TV and movie creators may look to cash in a bigger way from Netflix and its new ad service "Basic With Ads" -- especially if there is a big hit involved.
But what if you have a lousy TV show? Will TV producers and talent agency executives give back big cash?
Speaking with the Financial Times, head of the United Talent Agency Jeremy Zimmer said should a TV show on an ad-supported service become a big hit, that means more money for Netflix partly due to advertising.
“A show that does really well will get more advertisers and more revenue will flow to Netflix,” he added. “Therefore, our clients who created that show should be compensated for that additional revenue.”
What Zimmer is talking about here is trying to get a piece of the upside of a TV show (or movie).
When Netflix or other subscription streaming services that commit to a new TV series or movie with no in-show advertising, they can typically pay a flat fee.
After a streamer puts that content on, viewers may like it -- or not. And then the fun begins.
While Netflix knows how many people watched that content, and for how long, not all that data is shared with producers and talent.
If a show is a big hit, producers and talent will get a new season of shows to work on, which means more money for producers and talent. But not much else.
With advertising, however, things can be different -- because there is more transparency. For its ad option, Netflix is allowing third-party measurement firms -- impartial companies like Nielsen -- to verify those results. This is much the same as what legacy TV networks offer.
More importantly, if a TV show is a maor hit, an ad-supported streamer or TV network can charge higher CPMs for the show in subsequent episodes. Transparency also means producers and talent gets to see those details as well.
Zimmer believes the benefits of those advertising revenues should be shared -- indirectly or otherwise with Netflix. In that part that's how CBS, NBC, ABC, Fox, and cable TV networks can operate.
Cable TV networks and other platforms can go further offering a revenue-share arrangement sometimes -- all this so these parties can participate in the upside.
The difference for Netflix currently is that its ad-supported option, priced at $6.99 a month for subscribers, has only a limited number of TV shows and movies due to producers making adjustments to their previous TV show agreements.
Also Netflix, according to reports, doesn't offer traditional “back end” payments allowing talent to earn more from a successful show. Netflix buys out all rights up front.
Netflix is looking to redefine this deal-making. Legacy TV network-based companies, that also have streamers -- have had a long history in also selling advertising time on TV series -- including Walt Disney, Paramount Global, NBCUniversal, Warner Bros. Discovery , to name a few.
The bottom line is that Netflix may have the upper hand. Many producers want to be on Netflix; it is the biggest and most successful of all streamers.
And it is the only major entertainment streamer that is profitable.
Right now, it can write new rules. It doesn’t want "back-ends." It appears to it be looking for more upfront-end deal-making.
The problem with producers, stars, writers, etc. who have already been paid what they asked for to produce shows for the basic Netflix ad-free service, demanding more money if the same shows carry ads is obvious. Who's going to wind up footing the bill? Most likely it will be the advertisers, who already are being asked to pay super premium CPMs for an AVOD service with very limited reach and very small average minute ratings. So say nothing of all of the other restrictions that have been imposed---such as little or no say in what shows the ads appear in, no targeting, many "premium" shows not available, undesirable pre-and post- roll ad positionning, etc.
Of course all of this may change if experienced people take charge and are suppported by Netflix management. If the Netflix AVOD service grows in scale---as I expect it will----and learns how to become ad-friendly as well as user-friendly----then premium CPMs may be tolerable---but only to a point. Then what?
The likely answer will be that Netflix will have to de-emphasize the use of overly expensive content and, like the "linear TV' folks---especially the cable channels but now, increasingly, the broadcast networks---shift to less expensive fare and a different class of producers. If I were the currrent crop of Netflix producers and their agents I'd give that possibility some serious consideration.