EXCLUSIVE: Last year’s labor strikes may have eventually convinced the big players to revamp streaming residuals, but debates around compensation are far from over or unique to the U.S.
Via their fledgling consultancy businesses, British TV vets Adrian Wills and Simon Brown are on a mission to help producers, talent and agents pick up a greater slice of the pie from the streamers.
Working closely with analysis firm Digital-i, the pair, who have several decades of experience between them working for the likes of BBC Studios and UKTV, have developed a formula to broadly work out how much certain shows are worth to a streaming service in terms of monetary value – prospective gold dust to in-the-dark content makers.
While the streamers, especially Netflix, have become more transparent with viewing data of late, Wills and Brown are now taking data and leveraging it.
“We’re on a bit of a mission to help content producers get their fair share of SVoD revenues,” said Brown when Deadline caught up with the duo in Soho a few weeks back. “The margins for a streamer are now huge. If I were a content producer driving that level of revenue then I might expect to get a slightly larger share.”
Wills and Brown’s ‘content valuation service’ works by taking the ratings data of 20,000 streamer subs provided by Digital-i and then valuing a show based on its contribution to the streamer’s total subscription revenue and total content spend. When negotiating the price point of a future season or acquisition of a show, producers, talent or agents can subsequently take this to the table and provide the streamers with what Brown calls a “cap and collar valuation,” which is effectively two figures acting as a floor and ceiling for how much a project could be worth.
“We appreciate Netflix may generate ‘X amount’ from your show but they do have to run a business so you won’t get your full share,” said Brown. “But we give a producer a range – you go in with an aspiration about subscriber value and have in your back pocket a ‘we mustn’t fall below this’ number.”
Ironically, the streamers would struggle to deny the validity of the data as many subscribe to Digital-i in order to “look over the fence at their competitors,” according to Brown. Digital-i’s data maps Netflix, Prime Video, Disney and Max, while an extension to Apple TV+ is slated for next year.
Wills and Brown have spent the past months pitching to indies, talent, media law firms and agencies including CAA, Avalon, All3Media and Banijay. For CAA, they recently completed a valuation estimation for Bridgerton and Queen Charlotte, while they used the BBC’s Peaky Blinders, which has been licensed to Netflix for years, to prove their worth to producer-distributor Banijay. “We asked whether it would be valuable to know how much the streamer was making off their show and the answer was ‘yes’,” said Brown.
Notably, Wills and Brown are also advising a firm on valuation around the European Union’s 2022 Statutory Rights Remuneration, which aims to ensure that IP creators receive fair compensation for their works and is currently being challenged by the streamers in the courts.
Subs, engagement, retention
The pair’s formula examines a show’s performance through a three-pronged lens: subscriber acquisitions, engagement and retention. This is helped by Digital-i’s data spanning the 20 biggest markets comprising 80% of global subs, giving clients a worldwide outlook. “The market is relatively saturated in the U.S. and UK so a high-performing show over here might not drive subscriber growth but rather solidify audiences,” said Wills. “But it could do well somewhere else say in Japan or Latin America where penetration is lower. What struck me initially was therefore how many different ways we can create value around this.”
Given how streamer residual demands dominated last year’s dual U.S. labor strike negotiations, the duo note that now is a good time to be trying to help the industry win its fair share. “There is a ‘cost-plus’ tradition in this industry to take say £1.2M ($1.6M) per hour if your show was worth £1M, but we question that and say, ‘Well if a show is generating £4M then is £1.2M really the right level?,” said Brown. “Without wanting to sound overly altruistic, this is in everyone’s interest to support grassroots creativity.”
Going forwards, Wills and Brown will continue to spread the word about their work. They harbor hopes to smarten the formula so that a figure could also be conjured that applies to new shows based on similar projects that have done well, although they acknowledge they aren’t quite there yet.
“When you become predictive a chink in the negotiating armor opens up so we haven’t perfected that,” added Brown. “If it’s a returning series you can look at older seasons and that makes it pretty black and white but when you start thinking about new shows then that is where the streamer could question [the formula].”
As more graft goes into what could eventually become a killer formula, the conversation around streamer compensation appears louder than ever.
