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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 ackno

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
    Netflix pays ongoing residuals. These aren't secret agreements, you can find good overviews from the guilds and even read the legalese. The WGA's explanation [1] for example is very clear, and it's been discussed at length over the years on the Scriptnotes podcast [2] (both hosts have been WGA board members and directly involved in strikes and collective bargaining). > My bad for forgetting that people on HN like to miss the forest for the trees. Yeah no. You were wrong. Suck it up instead of being passive-aggressive insulting. Your argument was based on the claim that Netflix "does not pay residuals", which isn't true. It wasn't true as initially written, and it still isn't true rewritten as "ongoing royalties". Netflix pays yearly residuals for as long as they keep something on their platform. Being wrong isn't a big deal, unless you inexplicably double down on it and start insulting people. 1. https://www.wga.org/members/finances/residuals/hbsvod-programs https://www.wga.org/members/finances/residuals/hbsvod-progra... 2. https://en.wikipedia.org/wiki/Scriptnotes https://en.wikipedia.org/wiki/Scriptnotes
pwinnski 4y ago
That is absolutely incorrect, Netflix does pay residuals[0]. Netflix is notorious for not allowing shows, even popular shows, to go beyond two seasons[1], so your subsequent paragraphs also seem to be incorrect. It does make some difference for most streaming services who is responsible for the production costs of a show, but Netflix seems to have their own standard orthogonal to that, as they don't seem to cancel on the same basis as other services. 0. https://www.ign.com/articles/netflix-must-pay-42-million-in-writers-residuals https://www.ign.com/articles/netflix-must-pay-42-million-in-... 1. https://nofilmschool.com/netflix-cancels-another-show-after-only-two-seasons https://nofilmschool.com/netflix-cancels-another-show-after-...
- gamblor956 4y ago
  Your own citations demonstrate that Netflix does not pay residuals on an ongoing sales or viewership basis, but rather all at once up-front... "Netflix employs a cost-plus model, which means that it pays a show’s entire production costs, plus a 30% premium. Netflix shows are expensive because the company holds onto them. There's no money to be made in syndication, so it needs to make creators feel enticed to sell their ideas to them." Bonuses and pay bumps are not residuals. For successful shows, those happen entirely separately from residuals. In the case of Bird Box, Netflix was deemed to have not paid enough upfront. It did not owe residuals on an ongoing basis. (Note that Netflix does all of its licensing deals at the beginning, it doesn't continue to shop them later. This is in sharp contrast to...every other film library, which continuously shops its IP out to other organizations as the point of having a film library is the long-tail licensing income.) Licensing residuals are not relevant to a discussion on syndication residuals.

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
  Netflix pays ongoing residuals. These aren't secret agreements, you can find good overviews from the guilds and even read the legalese. The WGA's explanation [1] for example is very clear, and it's been discussed at length over the years on the Scriptnotes podcast [2] (both hosts have been WGA board members and directly involved in strikes and collective bargaining). > My bad for forgetting that people on HN like to miss the forest for the trees. Yeah no. You were wrong. Suck it up instead of being passive-aggressive insulting. Your argument was based on the claim that Netflix "does not pay residuals", which isn't true. It wasn't true as initially written, and it still isn't true rewritten as "ongoing royalties". Netflix pays yearly residuals for as long as they keep something on their platform. Being wrong isn't a big deal, unless you inexplicably double down on it and start insulting people. 1. https://www.wga.org/members/finances/residuals/hbsvod-programs https://www.wga.org/members/finances/residuals/hbsvod-progra... 2. https://en.wikipedia.org/wiki/Scriptnotes https://en.wikipedia.org/wiki/Scriptnotes

pwinnski 4y ago

That is absolutely incorrect, Netflix does pay residuals[0]. Netflix is notorious for not allowing shows, even popular shows, to go beyond two seasons[1], so your subsequent paragraphs also seem to be incorrect. It does make some difference for most streaming services who is responsible for the production costs of a show, but Netflix seems to have their own standard orthogonal to that, as they don't seem to cancel on the same basis as other services. 0. https://www.ign.com/articles/netflix-must-pay-42-million-in-writers-residuals https://www.ign.com/articles/netflix-must-pay-42-million-in-... 1. https://nofilmschool.com/netflix-cancels-another-show-after-only-two-seasons https://nofilmschool.com/netflix-cancels-another-show-after-...

gamblor956 4y ago
Your own citations demonstrate that Netflix does not pay residuals on an ongoing sales or viewership basis, but rather all at once up-front... "Netflix employs a cost-plus model, which means that it pays a show’s entire production costs, plus a 30% premium. Netflix shows are expensive because the company holds onto them. There's no money to be made in syndication, so it needs to make creators feel enticed to sell their ideas to them." Bonuses and pay bumps are not residuals. For successful shows, those happen entirely separately from residuals. In the case of Bird Box, Netflix was deemed to have not paid enough upfront. It did not owe residuals on an ongoing basis. (Note that Netflix does all of its licensing deals at the beginning, it doesn't continue to shop them later. This is in sharp contrast to...every other film library, which continuously shops its IP out to other organizations as the point of having a film library is the long-tail licensing income.) Licensing residuals are not relevant to a discussion on syndication residuals.