICM Partners managing director (and Rhimes’s agent), says that the desire to lock down A-list showrunners in and of itself is nothing new, but that “the amount of money being put behind it, the global scale of the companies competing now, and the pace of acceleration is unprecedented.” This applies primarily, of course, to Netflix, whose mission isn’t just to compete in Hollywood, but to swallow it whole.
“It would be like the NBA adding two expansion teams in major markets the same year LeBron James became an unrestricted free agent. So imagine in addition to that, there’s no salary cap. What would his value skyrocket to? The sky would be the limit. That’s what’s going on. Talent is truly at a premium. There’s just a scarcity of people who can manage multiple productions at the same time and keep the quality up.”
The Shonda effect
No one contests that Rhimes moving to Netflix created the new TV deal-making landscape. “The Shonda deal raised the stakes,” says another agent. “It made a company like Warner Bros., whose TV unit drives their revenue, feel that they couldn’t give up an engine like [Greg Berlanti, who has 14 scripted series on the air]. They’ve got to stay in the game.”
According to Silbermann, money aside, the Rhimes signing proved that places like Netflix could be a creative home for talent, not just a place to sell a show or two. He goes so far as to call Rhimes’s company Shondaland a division of Netflix, much in the way that Marvel and Pixar are under the Disney banner. It’s a place where she has more creative freedom than at a network and can develop things like Hot Chocolate Nutcracker, a documentary about the Debbie Allen Dance Academy’s reimagining of the classic ballet.
Indeed, the domino effect that Netflix has caused is still playing out all over town. Mindy Kaling just signed a new overall deal with Warner Bros. TV, estimated to be worth $51 million over six years; and Fresh Off the Boat creator Nahnatchka Khan moved to Universal Television in a similarly-sized package. Meanwhile, 20th Century Fox TV is still smarting over the loss of Murphy. “If you’re 20th, you’re like, Whoah, we just lost Ryan,” one agent says. “We’re never going to get him for five years because Netflix has him. That’s a scary place for them to be in.”
Other people who are being closely watched are Westworld creators Jonathan Nolan and Lisa Joy, whose deal with Warner Bros is up next year; Family Guy‘s Seth MacFarlane, whose deal with 20th Century Fox TV expires in June; Modern Family creator Steve Levitan, also at Fox (which he has criticized over its connection with Fox News) until later this year; 24 and Homeland creator Howard Gordon, who is also at Fox; and Riverdale creator Roberto Aguirre-Sacasa, whose deal is currently with Warner Bros.
Then there’s the most watched deal of all: J.J. Abrams, the prolific producer (Lost, Alias, Westworld) and feature film director-producer (Star Trek Into Darkness, Star Wars Episodes VII and IX) who is reportedly seeking a “mega deal” for his Bad Robot production company, which is currently based at Paramount for film and Warner Bros. for television. With those deals set to expire this year, Disney, Apple, Warner Bros., and NBCU are all said to be courting Abrams.
By taking ownership, so to speak, of showrunners, the studios also gain leverage when it comes to making deals with the streamers. So if, say, Netflix now wants to produce a show by Berlanti (whose You and Riverdale stream on Netflix), the company will have to pay Warner Bros. a fee and split the distribution rights to the show.
This leverage has become all the more critical for TV studios in an age when Netflix, thanks to its seemingly infinite financial resources, is relying less and less on studios and producing content in-house. “The streamers don’t quote-unquote need studios,” says the manager. “So for the studios to stay in business, the only thing they have going for them is the showrunner or the IP. They have nothing else. That’s where the squeeze is.”
The new buyers competing for talent
Adding to the frenzied nature of this TV environment are new players like Amazon and Apple, whose TV strategies are still not completely clear, but which both have billion-dollar war chests at their disposal. Although Amazon has been in the TV game for several years now, last year it underwent a management shakeup and brought in former NBCU Entertainment President Jennifer Salke to oversee Amazon Studios. Under her leadership, the company has signed high-profile names including Nicole Kidman, Blake Lively, and Jordan Peele, and is developing a show with Westworld showrunners Nolan and Joy.
The company has not yet made any deals with big showrunners, but Salke lamented not having the chance to compete for Ryan Murphy when she spoke with the press last June. “I would have loved to have been here as the Ryan Murphy thing was starting, which was a long time ago,” she told The Hollywood Reporter. “Maybe that would have ended up differently.” One agent says that Salke is being very aggressive and that “she has the complete support of Jeff Bezos. And you can never bet against Jeff Bezos.”
Some wonder if Salke might leverage her relationship with Dan Fogelman, the creator of This is Us–which she oversaw at NBC–and bring him over to Amazon when his deal with 20th Century Fox is up this year.
Apple, meanwhile, remains a wild card. Since hiring Sony Pictures Television heads Zack Van Amburg and Jamie Erlicht to oversee its nascent television service back in the summer of 2017, it’s made a few bold moves–it signed an overall deal with Parenthood and Friday Night Lights creator Jason Katims, and is spending $10 million an episode on a drama series starring Reese Witherspoon and Jennifer Aniston–but observers still can’t completely divine just how much of a Netflix it wants to become, or even what the actual platform will look like. Will it be tied in with Apple Music and its forthcoming “Netflix for news”? Observers will be keenly watching the Apple event rumored to be in late March to see what is revealed.
Hulu is also a question mark in terms of what happens to it once Disney becomes a majority owner after the Disney-Fox deal goes through later this year. So far the company hasn’t invested in showrunners, instead relying on third-party studios to produce shows like The Handmaid’s Tale (that show is jointly owned by MGM and Hulu). But that could change once Disney takes charge. Already the company has said that it plans on plowing a lot of resources into Hulu and turning it into its adult-oriented streaming service to complement the family-friendly fare that will stream on Disney+.
The truth behind the megadeals
What, exactly, are streaming companies and studios getting with these massive, overall deals? If the idea is to pay showrunners to create multiple worlds of IP, how realistic is it to believe that someone like Rhimes will personally be overseeing her eight Netflix shows? Not to mention that she also has three series at ABC that are still running. (Scandal ended after seven seasons last spring.) Granted, Rhimes, along with peers like Law & Order-empire-builder Dick Wolf, are known for being brilliant managers who, even if they’re not working on a show on a day-to-day basis, can swoop in and give invaluable notes and be present enough to maintain quality control.
Still, as the TV executive says, “Netflix is in the volume business. When you’re making a deal with Shonda Rhimes, basically what you’re doing is making a deal with the Shonda Rhimes who’s going to supervise up-and-coming writers that she thinks are good.” Many of those proteges go on to be successful TV creators in their own right, such as HTGAWM’s Nowalk, which is ultimately an added bonus for Netflix as it tries to grow its stable of talent.
One thing deal-makers are quick to point out, however, is that the gargantuan figures of the Netflix and other deals aren’t quite as gargantuan as they might seem. All of Netflix’s contracts, for instance, take into account that there is no back-end value or residuals for the creator. At a traditional TV network, someone like Rhimes makes most of her money from international sales and residuals, i.e. the money that comes when a show is sold into syndication and airs again and again for years. Because Netflix doesn’t sell its shows into syndication, it pays creatives upfront for that lost revenue.
Now studios are following suit. Sources say that Berlanti’s $400 million deal was similarly structured, and that Warner Bros. effectively paid him upfront for his back-end, making the deal seem larger in the headlines.
For showrunners, there’s also the question of how they will adapt from pitching their shows to multiple networks to being locked down exclusively at a place like Netflix. Murphy, for one, is known for being a skilled showman who relishes “lathering up a room of buyers and being in the middle of a huge sale,” as one agent put it.
How will he feel two years from now, the agent wonders, “when no one’s paying attention? During the five years he’s at Netflix, he’s not going to have the fanfare he’s come to expect around him.”
Then there’s the hullabaloo that networks lavish around shows in the form of advertising and promotions. Netflix has historically put most of its marketing behind promoting content on its own platform. Last year it doubled its marketing spend to $2 billion, with more emphasis on traditional advertising, but the perception remains that only a few shows and movies are on the receiving end of that heavy promotion: high-profile productions like Stranger Things and Grace and Frankie.
“When Shonda Rhimes created a big hit for ABC, it was a big effing deal,” the TV exec says. “There were promotions and billboards for years. Grey’s has been on for [15] years. ABC is constantly promoting it. When you go on Netflix, you’re lucky if you get one week of promotion. Then they’re on to the next show.”
Will Rhimes’s ego be able to take anything less, let alone the prospect of a show that isn’t aggressively thrust into the cultural conversation the way that Scandal and HTGAWM were, all but guaranteeing that they dominated watercolor chatter for seasons at a time?
The biggest question of all, of course, is whether these lavish deals will pay off. Will Rhimes, Murphy, and Barris actually prove to be worth their big paychecks? But in the end, for Netflix at least, it may not matter. Because it doesn’t play the ratings game–the company famously refuses to release any meaningful viewership data–no one will ever know how successful any of their shows are, beyond whatever buzz they generate in the culture. Theoretically, that buzz encourages people to hang on to their monthly Netflix subscriptions, if only just to see what these TV gurus come up with next.
“In broadcast TV or cable, the bubble burst when a show came out and the ratings stank,” says the TV executive. “In this world, it doesn’t matter. Netflix can put up a billboard and say that the show is so-and-so’s best work ever–an instant classic.”
[Photo Illustration: Samir Abady; Shonda Rhimes: D Dipasupil/FilmMagic via Getty Images; Ryan Murphy: Matt Winkelmeyer/Getty Images for GQ; Kenya Barris: Amanda Edwards/WireImage via Getty Images; Marti Noxon: Jamie McCarthy/Getty Images for AMC; Camera: smutnypan/istock]
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