The licensing model that built the streaming era ends up costing platforms more to rent IP than they were willing to pay to own it. What, if anything, can they do about it?
1. Understood this is primarily TV, but in (theatrical) film where cost-plus is not the dominant licensing structure, then what changes/ improvements can be made there for indie studios?
2. Are there any remedies of the cost-plus model for serialized shows if the terms are locked in per-episode at the pilot/ order stage? The renewal negotiations become so adversarial because there are no shared upside - the studio wants to re-price up, the streamer already feels it overpaid.
3. Wouldn't an equity-like participation structure work better for indies in the long run?
Hello! I'm sorry it took me so long to come back around to this, but I promised myself I would, and I hope late is better than never.
1. There's a key distinction between what it means to be an "indie" studio in theatrical film vs. in TV/streaming that makes it difficult to give a good answer to this question. In both media, "indie" essentially means that the company has production but not distribution/exhibition capacity. But whereas in features, it also indicates companies committing to financing/producing projects with distribution TBD later, in TV/streaming, even "indie" studios rely on orders from commissioning network licensees before committing to production. (The exception is the still-very small world of "indie TV" that I wrote about in my series on the 50/50 pools waterfall.) So there's no equivalent opportunity for indie feature producers to quickly and preemptively de-risk themselves.
2. Yes, financial terms are typically fixed for the life series at the time the project is first set up with a streamer (even if initially for development only). This is a major source of frustration for supplier studios, who virtually never get the opportunity to renegotiate their deals for even extraordinarily successful series. The objection by the streamer isn't that it "already feels it overpaid" -- it's that the streamer de-risked the studio by committing to pay it a reasonable profit even if the project flopped entirely, and that the streamer is therefore entitled to retain the "surplus value" from the much rarer major success. Personally, I've only ever been able to renegotiate the license deal for a major hit streaming series once.
3. Equity in the projects, or equity in the streaming platforms themselves? If it's the former, that isn't really an issue for the indie studios, who still retain ownership and nominal control of all distribution rights in their series — their problem is that streaming license deals typically come with onerous exclusivity and lengthy holdbacks on the exercise of off-network/second-window rights. If it's the latter, that sounds great to me, but the world just ain't that beautiful.
I genuinely appreciate you taking the time to reply, and in such great details! For a moment I was concerned that you’ve decided to abandon Substack altogether.
A couple follow up questions:
1. Understood this is primarily TV, but in (theatrical) film where cost-plus is not the dominant licensing structure, then what changes/ improvements can be made there for indie studios?
2. Are there any remedies of the cost-plus model for serialized shows if the terms are locked in per-episode at the pilot/ order stage? The renewal negotiations become so adversarial because there are no shared upside - the studio wants to re-price up, the streamer already feels it overpaid.
3. Wouldn't an equity-like participation structure work better for indies in the long run?
Hello! I'm sorry it took me so long to come back around to this, but I promised myself I would, and I hope late is better than never.
1. There's a key distinction between what it means to be an "indie" studio in theatrical film vs. in TV/streaming that makes it difficult to give a good answer to this question. In both media, "indie" essentially means that the company has production but not distribution/exhibition capacity. But whereas in features, it also indicates companies committing to financing/producing projects with distribution TBD later, in TV/streaming, even "indie" studios rely on orders from commissioning network licensees before committing to production. (The exception is the still-very small world of "indie TV" that I wrote about in my series on the 50/50 pools waterfall.) So there's no equivalent opportunity for indie feature producers to quickly and preemptively de-risk themselves.
2. Yes, financial terms are typically fixed for the life series at the time the project is first set up with a streamer (even if initially for development only). This is a major source of frustration for supplier studios, who virtually never get the opportunity to renegotiate their deals for even extraordinarily successful series. The objection by the streamer isn't that it "already feels it overpaid" -- it's that the streamer de-risked the studio by committing to pay it a reasonable profit even if the project flopped entirely, and that the streamer is therefore entitled to retain the "surplus value" from the much rarer major success. Personally, I've only ever been able to renegotiate the license deal for a major hit streaming series once.
3. Equity in the projects, or equity in the streaming platforms themselves? If it's the former, that isn't really an issue for the indie studios, who still retain ownership and nominal control of all distribution rights in their series — their problem is that streaming license deals typically come with onerous exclusivity and lengthy holdbacks on the exercise of off-network/second-window rights. If it's the latter, that sounds great to me, but the world just ain't that beautiful.
I genuinely appreciate you taking the time to reply, and in such great details! For a moment I was concerned that you’ve decided to abandon Substack altogether.