Jeff Sagansky says “The battle is now” against a new streaming model – deadline
It has 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 negative impact the proliferation of the power-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 talents. The issue of the disappearing backend, which is estimated to result in as much as $ 1.5 billion in lost revenue a year for creative talent, is expected to be at the center of the looming WGA and other unions’ negotiations with studios over a new film and TV deal.
I chatted with Sagansky to discuss the Hollywood response to his speech and what he wants to see happen next. Once again, he did not say the words, he spoke of a “backend theft” and “predatory behavior from the streamers” and called for immediate action to end the new streaming “business model dominimus” which is “inherently flawed.” He used the “warning lesson” from the 1997 DVD deal that cost billions of creative backend dollars to encourage them to fight now, because in a year or two it may be too late. “The fight is now,” he said.
DEADLINE: What has been the reaction to your NATPE speech? Do you have more thoughts about the new business model for streaming?
SAGANSKY: Let’s start by going through what we know. First and foremost, the electricity services will represent an increasing percentage of the total production consumption in the future. Today, I would estimate that 2/3 of the total TV series consumption is made by streamers, and it will increase every year as consumers differ from each other and the cable and broadcasting businesses are increasingly challenged.
Second, all the streamers, perhaps except Apple, have merged around the same business model-dominimus backend for the talent across the line. This backend theft happened very quickly: In less than 18 months and under Covid. I think the streamers / studios were so surprised that they could get away with this – elimination of 50 years and more with profit sharing in the backend that they all got on board as fast as they could.
Third, this will potentially affect any writer, producer, actor and director because we never know where the next hit will come from. Some people have said that this problem is just one that affects brand name talent. But from Stranger Things to The Witcher and Bel-Air, the streaming services are filled with shows for whom this could be the creative talent’s first big hit. So all creative talent is potentially influenced by this predator on the part of streamers.
But there are many others who are also affected. The talent agencies, if customers are fired, will also suffer the consequences. And more importantly the communities where the talent lives and works; most specifically Los Angeles and New York. 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 that do not have the same self-interest in the health of LA or New York, which will be negatively impacted at a time when these communities are already facing so many challenges.
DEADLINE: What do you want to see happen in the coming months when we go to the next film and TV contract negotiation between the studios and the guilds?
SAGANSKY: The most important thing I have learned in recent weeks is that the match is now. The longer this new “business model” is allowed to work, the harder it will be to change. I often think about how the introduction of the DVD 25 years ago became a warning lesson when you choose to fight. In 1997, the DVD was introduced based on a Sony Philips format, and shortly after, AMPTP negotiated that only 20% of the net DVD profit would be included 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 care of the studios. This new technology quickly became an annual business of $ 30 billion. But the attribution of 20% never changed. The creative participants gave up billions of dollars in the backend because they agreed to this formula early on. Even today, when the DVD has been replaced by streaming, the backend attribution is still only 20%. Set 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 harmed 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 needs to be referred to the trash can. Not in a year or two, but now. And to win this battle, it will require every guild, every agency and the leading names among the actors, writers, directors and producers. We will soon see who has the courage, perseverance and leadership to take this fight forward. I have been encouraged to hear from my many friends in the creative environment, in the agencies and even in the studios and streamers.
Many of these studio leaders earn two masters – the company they work for, but also the community they live in. They know that this new model is wrong in itself.