Here's Why A Hit TV Show Is Worth Millions Less Than It Used To Be | Forbes
Producing a hit TV series like The Bear was once a path to serious riches for its cast and creators. But in another massive entertainment shift, developing groundbreaking shows is worth hundreds of millions less than it used to be.
Read the full story on Forbes: https://www.forbes.com/sites/mattcraig/2024/06/26/future-of-tv-business-television-showrunners-bear-season-three-christopher-storer/
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Read the full story on Forbes: https://www.forbes.com/sites/mattcraig/2024/06/26/future-of-tv-business-television-showrunners-bear-season-three-christopher-storer/
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LifestyleTranscript
00:00Producing a hit TV series like The Bear was once a path to serious riches for its casting creators.
00:06But in another massive entertainment shift, developing groundbreaking shows is worth hundreds of millions less than it used to be.
00:15Here to discuss the new financial realities of the television industry is Forbes reporter Matt Craig.
00:20Matt, thanks for joining me.
00:22Thank you for having me, Brittany.
00:23I want to start off the conversation talking about the traditional TV syndication system.
00:28So let's go back to the days of Friends where that group of friends was making a million dollars per episode.
00:34Talk about how that worked and exactly how lucrative it was for both the show, the creators and the cast.
00:42Sure. So in those good old days, which really weren't that long ago, I mean, Friends were off the air 20 years ago,
00:49but I would say even up to maybe 10, 15 years ago,
00:52it was the case where studios who produced the shows and the TV networks that were distributing the shows were separate entities.
01:01And so the studio would produce the show, they would pay for it.
01:05That included the cost of production and also the fees for the talent.
01:08And then they would essentially like rent it out to different distribution networks.
01:12So that would start with a TV network who would pay to show the show.
01:17And it's important to say that most shows, you know, didn't make money or barely broke even.
01:22But in the case of a Friends or like a huge breakout hit, this network would continue to order multiple seasons of a show,
01:29usually like 22 episodes or sometimes even more than that for a single season.
01:34So talent was being paid on a per episode basis and they continue to be paid on a per episode basis.
01:39But there was many more episodes to go around.
01:41And then if the show continued to be successful and usually hit 100 episodes or whatever the threshold was, it would go into syndication.
01:48And what that meant was that then other entities would basically pay to rent out that show for reruns.
01:55So cable TV networks being the most famous example, but then also overseas markets and eventually streaming services.
02:03And if you think about it, if you're the studio that paid to produce that show, you have already paid for it.
02:08It's a done deal. It's in the bank. Right.
02:10But every time you resell it, you're just making pure profit.
02:14So a very successful show could make hundreds of millions of dollars in profits.
02:19And during that time in Hollywood, talent had a lot more leverage in these negotiations.
02:25And so as seasons went on, you said, if you want me to come back for seasons eight, eight, nine and ten, you have to give me a little slice of the pie.
02:32You know, in the case of Friends, the actors all collectively bargained for two percent of the show's profits each.
02:38And to this day, to this day, that is worth millions and millions of dollars.
02:43We estimated last year Jennifer Aniston brought home about 17 and a half million dollars just in residuals from Friends in the past year.
02:51So the money could be incredibly lucrative and significant for not just the showrunners who made the most amount of money and the producers, but also for the acting talent.
03:01So there was there was plenty of money to go around back then.
03:04When you think about syndication back in the days of Friends, in the days of Seinfeld, you really think of two dollar signs.
03:11Right. I mean, it was just cash flow was everything.
03:16Sure. Yeah. Yeah. I think I think, again, it's important to note that not a lot of shows are Friends or Seinfeld.
03:22But in the case of those absolute home runs, there was people who were making stupid amounts of money.
03:29I think a lot of the houses in the Hollywood Hills out here, you know, for me or bought from these shows.
03:35I mean, again, not even just Seinfeld and Friends, but if the show ran seven, eight, nine seasons and got into syndication, it was going to make a lot of money for those involved.
03:44So then we see this really seismic shift in the TV industry from the traditional model to what we were talking about, to cord cutting and streaming.
03:53So talk about a pre and post streaming world and just how different they are.
03:59Yeah. So, I mean, I think, you know, especially like people our age were kind of the first generation to be hit with this.
04:07But it was really a consumer choice over a number of years.
04:11Like, I mean, I would even ask you, like, why why did you start watching Netflix over cable? Right.
04:16One, it was cheaper. The cable bundle was, you know, 100, 200 dollars a month.
04:22And Netflix came along. Initially, it was eight ninety nine.
04:25Those were those really good old days, but it was cheaper.
04:29And also at the time, all those studios were licensing their libraries to the streaming services like Netflix.
04:35And again, for the same reasons that they would make a quick buck.
04:39But by then, a lot of the networks and the companies that own networks had also bought studios.
04:45So that was maybe not the smartest thing at the time, because essentially consumers just got really, really used to watching things on streaming.
04:52And then the third factor is that these streaming services started paying huge amounts of money for original programming.
04:59That was higher quality than what was on broadcast TV.
05:02I mean, broadcast shows were worried about profitability.
05:05And at that time, all Wall Street wanted to see from these streamers was subscriber growth.
05:10They could essentially borrow money into infinity when interest rates were incredibly low.
05:16And so over time, users, viewers flocked to these streaming services and kind of left the cable bundle behind, which it's continued to decay to this day.
05:27So not only is the streaming services have a worse model, you know, for all talent involved, which I'm sure we're going to talk about.
05:37But because everyone went over to the streaming services, also the broadcast model started printing less money for everyone.
05:42So basically, we've reached a point in 2024 where there's less money to go around overall.
05:49And everyone is bickering with each other and arguing over what's left of the reduced pie.
05:55And to your point, I mean, shows like Friends and shows from 20 years ago, I mean, they were 20 episodes.
06:02Now there's less like 8, 10, 12.
06:05They're more highly produced.
06:07They're like eight or 10 smaller movies in one season.
06:09And you note in your piece for Forbes that developing successful shows is worth hundreds of millions of dollars less than it's used to be.
06:18So why are the earnings plummeting?
06:21Sure. So I just talked about the massive move to streaming.
06:25And the thing to note here is that the streaming business is just a significantly worse business model, really, for everyone involved, including the studios.
06:34But we'll start on the talent side.
06:35And the reason for that is that if you think about it, let's take Netflix, for example, the same company that would be the studio in the old model.
06:44So the company that pays for the show is the same company that broadcasts the show.
06:48So they're serving as their own TV network and the same thing that would be the syndication, the cable.
06:53So the library of previous episodes is also available on that same company.
06:57So if you think about that, there's essentially no upside for a hit show.
07:01You know, whether a show is popular or not, there's no additional money to be made outside of just more people signing up for your streaming platform.
07:11So because of that, the platforms are disincentivized from ordering more and more episodes of a show.
07:18Instead, they're just going to have a kind of shots on goal approach.
07:22If you want to use the sports metaphor and just order more and more and more shows.
07:26That's another difference between broadcast TV and streaming.
07:28Right. On broadcast TV, you can only be showing one TV show at a time because it's a linear network.
07:35And on streaming, it can be multiple shows.
07:37So basically, these streamers just started ordering tons and tons of different shows and not renewing most of them.
07:44And even hit shows weren't running multiple seasons because they get more expensive as they go along.
07:50And there was no added benefit of more revenue to be made.
07:54So basically, on the talent side, the economics became significantly worse because there was no profits to ask for.
08:03There was no profit participation because essentially there were no profits.
08:08And even if there were, it would be a slice of the subscriber revenue of Netflix, which it would be impossible to tie that to a single show.
08:16So in case of those massive home run type shows, there was just there was way less money to be made.
08:24And because of that, you know, the talent representatives got really angry and said, hey, we're we're making a hit show.
08:30We're not being compensated in the way we used to be.
08:32So plug this example, this model for us in a real life show.
08:38I mean, one of the biggest it shows of the past few years has been The Bear with the star Jeremy Allen White.
08:45How does this look?
08:47This earnings model look in The Bear?
08:50Yeah. So the reason why I use The Bear as the example in my story is because you really couldn't ask for a show to do anything more in the modern landscape.
09:01Right. It's critically adored. It's swept at the Emmys. It will sweep at the next Emmys as well.
09:07It's also a very popular show for Hulu, which is owned by Disney.
09:11So really, you know, this is the show that if this show can't be compensated, then the model is broken. Right.
09:20And that kind of is the case.
09:22I think, you know, these these actors and these showrunners, Christopher Storr, the showrunner and creator of The Bear, are being paid pretty well, but not like they used to be.
09:33So essentially, because there's no profit participation to go around, the talent reps are left arguing for a high fee.
09:41So in the case of Jeremy, he won the Emmy for Best Actor for this role.
09:45So he got a massive raise between season two and season three of the show.
09:49But within season three, he's making about seven hundred fifty thousand dollars per episode.
09:53That's according to Forbes estimates.
09:55So that's even, you know, we talk about the Friends example of a million dollars an episode 20 years ago.
10:00So add 20 years of inflation.
10:02The talent today is still not being paid that.
10:05There's still, I would say, only a handful of talent that can fetch a million dollars an episode today.
10:09And then on the creator side of things, again, used to have the Dick Wolfe's of the world and the Greg Berlanti's and the Taylor Sheridan's kind of that older guard making 50, 60, up to a hundred.
10:22In some cases, more than one hundred million dollars per year still to this day, because they're kind of grandfathered in from the old system.
10:29Christopher Storr, the person who created The Bear, he has an overall deal with FX that Forbes estimated to be about five million dollars per year.
10:36So it's one tenth of what those old guard creators are making.
10:41And then instead of a proper participation model, there's a new sort of bonus model that's going around Hollywood that's meant to replace some of that.
10:51It's just a fraction, a fraction of what it used to be.
10:54I want to keep talking about The Bear for just a moment, because as you said, The Bear really is one of the most successful shows this day and age.
11:01Before you and I started filming, I haven't watched The Bear, but I even knew the phrase, yes, chef, from the show.
11:07So does sweeping awards season transfer to financial success?
11:13It doesn't. And the main reason for that is just that streaming has fewer episodes.
11:21So if you think about it, you know, some of the talent reps I talked to, they said, really, is The Bear a super profitable show for all the for all its success?
11:29And the answer is probably not.
11:32But back in the olden days, I mentioned 100 episodes would be kind of the threshold for syndication.
11:38So even if syndication did exist today, The Bear, after its three seasons, will have 28 episodes.
11:43So barely a quarter of the way to what the old syndication threshold would be.
11:50And again, there is no there is no syndication for for the show.
11:54I mean, it airs on Hulu the first time and then it stays on Hulu in perpetuity.
11:57I think, you know, there was last year some movement on that front with with Max starting to license shows on Netflix.
12:04And maybe that starts to look like syndication.
12:06But in general, basically, shows just end up, you know, where they start.
12:11And in some ways, that's better for consumers.
12:14But in a lot of ways for talent, it means a lot less money to go around.
12:18Let's talk about that a little bit, because how is this affecting the career trajectories of both showrunners and producers like the Dick Wolfs of the world and the actors, too?
12:29Because you're not seeing Jennifer Jennifer Aniston level money here.
12:33I mean, Jeremy Allen White probably is the biggest TV star and he's only making not even a million dollars.
12:39So is this giving more people of a slice of pie, albeit the pie is smaller?
12:44Well, yeah, I mean, I think after the strikes of last year and there's a major contraction going on TV industry right now.
12:53But before that, yes, there was way more shows being ordered.
12:57So a number of working actors was higher.
13:00The number of working writers was higher and those sorts of things.
13:03Unfortunately, that, too, is coming down because coming out of the strikes of last year, you know, there's fears of the recession.
13:10And all these companies now are having to worry about profitability because the interest rates are higher.
13:16And for that reason, less shows are being ordered.
13:19Budgets are down. You know, there's been layoffs at Paramount and other companies.
13:24And so, yeah, I would say that maybe was the case a couple of years ago.
13:28And even that isn't the case today.
13:29But the thing I would say for the hit shows and the big talent like Jeremy Allen White, $750,000 an episode, 10 episodes, so $7.5 million.
13:40But no hope for, you know, any sort of significant residuals.
13:46The way that it was put to me by someone, which I think is just perfect, is that actors, you know, and even creators, too, need to be thinking about their careers kind of like a doctor or a lawyer instead of a producer.
13:59Or a prince or a king.
14:01You know, if you think about Dick Wolf, I wrote a story about Dick Wolf at the beginning of this year, that he's now a billionaire.
14:08That seems incredibly unlikely, if not impossible, today.
14:14And you might be thinking, you know, $7.5 million is a lot for a doctor or a lawyer.
14:19I bet some of the lawyers I talked to for this story on background are probably making around that much.
14:26It's still a very good living, of course.
14:28If you can make a hit show, if you can be kind of the hit guy, you'll make a lot of money.
14:35Also, the thing I'll say, he's now very in demand for other projects, you know, film projects in particular, that can pay more.
14:41So I wouldn't cry for Jeremy Allen White and his $7.5 million.
14:47But it is not what it used to be.
14:50It is not going to be enough that he can kind of retire on it and continue to make millions and millions for the rest of his life.
14:55Can you dive a little deeper here in the new compensation models?
14:59And will we ever see someone, a producer, make Dick Wolf level money again?
15:05I mean, never say never.
15:08You know, who knows how the TV industry will turn?
15:12The one thing I'll say is like TV as a whole is not any less popular than it used to be.
15:16If anything, TV is more popular overall.
15:20It's just that it's more fragmented.
15:21So maybe if things consolidate and some of these companies buy each other, which seems pretty inevitable at this point, and there's maybe more of a monoculture.
15:31Yeah, I continue to believe that like hits and hit makers will continue to be paid at high level.
15:37And it really depends on just the competition and the kind of macro economics.
15:43But will we ever see it?
15:45Probably at some point in the near future, it seems incredibly unlikely.
15:48And how does the audience play into here?
15:52Because I remember, like you said, when we were younger, there was appointment viewing Friday at eight.
15:58There was a new movie and everyone rushes home and turns it on.
16:01How has how the audience now consumes all this content changed everything?
16:06Yeah, well, it certainly changed everything for broadcast TV.
16:11So if you think about, you know, who continues to watch broadcast TV to this day, it's old folks.
16:16I mean, Nielsen just came out with a report, I think about a month ago that said that primetime on the three biggest networks average age was like 69 years old.
16:27So we're talking about a very specific subset of people.
16:32And because of that, advertisers have either left the platform or it's different brands, you know, brands that would appeal to 69 and 70s and 80s year old folks.
16:42So there's less money to be made there for sure.
16:44On streaming, it doesn't necessarily matter in a subscription model, you know, whether you're young or old, because your money comes in the same.
16:54There's been a kind of a rise of advertising and streaming.
16:58And at first, when I was reporting the story, I thought maybe that means, you know, that some of these shows will have upside again.
17:05But it turns out that digital advertising works completely different than TV advertising.
17:10And it's it's a little in the weeds.
17:12But because digital advertising can track exactly how many people view something, packages are kind of sold on a number of views basis instead of being advertised against a specific program.
17:23So even that isn't necessarily helping these shows become more profitable on their own.
17:28So I think, you know, the demographics matter in so much as we now know and can say pretty much without any doubt that streaming is the future.
17:38And eventually broadcast TV, at least in its current form, will continue to decay and then die out entirely.
17:45But it just matters a whole lot less for how these shows get paid out in the new landscape.
17:51One of the biggest draws for streaming at the beginning was there was no commercial breaks.
17:55I'm old enough to remember when you first streamed for Hulu, you did not have to pay more for any type of commercials.
18:02Now that's not the case.
18:04We are seeing ads unless you want to pay top tier advertisement free subscription prices.
18:10So what do you think about the resurgence of commercials?
18:14Yeah, I what I really think it is, is, you know, it's kind of a classic story of economics, right?
18:20New people enter the market and they want to be disruptive.
18:24And the way they do that is by offering, you know, benefits to viewers.
18:28So, hey, at first it was you only had to pay five bucks, you know, when Disney Plus first came out or eight bucks when Netflix first came out.
18:36And there's no ads and, you know, it's too good to be true.
18:40And so people move over.
18:41And then, you know, as the pressures of needing to make money mounts, suddenly TV starts to look a lot like old TV.
18:50And I think you're seeing that to this, you know, to this point now with Hulu, with Amazon adding ads, with Netflix adding an ad tier.
18:58It's not their basic tier, but a lot of people are shifting over to that because it's cheaper.
19:03And so, yeah, we're seeing commercials come back.
19:05Like I said, we're seeing kind of a syndication type thing come back with Max, which is owned by Warner Brothers Discovery, licensing some of its shows to Netflix.
19:14Five years ago, that would have been unthinkable.
19:18But now that is kind of a syndication of a kind, if you think about it.
19:23Another thing we're seeing is Max and Disney, two separate companies, bundling their streaming services together into something that may end up looking like cable.
19:32And so it's basically like all these technology companies disrupted all the traditional entertainment companies and then want TV to go back to looking the way that it used to.
19:43And so I think we'll see more of that.
19:46The thing I will say is in streaming, one very smart analyst put it to me this way, like commercials aren't used to make more money in streaming.
19:55They're just used to lower the price point, to offset the amount of money that a consumer would pay and reach more people.
20:04So maybe someone who wouldn't pay, you know, 16 bucks or whatever the Netflix basic tier is now might pay that $8 and we can make the money up from advertising.
20:16But essentially, it's not additional money to someone like Netflix or Amazon.
20:22And because of that, the upside is, again, is not really finding its way back to TV creators.
20:28In your piece for Forbes, you quoted a talent lawyer who was laughing, saying that a pitch he heard from Amazon or Apple sounded a lot like a pre-streaming pitch from 10 years ago.
20:41So what do you think the implications here are for both compensation as well as production if we keep this status quo?
20:48Yeah, I mean, I think for us viewers, the new TV is going to look like old TV, you know, whether that is buying a bundle or seeing commercials or seeing, you know, stuff from other companies licensed onto other streaming services, which is, you know, I guess that syndication thing.
21:10For viewers, it might look a lot like old TV.
21:12The question is, and talent representatives are very concerned that this is not the case, is whether the talent pay will return to what it was for old TV.
21:23They're very skeptical. And I would say after doing the reporting, I'm very skeptical as well that talent will continue or will start to rise back up to what it used to be 10, 15, 20 years ago.
21:36Not to say it never will be or that the model will fix itself, but in the short term, it's hard to see a lot of upside for people that create shows, people who produce shows, write on shows or star on shows.
21:49Matt Craig, per usual, thanks for the conversation and your reporting.
21:53Thanks, Brittany. Appreciate it.
22:05Thank you.