Top Hollywood talent agencies are now calling on a greater share of revenue for the creatives who are contributing content to the platform, saying that Netflix commercials have changed the streaming landscape.
Last November, Netflix offered a less expensive, but limited subscription tier and infused it with ads to make up for its lost profits amid a slow growth rate last year.
According to Jeremy Zimmer, head of the United Talent Agency, this move represents a major shift in the streaming industry. The new strategy that Zimmer claims to “change the game” should dictate a paradigm shift in how creative talent is compensated.
“A show that does really well will get more advertisers and more revenue will flow to Netflix,” Zimmer said in an interview with Financial Times. “Therefore, our clients who created that show should be compensated for that additional revenue.”
Netflix has always been against profit-sharing arrangements, or “back end” payments as they’re called in the industry. Instead, the streaming giant buys out the rights upfront and pays fixed amounts, limiting UTA and its rivals from earning money on the platform.
The addition of an ad-supported tier comes at a challenging time for not just Netflix, but other streaming services such as Disney Plus as well. The slowing subscriber growth, pressure from investors, and potential Writers Guild of America strikes come May have all affected the platforms’ bottom lines and propelled them to take action.
Netflix commercials are a direct result of the worsening conditions for streaming giants. Despite the reasons for including the ad-supported subscription tier, Zimmer says that Netflix’s launch of such a service has altered the formula.
“They’ve changed all the rules [by saying] it’s no longer an ad-free environment,” he said. “There’s a different revenue stream coming in that they had said wasn’t going to be there.”
Netflix and Disney Plus have inadvertently subscribed to greater data transparency. With more transparency through detailed data collected by Nielsen ratings, creators will have more granular access to the performance of their programs. Theoretically, this could give them enough leverage to argue for more money.
Meanwhile, senior media tech analyst Tim Nollen warns creators not to expect any “meaningful” profits from the streaming giant anytime soon, claiming Netflix’s advertising service is off to a slow start. “It looks like 2025 before we see any real benefit from it,” the analyst added.
The United Talent Agency and other creative agencies will keep pushing for new and better arrangements for their top talent, at least that much is certain. If they succeeded, it could bring a massive shift in the streaming world.