How to make stupid money in television -- at this moment of time

Let’s see how long it takes for this business model to implode. Because it will. 

TV is undergoing more changes now than it has in decades, perhaps five decades.

In the old days, here’s how the few lucky talented (but still fortunate) writers got rich:

Networks couldn’t legally own shows. So studios would make development deals to tie up the best talent. That resulted in multi-year seven-figure deals. The idea was that those writer/producers were exclusive to that studio and if they created a hit show everyone stood to cash in.

Additionally, writer/producers owned part of the shows they created. And in those days the goal was to make at least 100 episodes to sell into syndication. A smash hit like CHEERS or SEINFELD could be worth hundreds of millions to the writer/producer.

Once networks could own shows those development deals began to dry up. A few high-end deals still remained but the parameters of those deals were different. At one time writers only created shows and produced pilots. Under the new model, the network or studio (often the same thing) could assign you to work on whatever show it wanted.  You don't have a pilot?  Guess what?  You're Co-EP of THE NEIGHBORHOOD. 

Now we’re in a totally different universe. Streaming services are the future. Netflix, Hulu, and Amazon are getting competition from Warners, Disney, Apple, CBS, and more to come. They don’t need 100 episodes. They don’t want 100 episodes. Syndication is drying up. Soon there won’t be shows with 100+ episodes.  Series used to go seven years; in the future they'll go three.  Producers once produced 22 episodes a season.  Now they produce 12.  Or 8. 

So why should writer/producers go to Netflix or Hulu when their shows won’t go into syndication and they won’t make a backend killing if the show is a smash? Good question.

The answer is that these streaming services are now paying huge upfront money to A-list writer/producers but owning the shows outright. J.J. Abrams, Shonda Rhimes, Ryan Murphy, Greg Berlanti, and a few others are making deals for over $300 million upfront. And the deals are not even exclusive. Pretty nice signing bonuses. 

Get it while you can, boys and girls, because this model is bound to collapse. Why? Compare it with the old model: Yes, everyone got rich IF the show became a big hit. If it didn’t, well, the studio was out a couple million for the development deal. Here, if shows aren’t hits the streaming service is on the hook for $300 million. How many of those hits can they absorb before they realize they made monumentally bad deals?

How has a similar model worked out for MLB? How does that Albert Pujols’ ten-year $240,000,000 deal look to the Angels now? How many championships has he led them to? How many additional fans has he put in the seats?

But at least he’s exclusive the Angels.

So Greg Berlanti, for example, has a $300,000,000 deal with the Warner Brothers/HBO streaming service, and also gets a show on NBC. If the NBC show becomes that rare hit he can make a ton in success. If the show he creates for Warner Brothers does well, so what? He’s gotten his money. Which of the two shows do you think he’s going to concentrate on more? And which of the two shows do you think he’s just going to hire a showrunner and basically attach his name to the project?

The problem for the streaming services is they have to pay stupid money to entice A-list writer/producers, especially at a time when there is a lot of completion. But here’s what will happen: Some of the competitors will fail, or more likely merge with other services. Now we have three or four big players. Next year there will be seven or eight. Five years from now there will be five again, just maybe not the same five. And once that settles, gone will be the need to overpay producers. Broadcast networks will erode even more. Netflix, Disney+, and a few others will no longer feel the need to throw insane amounts of money to a select few individuals.  They'll be the only game in town.

So like I said, get it while you can. Is there a chance if you take big money upfront and forfeit any ownership rights that the show will become the next FRIENDS and it will air over many platforms, still go into syndication, and make the studio wildly rich while you’ve left millions on the table? Sure. But in this marketplace, I’ll take the upfront money any day. When they call it stupid money, the person receiving it is never the stupid one.

from By Ken Levine