It’s been a little more than a year since the Great Netflix Freak-out, when the streaming pioneer’s first-ever loss of subscribers and ensuing stock drop sparked overdramatic proclamations that TV as we’d come to know it was finished. In that time, it’s become clear that the business model dominating modern Hollywood is deeply broken but also that it probably isn’t going anywhere — at least not yet.
Across the town, there’s despair and creative destruction and all sorts of countervailing indicators. Certain shows that were enthusiastically green-lit two years ago probably wouldn’t be made now. Yet there are still streamers burning mountains of cash to entertain audiences that already have too much to watch. Netflix has tightened the screws and recovered somewhat, but the inarguable consensus is that there is still a great deal of pain to come as the industry cuts back, consolidates, and fumbles toward a more functional economic framework. The high-stakes Writers Guild of America strike has focused attention on Hollywood’s labor unrest, but the really systemic issue is streaming’s busted math. There may be no problem more foundational than the way the system monetizes its biggest hits: It doesn’t.
Just ask Shawn Ryan. In April, the veteran TV producer’s latest show, the spy thriller
The Night Agent, became the fifth-most-watched English-language original series in Netflix’s history, generating
627 million viewing hours in its first four weeks. As it climbed to the heights of such platform-defining smashes as
Stranger Things and
Bridgerton, Ryan wondered how
The Night Agent’s success might be reflected in his compensation.
“I had done the calculations. Half a billion hours is the equivalent of over 61 million people watching all ten episodes in 18 days. Those shows that air after the Super Bowl — it’s like having five or ten of them. So I asked my lawyer, ‘What does that mean?’” recalls Ryan. As it turns out, not much. “In my case, it means that I got paid what I got paid. I’ll get a little bonus when season two gets picked up and a nominal royalty fee for each additional episode that gets made. But if you think I’m going out and buying a private jet, you’re way, way off.”
Ryan says he’ll probably make less money from
The Night Agent than he did from
The Shield, the cop drama he created in 2002, even though the latter ran on the then-nascent cable channel FX and never delivered Super Bowl numbers. “The promise was that if you made the company billions, you were going to get a lot of millions,” he says. “That promise has gone away.”
Nobody is crying for Ryan, of course, and he wouldn’t want them to. (“I’m not complaining!” he says. “I’m not unaware of my position relative to most people financially.”) But he has a point. Once, in a more rational time, there was a direct relationship between the number of people who watched a show and the number of jets its creator could buy. More viewers meant higher ad rates, and the biggest hits could be sold to syndication and international markets. The people behind those hits got a cut, which is why the duo who invented
Friends probably haven’t flown commercial since the 1990s. Streaming shows, in contrast, have fewer ads (or none at all) and are typically confined to their original platforms forever. For the people who make TV, the connection between ratings and reward has been severed.
So who
is getting rich off hits like
The Night Agent? Not streaming services, no matter how many global viewing hours they accumulate. Many streamers have spent themselves into
billions of
dollars of debt building their content libraries, and subscription fees haven’t grown fast enough to close the gap. If platforms like Netflix make any money at all, it is only a
fraction of what entertainment companies used to make back when more than
105 million U.S. households spent an average of $75 per month
on cable.
“The entire industry,” says the director Steven Soderbergh, who has been navigating structural changes in Hollywood since 1989’s
Sex, Lies, and Videotape, “has moved from a world of Newtonian economics into a world of quantum economics, where two things that seem to be in opposition can be true at the same time: You can have a massive hit on your platform, but it’s not actually doing anything to increase your platform’s revenue. It’s absolutely conceivable that the streaming subscription model is the crypto of the entertainment business.”
Like cryptocurrency, which has created massive on-paper fortunes built atop 1 + 1 = 3 arithmetic, streaming TV has always seemed too good to be true but seduced a lot of smart people anyway. Over the past decade, Hollywood completely reorganized itself around the digital model, as once-mighty networks and studios turned themselves into apps and abandoned reliable income streams hoping larger ones would materialize. They tripled their output, overpaid Oscar winners to debase themselves in miniseries, and hired all of your friends to work in writers’ rooms. Viewers across every niche and taste cluster were inundated with more bespoke programming than they could ever realistically consume.
We knew it couldn’t last, and it didn’t. Amid much lip service to fiscal responsibility, streamers have signaled plans to make fewer shows — a dramatic shift considering that the number of original scripted series had exploded from 210 in 2009 to
599 in 2022. We’ll still have enough to watch, at least for a while; billions will still be spent, and Ted Sarandos alone claims to have enough Netflix content stockpiled to last through the strike and beyond.
But for a certain type of viewer — imagine someone in her 30s or 40s who has never in her adult life had to worry about where her next critically acclaimed dramedy would come from — something already feels like it’s ending. Peak TV, as one of the industry’s most powerful tastemakers wearily puts it, “was a brief but intense mania that led to too much television.”
If you’re wondering whom to blame for TV’s predicament, that’s easy: It was Netflix. “Netflix completely revolutionized a 100-year-old industry,” says Mike Schur, who created
The Good Place. “Everything changed, and everything changed the way
they changed it.” In 2013, Netflix released the entire first season of
House of Cards on the same day, overthrowing the time-honored orderliness of weekly schedules and giving viewers a brand-new way to spend 13 consecutive hours. Then the company embarked on what was probably the biggest spending spree in entertainment history. Wall Street treated Netflix not like the next HBO but more like the next Tesla, ignoring the profit factor to focus on growth.
“We all saw Netflix’s market cap go from $20 billion to $60 billion to $100 billion,” says someone who was then an executive at a legacy TV company. “The unspoken thing was that this will all be accretive to valuation: ‘I may not be running a profitable business, but boy, is it going to add stock value!’” He eventually went to work for a streamer.
Everyone bowed to what felt like the inevitable — even the most storied brand in entertainment. In 2017, Disney CEO Bob Iger told investors that he would pull his company’s movies and shows from Netflix, ending a lucrative licensing deal, to start its own streaming service. AT&T (which then owned HBO and Warner Bros.) and Comcast (which owns NBCUniversal) did the same. They willingly sacrificed hundreds of millions in revenue at the same time they were burning billions to make shows for their new apps. Apple got in, too, and Amazon dramatically upped its commitment to Prime Video when Jeff Bezos
paid a quarter of a billion dollars for the rights to adapt
The Lord of the Rings. (Actually making the show would cost even more.) “The entire industry was spending money with no regard to making money,” says an executive who helped launch a Netflix rival with a
ten-word aside in a Netflix shareholder letter: “This added competition may be affecting our marginal growth some.” Investors began to bail. In April 2022, when the company announced that it had
lost subscribers — the first decline since it had started making its own content — more than
$50 billion evaporated in a
single day. A stock that had been approaching $700 would soon fall below $200. Netflix began to look more like one of the fusty incumbents it had attempted to vanquish. It changed policies on commercials (good) and password sharing (bad) and eliminated hundreds of jobs.
For the company’s rivals, Netflix’s woes begot a mix of Schadenfreude and relief: Maybe sanity had prevailed. But what at first looked like a Netflix correction was in fact a
streaming correction. Investors started punishing Disney, Warner Bros. Discovery, and other Netflix wannabes. “Wall Street woke up and said, ‘Actually, profitability is the only metric,’” says a senior executive at a major streamer. “The idea that you could have the optics of success, where you could add 5 million subscribers and you gained 10 percent in value? It was over.” Iger unretired to retake the CEO job at Disney.
Layoffs and budget cuts spread across Hollywood. After years of green-lighting shows with impunity, platforms invented cruel and unusual ways to cancel them. HBO Max, Disney+, Paramount+, and Hulu purged entire series from their libraries for the tax savings. Some slashed shows that had already wrapped production on full, unaired seasons; Nasim Pedrad’s
Chad got
pulled just hours before its premiere. Not even projects with big names were safe. In June 2022, HBO nixed J. J. Abrams’s $200 million sci-fi drama
Demimonde even though it had been in development for four years and had just cast its
lead actor. “The
Demimonde thing shook everybody up,” says one showrunner. “If HBO can say ‘no’ to J. J. Abrams, they could say ‘no’ to anybody.”
A few weeks later, Peacock pulled the plug on Schur’s TV adaptation of
Field of Dreams even though it was deep into
preproduction. “They just changed their mind,” says Schur. “They didn’t want to spend the money anymore.” He notes that the project will have one lasting artifact, perhaps the ultimate monument to Peak TV’s unfulfilled potential: “We built a baseball stadium in a cornfield in Iowa that’s still sitting there as we speak.” They built it, and nobody came.
By now, the
grievances of the Writers Guild are well known, especially if you live near a
picket line. Its members are upset that residuals are declining, that writing staffs are shrinking, that studios may replace them with ChatGPT, and that while streamers cry poverty, they’re paying their top executives nine figures. Many of these concerns are driven by a sense that the past decade was an elaborate bait and switch.
Early on, the streaming age seemed to herald exciting possibilities for writers. As the number of series ballooned, so did the number of writing jobs, allowing more people than ever, from a wider range of backgrounds and experiences, to partake in the great American fantasy of making TV. As other creative industries disintegrated, Hollywood promised not just an escape hatch but a ladder to career advancement, as former nobodies like
Severance creator Dan Erickson saw their pilot scripts pulled from slush piles and given full-season orders. Novelists and playwrights descended on L.A., and there were so many writers’ rooms to fill that a few shows even hired (God help them) journalists.
The development surge was also great for established writers — at least at first, as the new economics of streaming made it easier than ever to cash in fast. Under the old TV model, if a show was a success, its creator stood to get rich on the back-end profits. With all of linear TV’s revenue streams combined (ads plus syndication plus overseas rights), a studio might bring in $3 for every $1 in costs on a hit. The problem for writers was that most shows flopped, so there was no back end to get a piece of. Streamers offered something different. Their model, called “cost plus,” might pay $1.30 to $1.50 up front, making every show a winner — just not a very big one.
To make up for the lost back end, streamers floated performance-based incentives. Schur describes a scenario in which a platform might promise a showrunner a $100,000 bonus for season one, $250,000 for season two, $500,000 for season three, and $1.7 million for season four. “So you’re like,
Holy shit. This is great!” he says. There was a catch. Many seemingly successful series began to vanish after just a couple of seasons. “What no one saw coming was they’d just kill the show before they ever had to pay that money out,” Schur says. “They kind of tricked everybody. Now if you get to 20 episodes, it’s a miracle.”
“In the disorganization and the chaos of the free-for-all,” says Julie Plec, the creator of
The Vampire Diaries, “the foundational pieces of the business that made it work for everyone disappeared. We thought we were paying attention, and yet it still happened because nobody really knew anything about how any of this was working. We just all as a group sat there and watched all of the things that we had worked so hard to achieve — we watched them get taken away right from under our noses.”
Streaming bosses (and even some agents) think such complaints are overhyped. The cost-plus model offers creators pretty good, low-risk income. But on the whole, creative types aren’t looking for predictability. “Most writers are gamblers,” says someone who has created megahits in both linear and streaming TV
, “and are willing to bet on their own talents. They would be much happier getting a bigger payday with big success and a more modest payday if their show didn’t work. But now everybody’s basically playing a baseball game where people can only hit singles. The ball over the fence is still only a single.”
One high-level agent says that studios regard the WGA’s demands — for higher minimum pay and staffing requirements, among other things — as simply incompatible with the way TV is now made: “The Writers Guild, delusionally, is harkening back to a day when there were 25 episodes of
Nash Bridges a year and repeats and residuals. Back-end payments existed because Europeans were willing to watch our garbage, and Americans were willing to watch repeats of that garbage on cable at 11 at night. The real issue is that the medium changed. Instead of getting a job as a staff writer on
CSI: Miami for 46 weeks a year, now it’s a 25-week job working on
Wednesday, which is a better show. That’s just progress.”
But this so-called progress may have long-term consequences. Fewer weeks of employment mean that many entry-level writers are not receiving the training they need to advance through the ranks. Staff writers are now rarely invited to sets or editing rooms to learn the skills that would someday help them create their own series.
“Television has turned into a hyperspecialized Model T assembly line where everyone does one particular tiny job,” says Schur. “You focus really hard on screwing this bolt into this piece of metal, and that’s all you do. And as a result, nobody’s learning how to make a whole car. The battle now is to figure out which patches we can put on the process so that in five or ten years, people will still know how to make TV.”
“Staffing sucks right now,” says Greenwald. “I know that there are outliers and examples that are good, but broadly, I’m hearing horror stories.” Novice workers can spend “months on a show, and the show might just get tossed. It just might never air. What kind of career are you building with that handful of ashes?”
What was Peak TV, if we’re being honest about the stuff that piled up in our queues? The last decade surely produced some of the finest television ever, spanning high-toned dramas and offbeat comedies, several of them masterpieces unlikely to have been made under any other circumstances. But there were some stinkers, too.
“There is not a linear relationship between the amount of art you make in a given year and the amount of great art that will result,” says Soderbergh, whose new series,
Full Circle, arrives on Max next month. “Let’s say there are 60 shows made at one platform in a year, and six of them are great. If they make 120 the following year, that doesn’t mean they’ll get 12 great shows. The number of people that really know how to make something great is small, and those people are busy. There aren’t a lot of secret genius showrunners out there.”
Despite the genius shortage, streaming services tended to disproportionately favor an elevated form of TV-making that was frequently genius dependent: the prestige show. Maybe because there was no straightforward way to profit from their popular hits, platforms chased buzz instead, programming for critics and Emmy voters. But as competition among apps accelerated, this strategy produced so many darkly serious, cinematically embellished shows that the bad ones crowded out the good ones and not even tastemakers had time to watch them all.
“In the
Watchmen writers’ room, we would play this game called
Is It a Show?” says Damon Lindelof, who co-created
Lost and
The Leftovers. “Somebody would name a title, logline, and one of the actors, and we’d have to guess whether it was real. But the joke was it was always a show. Some were in their second or third seasons, and none of us — supposedly television professionals — had ever heard of them.”
If you feel like playing along at home, consider that for every recent coastally adored breakthrough like
The Bear or
Beef, there were unloved misfires such as
1899, American Gigolo, Archive 81, As We See It, Becoming Elizabeth, Dear Edward, The First Lady, Let the Right One In, The Man Who Fell to Earth, Night Sky, On the Verge, Paper Girls, Reboot, and
Shantaram, which all died in their first seasons in 2022 and 2023, plus others that may have escaped the embarrassment of cancellation only by disguising themselves as limited series.
“We’re all stuck in our bubbles of awareness,” says Lindelof. “Everybody I know is watching
Swarm, but then my mom and my in-laws and my young and cool brother-in-law don’t even realize it exists. So then you ask yourself,
Why do I know that this show exists? TV has become very artisanal.”
It may not have helped that some streaming services thought their recommendation algorithms could replace old-fashioned marketing, which made it easy for even great shows to come and go without causing a ripple. In an attempt to make their wares stand out among the glut, some platforms simply spent more money on them with mixed results. Over time, the expensive signifiers of prestige TV — the movie stars, the set pieces, the cinematography — became so familiar and easy to appropriate that it could take viewers six or seven hours to realize the show they were watching was a fugazi. “Premium and streaming have been chasing more of a film attitude than a TV attitude, which is making shows more expensive but oftentimes not as good as they used to be,” says Ryan. “You’re seeing ideas that should’ve been movies being elongated into eight episodes, and they don’t have the narrative engines to sustain them for that long.”
“People sometimes equate cost to quality, and that’s just utter bullshit,” says a senior executive at a major streaming platform. “They think they have to spend $20 million an episode, and they don’t.”
[...]
(just kidding although I do wonder what would happen if they made SNW on a James Cawley budget)
