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 [Music] be here to discuss the new Financial realities of the television industry is Forbes reporter Matt Craig Matt thanks for joining me thank you for having me britty I want to start off the conversation talking about the traditional TV syndication system so let's go back to the days of friends where the that group of friends was making a million dollars per episode talk about how that worked and exactly how lucrative it was for both the show the creators and the cast sure so in those good old days which really weren't that long ago I mean friends were off the year 20 years ago but I would say even up to maybe 10 15 years ago it was the case where Studios uh who produced the shows and the TV networks that were Distributing the shows were separate entities um and so the studio would would produce the show they would pay for it that included the cost of production and also the fees for the talent and then they would essentially like rent it out to different distribution networks so that would start with a TV network um who would pay to to show the show and it's important to say that most shows you know didn't make money or barely broke even but in the case of a friends or like a huge breakout hit uh this network would continue to order multiple seasons of a show usually like 20 22 Episodes or sometimes even more than that for a single season um so Talent was being paid on a per episode basis and they continue to be paid on a per episode basis but there was many more episodes to go around and then if the show continued to be successful and usually hit a 100 episodes or whatever the threshold was it would go into syndication and what that meant was that then other entities would basically pay to rent out that show uh for reruns so cable TV networks being the the most uh famous example but then also overseas markets and eventually streaming services and if you think about it if you're the studio that paid to produce that show you have already paid for it it's a done deal it's in the bank right uh but every time you resell it you're just making pure profit so a a very successful show could make hundreds of millions of dollars in profits and during that time in Hollywood um Talent had a lot more leverage in these negotiations and so as Seasons went on you said if you want me to come back for Seasons 8 8 nine and 10 you're G have to give me a little slice of the pie you know in the case of friends the actors all collectively bargain for 2% of the shows profits each and to this day to this day that that is worth millions and millions of dollars we estimated last year Jennifer Anderson brought home about 17 and a half million dollars just in residuals from friends in the past year um so the money could be incredibly lucrative and significant for not just the the showrunners who made the most amount of money and the producers but um also for the acting Talent so there was there was plenty of money to go around back then when you think about syndication back in the days of friends in the days of Seinfeld you really think of $2 signs right I mean it was just cash flow was everything sure yeah yeah I think I think again it's important to note that not a lot of shows are friends are in Seinfeld but in the case of those absolute home runs there was people who were making stupid amounts of money I think a lot of the houses in the Hollywood Hills out here you know for me um or bought from these shows I mean again not even just Seinfeld and friends but if a show ran seven eight nine seasons and got into syndication it was going to make a lot of money for those involved so 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 so talk about a pre and post streaming world and just how different they are yeah so so I mean I think you know especially like people at our age were kind of the the first generation to be hit with this but it it was really consumer Choice over a number of years um like I I mean I would even you know ask you like why why did you start watching Netflix over cable right one it was cheaper uh the Cable Bundle was you know1 $200 a month and Netflix came along initially it was $8.99 those were those were the good old days but uh it was cheaper and also at the time all those Studios were licensing their libraries to the streaming services like Netflix um and again for the same reasons that they would make a quick Buck but by then a lot of the the networks and the companies that own networks had also bought Studios so that was maybe not the smartest uh thing at the time because essentially consumers just got really really used to watching things on streaming uh and then the third factor is that these streaming services started paying huge amounts of money uh for original programming that was higher quality than what was on broadcast TV I mean broadcast shows were worried about profitability and at that time all Wall Street wanted to see from these streamers was subscriber growth they could essentially borrow money into Infinity uh when interest rates were incredibly low and so over time users viewers flocked to these streaming services and kind of left the Cable Bundle behind which it's continuing to Decay to this day so um not only uh is did the streaming services have a worse model you know for all Talent involved which I'm sure we're going to talk about but because everyone went over to the streaming services also the broadcast model uh started printing less money for everyone so basically we've reached a point in 2024 where there's less money to go around overall and everyone is uh bickering with each other and arguing over what's left of the reduced pie and to your point I mean shows like friends and shows from 20 years ago I mean they were 20 episodes now there's less like 8 10 12 they're more highly produced they're like eight or 10 smaller movies in one season and 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 so why are the earnings plummeting sure so I just talked about the massive move to streaming and the thing to note here is that the streaming business is just a significant L worth business model really for everyone involved including the studios um but we'll start on the talent side and 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 so the company that pays for the show is the same company that broadcast the show so they're serving as their own TV Network and the same that would be the syndication the cable so the the library of previous episodes is also available on that same company so if you think about that um there's essentially no upside for a hit show you know whether a show is is popular or not there's no additional money to be made outside of just more people signing up for your um streaming platform so because of that the platforms are disincentivized from ordering more and more episodes of a show instead they're just going to have a kind of shots on goal approach if you if you want to use the sports metaphor and just order more and more and more shows that's another difference between broadcast TV and streaming right on broadcast TV you can only be showing one TV show at a time U because it's a linear network and on streaming it can be multiple shows so basically these streamers just started ordering tons and tons of different shows and not renewing most of them and even hit shows uh weren't running multiple Seasons because they get more expensive as they go along and there was no added benefit um of more Revenue to be made so basically on the talent side uh the economics became significantly worse because there was no profits to ask for you know there was no profit participation um because essentially there were no profits and even if there were it would be a slice of you know the subscriber revenue of Netflix which it would be impossible to tie that to a single show so um in case of those massive home run type shows there was just there was way less money to be made and because of that um you know the talent Representatives got really angry and said hey we're we're making a hit show and we're being compensated in the way we used to be so plug this example this model for us in a real life show I mean one of the biggest it shows of the past few years has been the bear with the star Jeremy Allen White so how does this look this earnings model look in the bear yeah so the reason why I use the bear as the the example in my story is because you really couldn't ask for um a show to do anything more in the modern land landscape right it's critically adored it's swept at the Emy it will sweep at the at the next EMS as well uh it's also you know very popular show for Hulu which is owned by Disney so really you know this is the show that uh if this show can't be compensated then the model is broken right and that kind of is the case um I think you know these these actors and these showrunners Christopher store the the showrunner and creator of the bear are being paid pretty well but not like they used to be so essentially uh because there's no profit participation to go around um the talent reps are are left arguing for high Fe so the case of he won the Emy for best actor for this role so he got a massive raise between season two and season three of the show but within season three he's he's making about $750,000 per episode that's according to for's estimates so that's even you know we talk about the friend's example of a million dollars an episode 20 years ago so at 20 years of inflation um the talent today is still not being paid that there's still I would say only a handful of talent that can fetch a million dollars in episode today and then on the Creator side of things again you used to have the dick Wolves of the world and the Greg burlanes and the Taylor sheridans kind of that older guard um making 50 60 up to hundreds in some cases more than hundred million per year still to this day um because they're kind of grandfathered in from the old system uh Christopher store the person who created the bear he has an overall deal with FX that Forbes estimated to be about $5 million per year um so it's one tenth of what those Old Guard creators are making uh and then instead of a profit participation model there's a a new sort of bonus model that's going around Hollywood um that's meant to replace some of that is just a fraction a fraction of what it used to be I want to keep talking about the bear for just a moment because as you said the bear really is one of the most success full shows this day and age before you and I started filming I haven't watched the bear but I even knew the phrase yes chef from the show so does sweeping award season transfer to financial success it doesn't uh and the main reason for that is just that streaming has fewer episodes so if you think about it um you know some of the talent reps I talked to they they said really uh is the bear a super profitable show for all the for all it success and the answer is probably not but uh back in the olden days I you know I mentioned 100 episodes would be kind of the threshold for syndication so even if syndication did exist today the bear after its three seasons will have 28 episodes so barely you know a quarter of the way to what the old syndication threshold um would be and and again there is no there is no syndication for for the show I mean it it airs on Hulu the first time and then it stays on Hulu in perpetuity I think you know there was last year some movement on that front with with Max starting to license shows in Netflix and maybe that starts to look like syndication but in general basically shows just end up you know where they start uh and in some ways that's better for consumers but in a lot of ways for talent it means a lot less money to go around let's talk about that a little bit because how is this affecting the career trajectories of both show Runners and producers like the dick Wolves of the world and the actors too because you're not seeing jennif Jennifer Aniston level money here I mean Jeremy Allen White probably is the biggest TV star and he's only making not even a million dollars so is this giving more people of a slice of pie albeit the pie is smaller well yeah I mean I think uh after the strikes of last year and there's a major contraction going on in TV industry right now but um before that yes there was way more shows being ordered so the a number of working actors was higher the number of working writers was higher and those sorts of things um unfortunately that too is coming down uh because coming out of the strikes of last year you know there's fears of the recession and all these companies now are having to worry about profitability because the interest rates are higher um and for that reason less shows are being ordered budgets are down you know there's been layoffs at at Paramount and other companies um and so yeah I would say that maybe was the case a couple years ago and even that isn't the case today but uh the thing I would say for the hit the hit shows and the big Talent like Jeremy Ellen White $750,000 an episode 10 episodes so seven and a half million dollars um but no hope for you know any sort of significant residuals the the way that it was put to me by someone which I think is just perfect is that actors you know and and even creators too um need to be thinking about their career as kind of like a doctor or a lawyer instead of a PR or a king you know you think about Dick Wolf I wrote a story about Dick Wolf um at the beginning of this year that he's now a billionaire um that seems incredibly unlikely if not impossible uh today um and you might be thinking you know7 half million dollars is a lot for a doctor a lawyer I bet some of the lawyers I talked to for this story on background are probably making around uh around that much so um it's still a very good living of course if you can make a if you make a hit show if you can be kind of the the IT guy um you'll you'll make a lot of money also the thing I'll say he's now very in demand for other projects you know film projects in particular that can pay more um so I wouldn't you know cry for Jeremy white in his you know 7 half million dollars um but it is not what it used to be it 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 can you dive a little deeper here in the new compensation models and will we ever see someone a producer make Dick Wolf level money again I mean never say never um you know who knows how the the TV industry will turn the one thing I'll say is like TV as a whole is not any less popular than it used to be if anything TV is is more popular uh overall it's just that it's more fragmented so um maybe if things consolidate and and some of these companies buy each other which seems pretty inevitable at this point and there's maybe more of a monoculture yeah I I continue to believe that like hits and hit makers will continue to be paid uh at high level and it really depends on just the competition um and and the kind of macroeconomics but will we ever see it probably at some point in the near future it seems incredibly unlikely and how does the audience play into here because I remember like you said when we were younger there was appointment viewing Friday at 88 there was a new movie and everyone rushes home and turns it on how has how the audience now consumes all this content changed everything yeah well it certainly changed everything for broadcast TV so if you think about um you know who continues to watch broadcast TV to this day it's old folks I mean neelson just came out with a report I think about a month ago that said that prime time um on the three big three biggest networks average age was like 69 years old so we're talking about a very specific subset of people and because of that advertisers um 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 um so there's less money to be made there for sure on streaming um it doesn't necessarily matter uh in a subscription model you know whether you're young or old um because your your money comes in the same um there's been a kind of a rise of advertising and streaming and at first when I was reporting the story I thought maybe that means you know that some of these shows will have upside again uh but it it turns out that digital advertising works completely different than TV advertising um and it's it's a little in the weeds but because digital advertising can track exactly how many people view something um packages are kind of sold on a a number of views basis instead of being um advertised against a specific program so even that isn't necessarily helping these shows become more profitable on their own so I I think you know the the demographics matter in so much as we now know it can say pretty much uh without any doubt that streaming is the future and eventually broadcast TV at least in its current form will continue to Decay and then die out entirely um but it just matters a whole lot less for how these shows get paid out in the new landscape one of the biggest draws for streaming at the beginning was there was no commercial breaks I'm old enough to remember when you first streamed for Hulu you did not have to pay more for any type of commercials now that's not the case we are seeing ads unless you want to pay top tier uh advertisement free subscription prices so what do you think about the Resurgence of commercials yeah I what I really think it is is you know it's kind of a classic story of Economics right uh new people enter the market and they want to be disruptive and the way they do that is by offering you know benefits to to viewers so 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 and there's no ads and you know it's too good to be true and so people move over and then you know as uh the pressures of needing to make money mounts suddenly TV starts to look a lot like old TV and I think you're seeing that to this you know to to this point now with Hulu with Amazon adding ads with Netflix adding add tier it's not their basic tier but a lot of people are are shifting over to that because it's cheaper um and so yeah we're seeing commercials come back like 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 it shows to Netflix that five years ago that would have been Unthinkable um but now that is kind of a syndication of a of a kind if you think about it uh another 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 and so it's basically like all these technology companies disrupted um all the traditional entertainment companies and then want TV to go back to looking the way that it used to uh and so I I think we'll see more of that the the thing I will say is in streaming uh one very smart analyst put it to me this way like commercials aren't used to make more money in streaming uh they're just used to lower the price point to offset the amount of money that a consumer would pay and reach more people so maybe someone who wouldn't pay you know 16 bucks or whatever the Netflix basic tier is now um might pay that eight and we can make the money up from uh advertising but essentially it's not additional money to someone like Netflix or Amazon um and because of that the upside is again is not really finding its way back to TV creators in your peace 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 so what do you think the implications here are for both compensation as well as production if we keep this status quo yeah I mean I think um it for us viewers it's old new TV is going to look like old TV you know whether whether that is buying a bundle or seeing commercials uh or seeing you know um stuff from other companies licensed onto other streaming services which is you know like I said syndication thing for viewers it might look a lot like old TV the 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 um they're very skeptical and I would say after doing the reporting I'm very skeptical as well that Talent uh will continue or will start to rise back up to uh what it used to be 10 15 20 years ago not to say it never you know will be or that the model won't fix itself but in the short term it's hard to see a lot of upside for for people that create shows people who produce shows write on shows or star on shows Matt Craig per usual thanks for the conversation and your reporting thanks greny appreciate it

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Keywords: Forbes, Forbes Media, Forbes Magazine, Forbes Digital, Business, Finance, Entrepreneurship, Technology, Investing, Personal Finance, the bear, the bear season 3, tv, film AI, film industry AI, ayo edibiri, remakes in hollywood, remakes in movies, fresh prince, bel-air, paramount, BET, max, hbo, netflix, streaming, movie theaters, jeremy allen white, tv math, what tv shows cost, wealth, the bear new season, Friends, how much do tv stars make, Friends cast, syndication, hollywood, television

Id: EAjuwlDa9Mo

Length: 22min 6sec (1326 seconds)

Published: Mon Jul 08 2024