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A month or so ago I saw a great set of tweets guessing at what’s going on. Residuals. (EDIT: https://mobile.twitter.com/PeterClines/status/1610408579940646913

by MBCook 4y ago

A month or so ago I saw a great set of tweets guessing at what’s going on. Residuals. (EDIT: https://mobile.twitter.com/PeterClines/status/1610408579940646913 https://mobile.twitter.com/PeterClines/status/16104085799406...) After the initial window they have to pay residuals every time people watch the episodes. As a series goes on, more people might start watching if it’s popular. The people who are already watching may re-watch it to get ready for the new season. All of that means paying for residuals. But if your shows are flash in the pan, that’s not as much of an issue. When Netflix cancels a show what are the odds a bunch of people are going to start watching it four years from now? And what happens if you constantly drop new shows and heavily promote them, hiding what a person was already watching? They may go to that new show and stop watching the old one? The window is new on the new show. Why release all episodes at once? So people watch it fast, not over enough time for residuals to be big. It seems like they are incentivized to keep people from re-watching existing things. This may not actually be what’s going on. But it seems to fit weirdly well.

smogcutter 4y ago
Netflix’s incentives are all out of whack. The more a customer uses the service, the more they cost. Meanwhile revenue per customer is essentially fixed. Your biggest fans are your worst liabilities!
- slt2021 4y ago
  Same as Gym memberships
- hgsgm 4y ago
  Are bandwidth costs a significant portion of the price of a subscription, for a nontrivial part of userbase? Internet tells me streaming costs less than $.10/GB, which is about $.03/hr.
  - bcrl 4y ago
    Bandwidth costs way less than $0.003/GB. Even cheaper for Netflix because ISPs are willing to host cache servers for free.
at_a_remove 4y ago
That was sort of true of "syndication," or roughly your hundredth episode. If the show ran long enough, it got into syndication, and then the residuals mattered. It used to be that a hundred episodes was kind of a benchmark for that sort of thing. Case in point, Angel, which was cancelled on a February when Joss Whedon, the showrunner, demanded to know whether or not they got a fifth season. Sort of a "tell me now or fuck it." Well ... Granted, it wasn't a great choice for the network (that exec moved on, probably "failed upward") and it wasn't a good ultimatum for Whedon to make, but it does serve as an example of the kind of games that get played out, because quite a lot of networks would stop shows just before that, due to the Hollywood accounting being a pain once you had to keep paying your actors for decades. The math varies, so some shows go on, but that fourth season, man ... look out.
- Izkata 4y ago
  > Case in point, Angel, which was cancelled on a February when Joss Whedon, the showrunner, demanded to know whether or not they got a fifth season. Sort of a "tell me now or fuck it." Well ... Whether they'd get a 6th season. It did get 5, with a total of 110 episodes.
- MBCook 4y ago
  Wasn’t that also the deal with Brad Garrett’s sitcom after Everybody Loves Raymond? ‘Till Death? I think he had a contract that guaranteed enough episodes to get into syndication, but no one liked the show. So it just sort of weirdly limped on in this strange netherworld until they fulfilled the contract. And a show that normally would have been replaced mid-season instead was on for 5 years.
gamblor956 4y ago
Netflix does not pay residuals, they pay a lump sum upfront. So he's right about why WB cancelled and pulled a lot of shows (and the new CEO specifically acknowledged that this was done to avoid residuals) but wrong about why Netflix is cancelling shows. It's actually very silly for Netflix to cancel shows after 1 season; they generally tie talent to 3-season deals so the cost for a show doesn't significantly increase until a 4th season. Basically, Netflix show financing frontloads all the costs of a new show on its balance sheets. It helped in the beginning to draw talent in, but now it's biting them in the ass because their shows start off more expensive. Having sunk the money in, Netflix is faced with 2 choices: throw good money after bad and hope that the show can attract new viewers over the remainder of the initial 3-year contract, or just cancel the show. Most networks will give shows that are on the "bubble" of profitability additional time to try and gain an audience if the shows are cheap enough to justify the risk. But since Netflix frontloads the costs, the financial calculus rarely pencils out.
- FreakLegion 4y ago
  Netflix pays residuals. In fact the WGA won a fairly hefty arbitration against them maybe half a year back for underpaying, and SAG and DGA members also get them.
  - gamblor956 4y ago
    Yeah, you're technically right. Residuals refers to two things: licensing income royalties, and ongoing royalties. Ongoing royalties, i.e., the traditional meaning of residual, refers to royalties paid on the basis of ongoing views or sales. Netflix does not do this. Licensing income royalties are owed when a movie is licensed. They are included in the term "residual" because all film libraries, except Netflix, continue to license out their IP on an ongoing basis. Netflix does not; they shop their IP once at the beginning and then never again. I was referring to the former, not the latter, because the GP is talking about syndication residuals. My bad for forgetting that people on HN like to miss the forest for the trees.
    - FreakLegion 4y ago
kderbyma 4y ago
great analysis. Netflix is run by producers and financiers....maybe a political fad from time to time, but it certainly is not run by people who are passionate about entertainment or movies or films or the art.... the platform has little creativity in any aspect of it...and the shows being done for a single viewing may just be the side effect of having no talent in anything except infrastructure planning....

by MBCook 4y ago

smogcutter 4y ago

Netflix’s incentives are all out of whack. The more a customer uses the service, the more they cost. Meanwhile revenue per customer is essentially fixed. Your biggest fans are your worst liabilities!

slt2021 4y ago
Same as Gym memberships
hgsgm 4y ago
Are bandwidth costs a significant portion of the price of a subscription, for a nontrivial part of userbase? Internet tells me streaming costs less than $.10/GB, which is about $.03/hr.
- bcrl 4y ago
  Bandwidth costs way less than $0.003/GB. Even cheaper for Netflix because ISPs are willing to host cache servers for free.

at_a_remove 4y ago

That was sort of true of "syndication," or roughly your hundredth episode. If the show ran long enough, it got into syndication, and then the residuals mattered. It used to be that a hundred episodes was kind of a benchmark for that sort of thing. Case in point, Angel, which was cancelled on a February when Joss Whedon, the showrunner, demanded to know whether or not they got a fifth season. Sort of a "tell me now or fuck it." Well ... Granted, it wasn't a great choice for the network (that exec moved on, probably "failed upward") and it wasn't a good ultimatum for Whedon to make, but it does serve as an example of the kind of games that get played out, because quite a lot of networks would stop shows just before that, due to the Hollywood accounting being a pain once you had to keep paying your actors for decades. The math varies, so some shows go on, but that fourth season, man ... look out.

Izkata 4y ago
> Case in point, Angel, which was cancelled on a February when Joss Whedon, the showrunner, demanded to know whether or not they got a fifth season. Sort of a "tell me now or fuck it." Well ... Whether they'd get a 6th season. It did get 5, with a total of 110 episodes.
MBCook 4y ago
Wasn’t that also the deal with Brad Garrett’s sitcom after Everybody Loves Raymond? ‘Till Death? I think he had a contract that guaranteed enough episodes to get into syndication, but no one liked the show. So it just sort of weirdly limped on in this strange netherworld until they fulfilled the contract. And a show that normally would have been replaced mid-season instead was on for 5 years.

gamblor956 4y ago

Netflix does not pay residuals, they pay a lump sum upfront. So he's right about why WB cancelled and pulled a lot of shows (and the new CEO specifically acknowledged that this was done to avoid residuals) but wrong about why Netflix is cancelling shows. It's actually very silly for Netflix to cancel shows after 1 season; they generally tie talent to 3-season deals so the cost for a show doesn't significantly increase until a 4th season. Basically, Netflix show financing frontloads all the costs of a new show on its balance sheets. It helped in the beginning to draw talent in, but now it's biting them in the ass because their shows start off more expensive. Having sunk the money in, Netflix is faced with 2 choices: throw good money after bad and hope that the show can attract new viewers over the remainder of the initial 3-year contract, or just cancel the show. Most networks will give shows that are on the "bubble" of profitability additional time to try and gain an audience if the shows are cheap enough to justify the risk. But since Netflix frontloads the costs, the financial calculus rarely pencils out.

FreakLegion 4y ago
Netflix pays residuals. In fact the WGA won a fairly hefty arbitration against them maybe half a year back for underpaying, and SAG and DGA members also get them.
- gamblor956 4y ago
  Yeah, you're technically right. Residuals refers to two things: licensing income royalties, and ongoing royalties. Ongoing royalties, i.e., the traditional meaning of residual, refers to royalties paid on the basis of ongoing views or sales. Netflix does not do this. Licensing income royalties are owed when a movie is licensed. They are included in the term "residual" because all film libraries, except Netflix, continue to license out their IP on an ongoing basis. Netflix does not; they shop their IP once at the beginning and then never again. I was referring to the former, not the latter, because the GP is talking about syndication residuals. My bad for forgetting that people on HN like to miss the forest for the trees.
  - FreakLegion 4y ago

kderbyma 4y ago

great analysis. Netflix is run by producers and financiers....maybe a political fad from time to time, but it certainly is not run by people who are passionate about entertainment or movies or films or the art.... the platform has little creativity in any aspect of it...and the shows being done for a single viewing may just be the side effect of having no talent in anything except infrastructure planning....