Updated: October 1, 2021
The coronavirus pandemic completely upended the movie and entertainment business. Film shoots were scrubbed, theaters closed, release schedules were overhauled and the industry’s long-running shift towards streaming content was forced into overdrive. That shift to streaming has since caused a major disruption in studio relationships to filmmakers and movie stars.
Several major studios made the decision to stop delaying the release of big-budget films and send them directly to streaming platforms, cancelling an entire theatrical run. Other studios chose a simultaneous theatre and streaming release, such as what happened with Disney and Black Widow. Many actors have complained about losing potential box office earnings and thus a significant percentage of their expected profit. Scarlett Johansson actually brought suit against Disney for this issue based on breach of contract. The now-settled lawsuit raises important questions about how actors are compensated in the age of streaming.
HOW ARE ACTORS COMPENSATED FOR MOVIES?
Most actors are paid union rates specified by the Screen Actors Guild (SAG). These vary based on experience. However, better known actors can negotiate higher compensation. Actors can be paid a set amount upfront or at the project’s completion. They may also receive additional compensation based on how the film performs in theatres and/or residuals from DVD sales, TV licensing, etc.
As with many movie stars, Johansson’s compensation was largely tied to Black Widow’s box office performance. She received a box office bonus which was directly tied to revenue from ticket sales. Both stars and studios often seek to base at least some compensation on the success of the movie. As noted by attorney Domenic Romano on Good Day New York, “Typically, when actors’ representatives negotiate these deals, there is an expectation that they are sharing some of the risk with the studio… in exchange for some sort of compensation later depending on how well the project or film does.” Actors benefit when the movie is successful but shoulder some risk if it does poorly. Studios similarly do not have to pay actors a significant amount upfront for a flop but will have to share more of the profits if it does well.
The issue arises because of streaming services. Johansson argued that in releasing the movie to Disney+ –Disney’s streaming service—and theatres at the same time, Disney undercut the performance at the box office, costing her $50 million. She argued Disney did not renegotiate her contract related to the change in release plan as other studios were doing and as Disney had previously promised it would do.
HOW DOES STREAMING IMPACT ACTOR PAYOUTS?
Where a movie is only released on a streaming service and not in theatres, actors are typically paid a higher amount than they would be for a movie that goes to theatres. That is because actors cannot make money from residuals. The streaming service buys the exclusive rights to the movie for a one-time payment. There may be additional revenue from on-demand sales, but how these payments are calculated are difficult to ascertain.
Romano noted that a streaming service like Disney+ or Netflix “operate as kind of a black box with regards to its revenue, how many people are watching its films. It’s a real challenge for the creative people in the entertainment industry when they are foregoing upfront money to establish verifiable metrics on what happens on the other side depending on how successful the film or the television series is.”
When a movie is a simultaneous theatre and streaming release, arguably the availability of streaming could significantly reduce box office sales. As a result, box office bonuses become more difficult to meet and revenue from online sales do not compensate for those losses. Studios and actors are realizing they must adapt and develop new compensation models. Some of these changes are already happening as a result of the pandemic’s impact on the business. Several studios have renegotiated agreements to reduce the amount that the movie must earn for the actors to get a box office bonus. Studios are also beginning to count online and direct-to-streaming sales towards the bonus threshold.
THE RESOLUTION OF THE BLACK WIDOW LAWSUIT AND ITS IMPACT ON THE INDUSTRY
In late-September, Johansson and Disney chose to end the lawsuit after reaching a confidential agreement. Johansson said in a statement that she was “happy to have resolved our differences,” and that she looks forward to future collaborations with Disney.
The resolution, however, still leaves many questions. While Disney’s dispute with Johansson is settled, the issues at the core of the dispute remain unresolved. There are still unanswered questions regarding the future of theatrical stars, transparency and the interaction between the streaming and theater business.
The case will likely affect future contracts as actors, directors and other creative people will likely consider the growth in streaming when negotiating compensation terms. This case is a good example of the need for experienced legal counsel to analyze how certain terms may affect revenue and negotiate the best terms. Contact the attorneys at Romano Law today for help with your entertainment matters.
For more information about the Black Widow lawsuit, view Domenic Romano’s appearance on Good Day New York.
Photo by Erik Witsoe on Unsplash
