Streaming studio executives believe they have gamed the system by locking talent into occasionally lucrative yet restrictive deals that pay talent substantially more upfront and hoard all the long-term benefit for the distributor. In actuality, this new system may wind up hurting creative quality and exposing studios to increased financial risk.
What was once a relatively transparent talent compensation calculation based on box office earnings or linear TV ratings has become a mathematical game of hide and seek. Amid the streaming boom, Hollywood has largely shifted away from backend compensation — where directors and key stars get a share of the revenues from the box office or from linear syndication and deals for streaming broadcast rights — in favor of more nebulous front-loaded payment for SVOD content.