As a seasoned movie critic with decades of experience under my belt, I’ve seen the Hollywood landscape transform from black-and-white to high-definition and beyond. The latest developments at Netflix, as revealed by co-CEO Ted Sarandos during their Q3 earnings call, have once again caught my attention.
In response to Netflix outperforming other media companies in their Q3 earnings, co-CEO Ted Sarandos reinforced their dedication to the dealmaking terms central to Netflix’s business strategy, along with a predilection towards limited and brief theatrical releases for their original films.
During a third-quarter video call, Netflix’s executive, Sarandos, openly discussed the rumors circulating within the industry regarding potential changes in the financial conditions of their traditional licensing agreements for series and films.
For approximately ten years, Netflix has collaborated with Hollywood creators on cost-plus licensing agreements, which is a system where Netflix funds the entire production budget, plus an additional 10% to 20% (or more) as profit for the producers. This is quite a departure from the deficit financing model that was common among traditional TV networks and studios. In this old model, creative talent only got a share of the backend profits from a series or film if it proved to be a massive success. Under the cost-plus system, the platform purchasing the content usually buys out the syndication and international rights for a title to ensure its long-term availability and exclusivity on their platform.
As more platforms like Netflix expand their reach, prominent content creators are experiencing a decline in residual earnings from syndication broadcasts and international distribution deals. These revenue streams, once reliable for shows and films that gained success, are now diminished on global platforms such as Netflix, Amazon Prime Video, Apple TV+, HBO Max, and Disney+. Although these streaming giants pay large initial fees to leading creative talent, the absence of ongoing income from successful TV series and movies has significantly impacted Hollywood’s financial stability.
Ted Sarandos dismissed rumors that Netflix was altering its contract terms for content acquisitions, instead opting for a more conventional licensing method. It’s been noted that some low-budget film deals have been struck under atypical licensing conditions as per Netflix standards. When questioned about the possibility of a significant overhaul in their licensing strategy, Sarandos was unequivocal: “We believe we’ve got the right formula and we’re not considering any changes,” he stated.
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Ted Sarandos stated that creative talent tends to prefer advance payments due to the inherent unpredictability of the industry. He spoke about a recent gathering he mentioned that the streamer’s content head, Bela Bajaria, had with a group of influential talent agents and legal representatives – these professionals who are deeply involved in the nitty-gritty of daily deal-making.
Bela made this point quite explicitly a couple of weeks ago to every talent agency: We’re sticking with our current payment structure,” he explained. “Paying creators upfront, an approach Netflix pioneered, advantages both parties. For creators, it means they can concentrate on producing the best work without worrying about finances, as Netflix assumes all financial risks. And for Netflix, this system helps us attract top talent globally.
Simultaneously, Sarandos admitted that “We’ve been flexible, and we remain so, for tailored agreements when talent shows interest.” However, he also mentioned that “Such arrangements are not common, as usually the talent prefers the upfront payment method.
Sarandos addressed the ongoing question about Netflix’s approach of releasing only a few theatrical versions of its original films, with brief runs. He didn’t feel the need to defend this strategy, as he explained that Netflix utilizes popular film titles to generate cultural excitement and boost subscriber interaction within its platform, rather than in cinemas.
To clarify, we’re involved in the field of subscription-based entertainment, and as you can see from our financial performance, it’s a thriving sector. It caters to a vast number of consumers and enthusiasts. In fact, our top 10 Netflix premieres garner over 100 million views, making them some of the most viewed films globally. Our aim is to continually enhance the value for our subscribers with their monthly subscription fee. We think that eliminating the wait for months to watch a movie everyone’s discussing is one way we can do this, thereby providing additional value.
Following the presentation of robust Q3 earnings and pledging continued high double-digit growth by 2025, Sarandos didn’t hesitate to highlight the advantages that the Netflix platform offers for Hollywood storytellers.
He explained that our service connects filmmakers with a global audience for their films, and assists them in creating their best work yet. This could range from any of the nine Best Picture nominee movies we’ve already released, to other blockbuster-level productions that have grossed billions at the box office. I am confident that we can keep tapping into cultural trends and creating memorable moments, even when those beginnings are on Netflix.
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2024-10-18 01:17