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The Death of Hollywood’s Middle Class

How Netflix and the streaming wars are creating massive income inequality in the entertainment industry.

Fast Company

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In 2015, Jack Allison, a comedian with a nerdy affect and an impish wit, was a staff writer on The Jimmy Kimmel Show, doing what he loved best: Hanging out with a bunch of other funny people, writing jokes, and downing Twizzlers. In other words, he was a Hollywood TV scribe.

For each of the two years he was on Kimmel, Allison earned about $208,000, which in Los Angeles, the second-most-expensive city in the U.S., represents a middle-class lifestyle. He also received residuals–the payments that TV networks make to writers, actors, directors, and producers for rerunning their work. Kimmel only airs an old episode once a week on U.S. TV, but even so, Allison has so far collected $102,000 in residuals.

A year and a half ago, Allison left Kimmel to pitch his own series. The show wound up in development hell, so he started looking for other TV jobs, only to find that the TV landscape had changed dramatically.

Jack Allison. Photo by Alberto E. Rodriguez/Getty Images for Writers Guild of America, West.

“People talk about this Golden Age of TV—there are so many shows, so many opportunities,” Allison says. “But there are only so many shows staffing at any given time. And there are so many people going up for those jobs, because the jobs are shorter and there’s an influx of people who want to do this.”

Streaming companies like Netflix and Amazon have changed TV and the entertainment business in innumerable ways, particularly since Netflix started to air its own original programming in 2013. Almost all of the focus on this upheaval has been on viewers’ first-world problem of too many good shows to watch or the corporate gamesmanship between iconic Hollywood conglomerates and the tech giants who seek to usurp them in delivering the world its entertainment. Left out of the conversation are the workers whose livelihoods are being upended in the process.

Much as with the rest of U.S. industry, Hollywood’s middle class has seen the stability that reigned from the 1940s to the 1980s slowly chipped away in pieces over the last several decades. In 1993, the so-called fin-syn laws, which prevented companies from owning a production studio and a network, were abolished, ushering in an era of consolidation that reduced competition. Around the same time, cable television exploded, which diverted eyeballs and advertisers from the Big Four networks, which had been the most reliable providers of job security and good pay. In addition, most original programming on cable networks was produced on the cheap. In 2007, a Writers Guild strike, just as the global economic collapse began, led to a contraction from which workers have not fully recovered. Networks slashed their budgets for lucrative overall development deals for writers who were in any way associated with hit shows, and salaries were slow to return to pre-downturn levels.

Then came the arrival of streaming, which has only accelerated the decline for workers.

A Netflix innovation, such as releasing all episodes of a season all at once to encourage binge watching, has been good for viewers, but it’s spurred an industry-wide shift to drastically shorter seasons, from the traditional 22 episodes of broadcast networks to as few as 10 or even eight or six, which means landing a TV gig is no longer necessarily even a full year’s work. The tech entrants into Hollywood typically do not sell their shows to other platforms, which means there are no syndicated reruns, and networks, feeling the pressure to keep up, air far fewer reruns. Together, these developments have largely ended the residuals system. Hollywood operated on the principles of the gig economy well before it became fashionable, and talent has relied on those supplemental payments as a potential cushion in between jobs. (In addition, unlike in most of the creative economy, Hollywood employment means paying out the managers, agents, and lawyers who may have assisted you in securing it.)

For viewers, all the talk of “peak TV“–last year there were 487 scripted series–and the artistically daring programs it’s produced such as The Handmaid’s Tale, Succession, and The Man in the High Castle implies an economic boom for the people who write, act, direct, and work behind the scenes on those shows. Furthering that impression: Just this month, Costco, Facebook, Snap, Walmart, WarnerMedia, and the Jeffrey Katzenberg-backed Quibi have all made news or been rumored to enter this new digital video world.

The reality, though, is far less rosy. “Yes, there are more buyers,” says Allison, “but that just means that J.J. Abrams has more shows.”

Deep-pocketed digital players like Netflix, Amazon, and now Apple are willing, and have the means, to pay whatever it takes to build up their talent rosters. In the last year, Netflix has shelled out nearly half a billion dollars to lure three showrunners who made their names producing network TV: Shonda Rhimes (Scandal, Grey’s Anatomy), Ryan Murphy (Glee, American Horror Story), and Kenya Barris (Black-ish). Amazon is spending $1 billion just to produce a Lord of the Rings prequel series.

Rob Long. Photo by Flickr user USCPublicDiplomacy.

For everyone else, the economic reality of TV is a struggle, and it’s not just affecting folks like Allison who are still relatively early into their careers. The pressure can be more acute on veterans as well. “It’s really hard to be a person in their mid-career and have financial obligations and be in show business,” says Rob Long, whose writing and producing credits include Cheers and Kevin Can Wait. “It’s a great time if you own your house and you don’t have that many expenses. Or if you’re young and broke and don’t have any particular need to drive an expensive car or live in anything other than a shitty apartment. But if you’re in the middle and you’ve got a spouse, kids . . . it’s a hard business.”

The Rich Get Richer

The growth of Netflix, Amazon, Hulu, and now Apple and Facebook’s video ambitions have meant an explosion of content buyers in Hollywood. This year alone Netflix is launching 80 original movies and will have 700—no, that’s not an extra zero—original shows on its service. Besides creating more jobs, these companies are broadening the type of content that’s being made. Shows that once might have been considered too niche for anything other than HBO now have multiple homes.

Streaming has been “a boon” for writers, says Marjorie David, VP of Writers Guild of America West, the union which represents Hollywood scribes. “It’s increased the amount of material and the number of jobs that we can get, and in many cases it’s raised the quality of what people get to write. So nobody’s complaining about that.”

The issue is who’s benefiting most from the boon. An agent with one of the major talent agencies explains that the competition for talent is raising the deal sizes that creators can get. By way of example, there was reputedly a bidding war between Warner Bros and Netflix for Melissa Rosenberg, who is not a household name but has done notable work on everything from Dexter to Jessica Jones. The result: an eight-figure deal over four years. “Warner decided they needed to be competitive with Netflix,” this agent says.

This person notes that this sort of thing is going on all over town, with Amazon and Netflix pressuring others to step up to be competitive. “The traditional studios are absolutely terrified right now and have been very aggressive about putting people under deals,” the agent says. “From Sony to Universal to Fox, people are throwing money around. AMC has radically expanded its overall deal list over the last two to three years, from three to four people to a roster that might be 35 people.”

But the ones benefiting are either proven showrunners like Rosenberg or some of the senior staffers who’ve worked for them. If you’re coming from the right family tree, per se, there’s an opportunity to get a $1 million or even $2 million deal to create a show when you’ve never done so before. The competition for Rhimes’s senior staffers between Netflix and ABC led to those folks getting pay boosts.

For mid-level writers, though, the agent acknowledges they “might have to cobble together a season that might involve two shows in a year, and if on streaming, the residuals have been bought out, so they don’t have that source of revenue.”

“Hollywood has bifurcated completely,” says one prominent literary manager. “The rich are getting richer. What seems like an endless supply of money is really for the premium people.”

The Wild, Wild West

Streaming companies pride themselves on upending the stodgy traditions of Hollywood. When it comes to compensation, that cuts both ways. On the one hand, name-brand stars like Rhimes receive jaw-dropping deals that the networks can’t match.

On the other, less prominent talent is finding that streaming companies can be quite creative in being thrifty.

The WGA West’s David admits that thanks to streaming, “It’s the wild, wild West out there.”

Part of the 2007 writers’ strike was fought over new media, resulting in the creation of a minimum wage system for its members who work on streaming projects, but there’s still a huge amount of variance. For example, a writer on a Netflix show is paid differently from someone on a Hulu or YouTube Premium show, because fees are based on the number of subscribers that a service has. The fees also only cover shows that cost over $1 million to make.

In lieu of residuals, the guilds created a system whereby talent receives a buyout, in the form of six fixed payments after a show airs–but they’re nowhere near network residual levels.

Allison Becker. Photo from Wikipedia.

Because companies like Netflix don’t release viewing numbers, the payments aren’t based on ratings. So if a show is a big hit, the residual payment won’t reflect that. The secrecy around viewership “absolutely affects your residuals,” says actress Allison Becker. “That’s one of the things Netflix is being sneaky about, and that’s greatly hurting our residuals.”

In August, Becker, a seasoned performer who was a recurring guest star on Parks & Recreation, decided to go public with the way Netflix treats the rank-and-file workers on its shows.

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Becker found this out after landing a gig on an upcoming Netflix kids’ show (she did not want to say which one, because she did not want to taint the show’s reputation). Excited for the work, and the opportunity to work at a place known for its creative risk taking, she excitedly told her friends, “‘I booked a Netflix show!’ And they’re like, ‘Oh my God! Congratulations!'” she says.

But the experience proved to be a frustrating wake-up call. Becker was used to the network model of Parks & Recreation, where as a guest star she received a weekly rate of about $3,000, which was the guild minimum (today it’s $3,500). “But by the time it was the seventh season, I was making like $4,000 a week, because I was more accomplished and they upped me a little,” she says.

At Netflix, despite working two days a week, she was paid a daily rate, instead of the more lucrative weekly one. “They’d find ways to get around paying me more,” she says.

She also was never made a series regular despite being No. 5 on the call sheet, which in industry parlance means she had the fifth-biggest role on the show. Actors who are regular members of the cast are paid their “rate,” a fee that’s determined by experience and other factors.

“If I was on a [network show like] Community, I would have been paid as a series regular,” Becker says. “But they didn’t make me a series regular, they made me a recurring guest star and paid me a daily rate. If I’d been number five on an NBC show, I’d be making $30,000 a week, but I was making $980 a week [at Netflix]. By the time you pay out taxes, your manager, agent, and lawyer, I was walking away with like $200.”

Becker’s tale is echoed almost verbatim by another actor on a well-reviewed Netflix show that was on for three seasons. This actor, who wished to remain anonymous, appeared “here and there” on the show’s first season, but by the second season he was in most of the season’s 12 episodes. He filmed all but three episodes of the show’s third season.

But despite his increased visibility–he was No. 4 on the call sheet–Netflix would not change his guest-star status even after his managers tried to negotiate.

“I always thought it was kind of shady,” the actor says. “I have friends who are like, ‘That’s always how Hollywood’s been.’ And I’m like, ‘No, it’s different.'”

Netflix, meanwhile, spun things positively. “They were like, ‘Hey, we’re gonna pay you for the week instead of paying you the daily rate,’ and they’d make it seem like a good deal,” he says. “I was like, Oh, that seems like some sort of make-up for the fact that I’m still a guest star. People think you’re on TV and they think you’re probably well off or whatever. And I’m like, the amount of money I made for seasons one and two combined, it’s under $80,000. It’s a small amount of money.

“I remember talking to another actor and he was like, ‘If you and I were working 20 years ago, we’d both have bought houses. It’s just a completely different thing now.”

In response to these claims, a spokesperson from SAG-AFTRA, the actors’ union, says: “With a proliferation of media platforms and new entrants like Facebook and Apple entering the market, there’s more content than ever on traditional television and digital media. But even in such an exciting time, we are finding companies who want to nickel and dime our members. Often, productions squeeze actors by incorrectly categorizing their employment or misinterpreting our contract. We work to counter this through our enforcement efforts to ensure that all actors benefit from this amazing era of television.”

A Netflix spokesperson responds, “Decisions about series regulars are always made in consultation with the show creators and depend on a variety of factors including creative vision and production’s scheduling needs for the actor. We work hard to support artists and are always grateful when they share their talent on our shows.”

The Tradeoff

As the entertainment business continues to adapt to the new realities brought by streaming and its consumption habits, the solutions continue to erode what had been longstanding practices that workers relied upon.

Networks are dealing with the migration of eyeballs by instituting things like “mini writers rooms,” where they pay two or three writers to work on a few scripts in order to flesh a season out before the pilot is shot. The jobs only last a matter of weeks and are far less lucrative than being staffed in a traditional writers’ room. Presentation pilots are much less expensive than traditional ones, so everyone involved takes less money to try to get a show made. These moves keep networks from blowing millions of dollars on a project that they may not move forward with, but it erodes or eliminates what had been good jobs.

More recently, the WGA successfully loosened the exclusive holds that studios traditionally held over lower-paid writers, which keep them from seeking other employment while they’re working on a show—which meant that if you’d finished working on one season and were waiting to see if the show was re-upped for a second, you couldn’t seek another gig. This is a big issue with streaming companies, where there is often a long gap from the time a show is written and produced and when it airs.

“If the show has no air date, you won’t know if it’s coming back until it airs,” says WGA assistant executive director Ellen Stutzman, “and then you’re out of the market for months and months and months.”

But even with these attempts to level the playing field, there is still the fact that a season for a streaming show is typically less than half the length of a traditional network show (though networks have also started ordering shorter seasons). If someone like Allison theoretically went from a network late-night show to its streaming equivalent, say, Norm Macdonald Has a Show on Netflix, or Sarah Silverman’s I Love You, America on Hulu, it’s a completely different financial outlook. Macdonald’s show had 10 episodes, which meant a writers’ room that likely lasted for 10 weeks, compared with 46 weeks of employment.

The one–significant–upside of this new reality is that there is now more creative freedom. Writers and actors do appreciate being less hemmed in by network standards and practices and even just the unspoken mandate to appeal to everyone. “You have a group of writers and supervising producers, sub [executive producer] level, who are getting affected by [these new practices] and are making less than if they were on network shows,” says the agent. “But quite frankly, most of them are doing it by choice. People would much rather work for 10 episodes on The Handmaid’s Tale than they would on NCIS, even though they would make a lot more money doing that.”

Amid Consolidation, a Ray of Hope

The other force at work in Hollywood today is that despite the growth in TV buyers, with the rampant consolidation under way, most of those buyers are owned by the same few companies. Disney and Fox are in the process of becoming one. And with that, Hulu, which was formed as a joint venture between Disney, Fox, and Comcast (the owner of NBCUniversal), will become essentially another arm of the Happiest Place on Earth. It’s only a matter of time before CBS is spun off and gobbled up by a corporate behemoth, or remarried with Viacom.

Meanwhile, the widespread perception is that Netflix is doing its best to run everyone out of business and create its own monopolistic TV ecosystem. This gives these players more bargaining power with talent.

The one ray of hope, perhaps, is Apple. The tech giant clearly has the resources to take on Netflix and Amazon: Unlike its rivals, it’s wildly profitable and has almost $250 billion in cash on hand. Apple has already pledged to spend $1 billion on original content this year, lining up deals with Battlestar Galactica showrunner Ronald D. Moore and La La Land and First Man director Damien Chazelle. It’s not the rumored $12 billion that Netflix will spend in 2018, making it seem like merely a toe dip, but Apple has the means to do almost anything.

The company is not expected to launch its video offering until sometime next year, but its most significant contribution to the streaming wars thus far is paving the way for better deals for the staffs who work on their shows. Over the summer, Apple signed on as a WGA signatory, becoming the first tech company to agree to script fees, weekly minimums, and residuals for a free-to-consumer platform. Historically, those contracts were all determined on a writer to writer basis. This sets a precedent going forward as more and more free digital platforms dive into original content, following on the heels of Facebook and Snapchat.

These financial benefits come with a creative cost though. Reports suggest that Apple is being far more hands-on in the development process than companies like Netflix, as it builds a slate of projects that hew to the iPhone maker’s pristine, family-friendly brand. Too much sex, profanity, and violence are reportedly frowned upon by Apple execs. Talent may be better protected working for the company, but they will also be more creatively curtailed.

The Hustle

While everyone waits to see if Apple, an invigorated labor movement, or these first signs of people speaking out against the streaming giants produce long-term change, a new job description has been added for those working in TV: the hustle.

“I go from job to job, sometimes it’s my choice, sometimes it’s not,” says Caroline Williams, a writer on Netflix’s Arrested Development and Maniac. “You’re always kind of looking ahead and trying to create security in a totally insecure environment. Tying to line things up when that is impossible.

“I’m definitely grateful to be from a two-income family,” she continues. “My husband is a writer and director. The fact that I have that protection, meaning if one of us were to drop dead, we would definitely still have a source of income to take care of our kids. If I’m only on one show and it’s only 20 weeks, what am I going to do the rest of the year? And if the show is 10 episodes?”

Giving writers paid time off was historically a way to keep the industry thriving with new content. The idea was that during their off months they would be developing new projects. Now that time is either very curtailed or doesn’t exist. “I used to be able to get away with directing a few episodes here and there,” says one TV writer-director who asked for anonymity. “The rest of the time I was writing scripts. But now I need to direct seven episodes in a year, which means I’m working seven months” and have less time to develop. “You’re working a lot but not making as much money.”

But most mid-level TV people aren’t so lucky and are having to invest more in what used to be extracurriculars: podcasts, teaching, and starting up their own entrepreneurial businesses on the side. Allison Becker is spending more time auditioning for commercials and teaching improv through her company Access Improv, which “goes into offices and teaches business people improv comedy—all the cool skills.”

Other comedic writers and performers have turned heavily to podcasts, where they can take a cut of advertising dollars, or be paid directly by fans through platforms like Patreon. Jack Allison, for example, cohosts a podcast called Struggle Session, about the politics of pop culture, which has more than 900 people paying at least $5 a month to support the show. This summer, he started a morning show on Twitch, which is best known for streaming people playing video games. JackAM–which Allison cohosts with his wife, Cait Raft, who’s also a writerperformer–has a Patreon as well. “I am now becoming one of these people that just seems to be doing podcasts and shit,” Allison says. “That’s nice. It is good, in a way, in that you’re able to reach people, and you’re able to earn a living off of people that are fans of your work.

“The downside is that it’s just so tenuous. You’re depending on the largesse of all these people to continue to want to pay you as a patron every month. That’s a nerve-wracking way to live.”

But the odds of a major reversal in the trend toward squeezing the margins are minimal, leaving Hollywood’s middle class beginning to dream of other pastures. “A lot of writers are like, How can we get out of California so we can afford to live?’ says the manager. “Between the property taxes, state taxes, income taxes . . . .”

“I had a conversation with friends the other day, and we were like, man, it’d be nice to stop doing this,” Allison says, laughing. “If only there was anything else to do.”

Nicole LaPorte is an LA-based senior writer for Fast Company who writes about where technology and entertainment intersect. She previously was a columnist for The New York Times and a staff writer for Newsweek/The Daily Beast and Variety.

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This post originally appeared on Fast Company and was published October 25, 2018. This article is republished here with permission.

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