Remember when the entire cast of Friends signed a contract where each of the stars was paid $1 million per episode.
As they say, those were the days.
This was all the way back in 2002. You would think that, considering how things seem to work, that actors on hit television programs would be paid more.
Nope.
In fact, gone are the days of living like a king (or queen). People like Jerry Seinfeld, becoming a billionaire off a hit television show, are ending.
In this article we will dig into what is going on and what changed?
Image generated by Ideogram
The Money Leaving Hit television shows
According to an article in Forbes, not only did the Friends cast make bank when the show was on the air, they also negotiated a 2% residual. That amounted to $17.5 million for Jennifer Aniston last year.
The entire industry changed and the money went with it. We are seeing the studios suffering and it is flowing to all aspects of the business.
Right nOW, The Bear on Hulu is one of the hottest shows there is. You would think being the creator would put you, potentially, in line with the likes of Larry David or the aforementioned Seinfeld.
Not at all.
With a hit show like The Bear, Forbes estimates that series creator Christopher Storer earns $5 million per year in an overall deal with FX, with his fees for writing, producing and directing counted against that total. Instead of owning a percentage of the series’ profits, which TV creators had traditionally maintained for decades, Storer and co-showrunner Joanna Calo are rewarded for their success through a bonus pool based on a set of achievements, including season renewals, award nominations and streaming service rankings.
This means he is earning less than 1/3 what Aniston (and presumably the rest of the cast) did.
Of course, this flows to the actors.
According to Forbes estimates, Bear star Jeremy Allen White will earn $750,000 per episode for the show’s third season, a significant raise from last year but as one veteran dealmaker put it, “if this was 2021, I would’ve expected it to be $1.2 million.”
This is more than 20 years after the deal by Aniston and costars and is still $250K less.
So what happened?
The Money Left Hollywood
Streaming killed all aspects of the traditional industry. The fragmentation of entertainment has been taking place for a couple decades. It is only NOW to the point where it is noticeable financially.
Movie studios are in trouble. Paramount was just sold, following in the footsteps of MGM. Time Warner is in trouble, especially as Cord Cutting 2.0 starts to accelerate, further eating into their profits.
Here is the way things use to be:
Under the traditional TV syndication system, the potential existed for a hit series like Seinfeld or CSI to become its own cottage industry. Once a studio paid to produce the show, it would essentially rent it out to distributors—first a broadcast network, then cable channels, overseas markets and eventually streaming services—an infinite number of times. While most shows struggle to break even, a hit series would eventually reach profitability the longer it ran, and make astronomical profits in syndication.
The basis was longer running series, to get as much content as possible. We see how there are multiple layers of revenue, while the actors (and others) had a great deal of leverage.
When a hit show is generating hundreds of millions of dollars per year, everyone wants to keep it rolling. Even if the costs go up, the realization that it will only be recouped as more is rolled out to the different channels means it is worth it.
Contrast this with how things stand now:
That all changed with the rise of streaming. In the new landscape, a single company acts as the studio that pays to produce the show, the network where it first airs and the syndication network where its catalog can be replayed, meaning there are fewer ways to capitalize on a breakout hit. Revenue through subscriptions remains relatively flat while a show’s costs rise over time, disincentivizing more episodes and more seasons.
Have you ever noticed how Netflix will cancel a series after its first 3 seasons? This is the reason here. When costs go up, there is no incentive to keep producing the show. Might as well start another series, with a lower price tag.
Basically, you could say Hollywood broke itself.
Further Fragmentation
The world of television is getting further fragmented.
Have you noticed the appearance of more "free" streaming services. This is the next wave of fragmentation.
In addition to the major players, it seems everyone is getting into the game. Television manufacturers such as Roku have a service. This is, like Tubi and others, supplemented by ads.
Then we have the likes of Spectrum rolling out a streaming news application. This also follows the same model.
Basically, we are looking at massive decentralization with regards to distribution.
Next there is the problem of content.
Another new entrant is TCLtv+, a new service of TCL. This is available on many Roku televisions. The service offers free on-demand movies and TV shows along with 350 free live TV channels.
If this sounds familiar, it is because we covered this not long ago in talking about TCLtv+ generating some short films completely using AI. Naturally, these are creating a platform where they can deliver this content as it improves.
In 1990, according to Groq (citing Nielson), ABC World News Tonight with Peter Jennings averages 10.4 million viewers. Of the nightly news casts, it is the leader still, with David Muir pulling in about 2 million per evening.
That is a loss of 80% of their audience while the population has see explosive growth. Why is that?
Fragmentation.
This is the plight of television. The money is going out as more options appear.
We should expect another upheaval as AI enters the process. This is going to affect a lot of incumbents, in many industries.
Entertainment is no exception.