The 97-year-old studio, the ancestral home of Humphrey Bogart (“Casablanca”) and Bette Davis (“Now, Voyager”), suddenly finds itself at the uncomfortable center of a Hollywood that is changing at light speed. Even before the pandemic, streaming services like Netflix, Apple TV+ and Amazon Prime Video were upending how movies get seen and their creators are compensated. Now, with theaters struggling because of the coronavirus and the public largely stuck at home, even traditional film companies are being forced to evolve.
It’s not that all actors and directors are against streaming. Plenty of big names are making movies for Netflix. But last week’s move by Warner Bros. raised fundamental financial questions. If old-line studios are no longer trying to maximize the box office for each film but instead shifting to a hybrid model where success is judged partly by ticket sales and partly by the number of streaming subscriptions sold, what does that mean for talent pay packages?
How studios compensate A-list actors, directors, writers and producers is complicated, with contracts negotiated film by film and person by person. But it boils down to two checks. One is guaranteed (a large upfront fee) and one is a gamble: a portion of ticket sales after the studio has recouped its costs.
If a film flops, the second payday never comes. If a film is a hit, as is often the case with superheroes and other fantasy stories, the “back end” pay can add up to wheelbarrows full of cash. That money trickles down through Hollywood’s financial ecosystem to agents, lawyers and managers — funding Pacific Palisades mansions, the latest Porsche and $1,000-per-person Urasawa dinners.
But are the days of the jackpot back-end payoffs now coming to a close?
“Precedent is being set over the value of talent and what kind of transparency is essential to creating equitable partnerships,” Bryan Lourd, a co-chairman of Creative Artists, said in an email. “We will do everything necessary to make sure artists are fairly compensated for the value they are creating, and that their creative and artistic work and rights are protected.”
William Morris Endeavor declined to comment for this article.
It is unclear whether Warner Bros. has a legal requirement to renegotiate back-end arrangements for the 17 movies, as it did with “Wonder Woman 1984” heavyweights. Mr. Kilar said in a phone interview on Friday that, while these changes might be jarring to those who expected one thing for their movie and were now getting something very different, the end goal was to honor talent relationships as the studio had done in the past.
Orignially published in NYT.