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I would think the logical structure would be to set up a holding company for each major production/show that the writers and other major contributors would hold equity in, and that holding company sells the rights to the work to the streaming company with regular renegotiations and some bonus clauses for short term success. So long as the content is still deemed a valuable asset, the holding company can keep charging a high price for the streamer to keep it, allowing the creators to collect dividends, or the streamer can buy out the equity holders if they want permanent ownership. With the bonus clauses (ie you get an extra lump of cash if this show winds up suddenly getting super popular) there is a strong incentive both to make something that will briefly drive a surge in membership, but with the equity there is an incentive to make something of genuine value that the streamer would want to make a permanent addiction to their collection. Of course if the streamer is bankrolling the production, it would make sense that they'ed have an exclusivity agreement in place so the holding company can't shop it around, giving them a very strong negotiating position (though they can't completely shaft the production team assuming they want to work with them in the future), but the people involved in the production would at least know what they are getting into ahead of time and decide if the equity they'd be getting is worth it.

Of course this is a change to how it's been done in the past, but not that big a change - this is basically already how the producers for movies get paid, essentially you'd just have a much larger number of "producers" with much lower individual equity stakes. And ultimately a new medium with a new business model was always going to require a new compensation strategy.

Is this not a problem that is easily solved in principle. For each 1 million views of a Stranger Things episode (after some date threshold), the writer gets n dollars. The contract would state that this clause transfers to any new ownership (just in case Paramount+ or whatever it's called now buys them and their catalog out).

Sure, they won't want to negotiate to allow this... but what's the difficult here besides unwillingness? It's basically the same thing as now, except that as rights to Friends and Seinfeld are bandied about, the value proposition for those is a little more clear (some network paid $1.1 billion to be able to air reruns for the next 14 years or whatever).

You'd think if there was some neutral arbitrator, they might settle what the format/pattern of that residuals clause would be, so that the two parties could just sit down and haggle out the actual numbers.

In principle, yeah, but the edge cases look nasty pretty quickly.

Some streaming platforms do have ads shown alongside their shows. So a residual structure could make sense.

Some shows will air on both kinds of streaming platforms - Community is on both Hulu and Netflix.

Some shows will start on linear television and then come to streaming, or vice versa -- Abbott Elementary is a recent, popular example.

I think you're generally right, though -- smart people could figure this out if they sat down and talked about it. It seems like the talking is the hard part right now.

I'm not sure I understand the first point. I am nearly 50, and still remember broadcast tv... so the idea that some tv shows ultimately derive revenue from advertising (sweeps month!) is not unfamiliar. But for a platform like Netflix where (hopefully?! dunno, I use Plex) revenue is ultimately derived from subscriptions, how should that be different? The writers don't give a shit about the original source of revenue, just that they get their cut.

Are residuals closely tied to how well the ad dollars flow? If someone buys a sitcom for re-runs, and the dish detergent manufacturers and Chrysler refuse to put ads on during those re-runs, do the writers get less (or no) residuals?

There has to be some residuals for shows not originally produced by Netflix, because Netflix isn't getting back catalogs for free.

> Each view of a Stranger Things episode generates exactly zero dollars.

I stopped watching shows on Netflix and subsequently cancelled my subscription. The value isn't in Netflix having content. Rather, the value is in viewers' consuming of content. Surely each view of an episode contributes to the revenue generated by the viewers' subscription fees.

Not directly, no. There's no marginal revenue generated from a person viewing an episode of a show on Netflix (unless they're on an ad-supported subscription).

The value of each show on Netflix is that it gives users one more reason not to cancel their subscription. The value is in Netflix always having more content for you to watch.

>The value is in Netflix always having more content for you to watch.

More precisely it's, as you said, in Netflix always having more can't miss content for you to watch. If you subscribe to Netflix for one or two shows that you absolutely must watch they are perfectly fine with that.

Kindle Unlimited works[1] works that way. They have pool of royalties derived as a percent of revenue for the month, that then distributed by views on a proportional basis. They have a specific algorithm that defines a "normalized page view" which prevents gaming from people doing things like using larger fonts, or adding filler pages that people skip.

I could imagine a version of this being adapted to other "unlimited consumption" model platforms like video streaming. That leaves room for the contract to negotiate the royalty percentage, maybe with some kind of a fixed floor, and to discuss how views are "normalized." Does minutes watched make sense? Should it be normalized by account, rather than overall time? etc ...

[1] https://kdp.amazon.com/en_US/help/topic/G201541130

> Does minutes watched make sense? Should it be normalized by account, rather than overall time? etc ...

And then incentivize people to leave their netflix accounts watching shows while they are away or whatever for pennies to recoup some of their monthly sub fees. If the royalties are enough, it would seem possible to instead just farm views for profit at netflix expense, on top of royalties, who then passes on the cost. Seems like a losing game all around

Do youtubers have tvs running with their videos on it to farm views in a meaningful way?

That wouldn't pay off for paid accounts. The cost of paying for a netflix account, will be higher whatever share of royalties is allocated from that account to the rights-holder. If for no other reason than netflix themselves is taking a cut. There might be some scenerio where gaming the system could be profitable with ad-supported accounts, but the remedy for that is probably contractual. If detected, it is a from of fraud and would have some sort of contractual or maybe even tort remedy.

Someone else in the thread mentioned that this is roughly how Spotify works, too -- take a pool of revenue, and distribute it based on how many streams an artist got.

One way or another, it's clear that there are existing, practical models for distributing revenue in this way. Seems like TV / streaming video is just behind the times.

I suppose it will end up like the Spotify model of paying musicians.

Viz, the artists get bupkis.

exactly!

Yeah. Take the subscription revenue, divide it up by program based on watch count (or number of minutes viewed, or whatever).

This gives you a rough approximation of revenue that can be attributed to each program. From this some proportion could sensible be allowed to the writers of the programming. This might be a percentage of the revenue after certain overheads have been first subtracted, or whatever. There are plenty of possible details to work out, but the basic concept seems sound.

Obviously this applies to subscription streaming without ads. Non-subscription streaming with ads seems perfectly amenable to traditional residuals, although if such ads pay less than TV ones (which i suspect is true), a smaller residual may make sense.

Subscription streaming with ads could sensibly be be either pure residual, of a hybrid of both approaches. The hybrid makes more sense for services that offer no ads if consumers pay more.

Each view of a show individually generates zero dollars, but each month that it's on the platform generates lots of dollars (compared to the case where it wasn't on the platform). I don't think it's really tricky at all.