Netflix co-CEO Ted Sarandos moved to end Hollywood speculation over the streamer’s practice of upfront talent compensation when he told analysts on Thursday: “We think we have the right model and we’re not looking to change it.”
The executive’s comments came amid ongoing chatter that the company might move away from its existing buy-out model in order to save costs and adopt the more traditional practice favoured by legacy media, whereby talent receives a lower upfront fee and participates in profit when certain thresholds are reached.
Sarandos was not having any of it, telling analysts during Q3 earnings: “We like our model and talent likes our model. It’s so much more impactful for our business if we can make our films and shows a little bit better [rather than] making them a little bit cheaper.”
Earlier in the day Netflix announced $9.83bn in revenue for the third quarter, up 15.7% year-on-year, and forecast that 2024 revenues of approximately $38.9bn would increase 11%-13% in 2025 to reach $43-44bn.
Industry talk about a possible change to the compensation template mounted after Netflix met with talent agencies in late September, which one source described as “a big pile of fluff”.
Sarandos added that under the existing model “Netflix takes all the financial risk so [creators] can focus on making the best possible version of what they’re working on. And for Netflix, that model enables us to attract the best talent in the world.”
He conceded, “With all that said, we have been and we continue to be and we are open to more bespoke deals where talent is interested. They rarely happen because typically talent chooses the upfront model. We think we have the right model and we’re not looking to change it.”
The executive also pushed back on the now routine question about why Netflix does not stage wide theatrical releases before films debut on the platform.
“It’s our desire to keep adding value to our consumers for their subscription dollar,” he said, noting that Netflix’s 10 biggest films each drew more than 100m views. “We believe not making them wait for months to watch the movie everyone’s talking about adds that value. What we do for filmmakers is we bring them the biggest audience in the world for films, and we help them make the best films of their lives.”
Sarandos went on to talk about the impact of the Hollywood strikes last year, which led to a first half of the year that was “much lumpier than we would have liked… It did hit UCAN [United States and Canada] the hardest”. He said he expected business to be “largely back to normal” in 2025.
Next year’s feature highlights include a new Knives Out film; Guillermo del Toro’s Frankenstein starring Christoph Waltz, Mia Goth, Oscar Isaac, Jacob Elordi and Charles Dance; Happy Gilmore 2; and a new film from the Russo Brothers, The Electric State, with Millie Bobby Brown.
Also coming in 2025 are strike-delayed next seasons of Wednesday and Stranger Things, and new series from superstar showrunners Shonda Rhimes and Ryan Murphy.
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