THE GRAND CHECK

Why Amazon and Netflix are paying so much to lock down the world’s best talent

Obsession
Glass
Obsession
Glass

Amazon’s biggest new show, The Grand Tour, premieres today, with the team formerly of the BBC’s Top Gear traveling in expensive cars around the world. It is rumored to cost a whopping £4.5 million ($5.6 million) a show—and Jeremy Clarkson is reportedly making $12.4 million a year to host.

He’s not the only streaming-video star taking home a hefty paycheck. The Hollywood Reporter notes that Amazon is paying Robert De Niro $750,000 for each of the 20 episodes of an upcoming series. Jonah Hill and Emma Stone will get $350,000 per episode to star in an upcoming Netflix show called Maniac. Back on premium cable, Dwayne “The Rock” Johnson makes $450,000 per episode on the HBO comedy Ballers. (HBO, it should be noted, is trying to be more like Netflix.)

These figures are insane, sure. Netflix, Amazon, and HBO are digging deep into their pockets to secure the best talent. HBO is expected to spend about $1.8 billion this year, 20% more than in 2015, while Netflix plans to spend a staggering $6 billion on content next year and Amazon has boosted its content budget too.

But these platforms also pay more for talent upfront, because actors and creators miss out on the ancillary income they would typically get from syndication—when a show is sold on to other networks. That has all changed with streaming. Netflix, in particular, has kept an iron grip on the global rights to most of its programming, rarely releasing it outside of the platform, which means actors don’t get their usual cut of other revenue streams that would have come down the road.

An example: the US sitcom Friends still makes about $1 billion a year in syndication revenue for Warner Bros. Each of the show’s core cast members—Jennifer Aniston, Courteney Cox, Lisa Kudrow, Matt LeBlanc, Matthew Perry, and David Schwimmer—takes home about 2% of that, which translates to roughly $20 million per year in syndication income. Each. And that’s for a show that ended 12 years ago.

De Niro’s flat fee of $15 million for 20 episodes at Amazon seems like a bargain in comparison.

Streaming services like Netflix and Amazon account for that when they negotiate deals. Most of Netflix’s deals now have a flat “buy out,” according the Hollywood Reporter. “That’s why the checks are so big,” Netflix’s chief content officer Ted Sarandos reportedly said. “We are negotiating for what the backend would be.”

The same is true with films, an earlier Hollywood Reporter story showed. Few Netflix movies go to theaters and those that do are released online the same day, which limits the audience who will pay to see them in theaters. When Netflix is negotiating for the rights to films, it often buys out the cut that actors and creators would get from box-office profits, which is known as profit participation. Amazon offers a small, exclusive window for its theatrical releases, so it likely doesn’t have to buy out the profit participants.

This means that Netflix and Amazon’s deep pockets are driving up costs for everyone. Why would someone like De Niro wait for his $15 million when he can get it upfront and work with other A-list talent?

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