Photographer: Gabby Jones / Bloomberg
Photographer: Gabby Jones / Bloomberg
Warner Bros. presented a new plan to compensate filmmakers during the pandemic: treat each film as a box office success.
After shocking Hollywood with its decision to release all of its new films this year on HBO Max, the studio adjusted the terms of its partner agreements to guarantee payment regardless of box office sales and to increase the chances of performance bonuses. Warner Bros. will also pay a larger group of money from the cast and crew based on the fees it receives from HBO Max, according to people familiar with the studio’s plans.
The company is close to resolving disputes with many parties, said the people, who asked not to be named because the discussions are private. Details of some deals have started to appear, with the Hollywood Reporter saying this week that Warner Bros. is close to an agreement with Legendary Entertainment on the film “Godzilla vs. Kong. “
The deals are a sign of the troubled times of the pandemic. Most cinemas are closed because of the coronavirus, motivating studios to put their films online. But their payment contracts with partners are often highly dependent on the success of the big screen – a system that many in Hollywood want to protect because it has enriched them.
Warner Bros. plans to release 17 films in 2021, including “Dune”, “In the Heights” and sequels to “The Matrix” and “Space Jam”. The films will appear in theaters and on HBO Max at the same time – although they are shown exclusively on the big screen in many territories around the world. The films will be shown on HBO Max for 31 days, but may remain in theaters for a long time.
This is how it works, according to people familiar with the situation: when the films are released this year, anyone entitled to a bonus will receive one for half of the box office revenue that would normally be required to trigger a payment. And if more cinemas close, the limit will drop further – a stipulation called the “Covid-19 multiplier”. Those who would normally participate in box office profits will continue to do so, as well as benefit from on-demand and on-demand sales.
HBO Max will pay Warner Bros. a 31-day window fee, and the money for that will be shared not only with the profit participants, but also with the cast and crew. Both deals are part of WarnerMedia of AT&T Inc., run by streaming veteran Jason Kilar.
“HBO Max is paying a considerable fee for the ability to show these films,” said Kilar in an interview last month.
AT&T, which acquired Warner operations in a $ 85 billion acquisition in 2018, has a lot to do with the strategy. In addition to helping to deal with the pandemic, the hope is to attract millions of subscribers to HBO Max, launched last year. The telecommunications giant is counting on the platform to become a full-fledged competitor of Netflix Inc. and Disney +.
Complaints from directors
What is not clear is whether the extra money is enough to ease the tension between the studio and famous filmmakers and financiers who immediately complained about Warner Bros. ‘decision. “Tenet” director Christopher Nolan rebutted the idea of diverting the films to HBO Max, which he called “the worst streaming service. ”Denis Villeneuve, whose film“ Duna ”was affected by the change, criticized Warner Bros. and AT&T in a column for the Variety industry commercial publication.
“AT&T hijacked one of the most respectable and important studios in the history of cinema,” he said. “There is absolutely no love for cinema, nor for the audience here.”
Talent agencies also have complained to Endeavor executive chairman Patrick Whitesell, saying it was an attempt by Warner Bros. self-negotiation. Richard Lovett, president of the CAA agency, said the move was “totally unacceptable” for his company and its customers.
“You unilaterally determined a value for our customers and their work to benefit HBO Max’s long-term prospects and AT&T’s finances, a choice that our customers did not make,” he said in a letter to WarnerMedia quoted by Variety.
Many of the parties were upset because they sense Warner Bros. did not give them enough information or because they wanted their films to be shown exclusively in theaters. But the scolding was also a carefully orchestrated part of a negotiation: many were concerned about the potential impact on wages.
And although launching movies on the Internet is nothing new – Netflix Inc. and Amazon.com Inc. releases dozens of films every year – filmmakers tend to choose traditional studios because they want their films to appear in theaters first and because the potential advantage of a major theatrical success far outweighs the money of a streaming success . In big films like “Wonder Woman”, this can cost tens of millions of dollars. Robert Downey Jr. did a reported $ 75 million for “Avengers: Endgame” between his earnings and profit sharing.
Spelling
Warner Bros. he has spent the past few weeks talking to his partners, like LeBron James’ SpringHill Entertainment and director Jon Chu, to better explain his strategy and make the point that they will make more money this way. Although Warner Bros. believed that it had the rights to release its films to HBO Max without the consent of its partners, it adjusted its contracts to offer more favorable terms.
The film industry is always a risky venture. Even without a pandemic, most films tend to lose money. Therefore, ensuring at least some kind of pay day it’s new – even if it’s not what people would do if the theater business was healthy.
Not all of Warner Bros. ‘the partners are upset about the HBO Max deal, but the studio wants to keep its talent happy – especially when it’s time to promote the films that will be released this year – and maintain loyalty for future projects.
Extra payments are not permanent. After 2021, the studio plans to revert to the old contract model. This raises another risk, in which the partners get used to higher and guaranteed payments that the studio cannot sustain. To cover the extra costs, Warner is reallocating money from some productions that were closed this year.
Sharing the HBO Max license fee with team members and writers is another temporary change. Team members typically do not share box office revenue, but they do get a share of the sales of home entertainment.
“Our guidance in these situations is always to be generous,” said Kilar in last month’s interview.