Peak talent is here for streaming TV

Last week, MIDiA covered the HBO phenomenon The Last of Us. Following in the footsteps of other successful games crossovers such as the Netflix Original The Witcher, The Last of Us is HBOs’ pitch at creating a high-profile scripted drama to bring gamers to its direct-to-consumer service (D2C) HBO Max. The show is true to HBO’s roots as a big-budget content commissioner for gritty, expansive genre-defining drama, headlined by household star Pedro Pascal (who also happens to have his own gamer following). The Chilean-born 47-year-old actor also has a significant sci-fi fantasy following due to his lead actor in Disney+ exclusive, The Mandalorian. HBO is hedging its bets on Pascal’s ability to draw in new viewers from target younger demographics, reportedly paying him $600k per episode. This also reflects the changing nature of remuneration for A-listers in the era of streaming TV.

Streaming broke the old talent remuneration models and is set to break its new model

HBO was the first commercial TV network to meaningfully invest in high-budget scripted drama as a point of competitive differentiation. Alongside investing in quality writers, able to develop compelling plot lines laced with incisive dialogue, HBO invested in commissioning big budget productions to rival film as the primary source of creative energy in audiovisual entertainment. Breakthrough productions such as The Sopranos and The Wire were greenlit by HBO’s trail-blazing CEO Richard Plepler, ushering “the second golden age of television”. TV went from being the inferior product to film to the superior way for storytellers to reach audiences. Along the way, HBO became the most desired (and most expensive non-sports) pay-TV channel offering in the market. Its parent company, Time Warner, further increased its margin on its original content by signing lucrative licensing output deals in markets such as the UK (with Sky) that allowed the production team and actors / actresses to benefit from syndication deals (and so kept commissioning budgets in check).

However, the golden age of TV led to the unintended consequence of peak TV. Coined by John Landgraf, the Chairman of FX in 2015, peak TV describes the explosion of programming resulting from the HBO impact and the looming peak, followed by the inevitable decline in commissions. Fuelling this growth has been the arrival of subscription video on demand (SVOD) following Netflix’s pivot to SVOD in 2007, and then the subsequent move into originals to drive subscriber acquisition in 2013 with the release of its $100 million production House of Cards. The drive for exclusive zeitgeisty originals on international platforms has resulted in a shift to unipolar licensing deals, ending the lucrative syndication revenues which had previously significantly funded the talent. As a result, SVOD services have had to aggressively increase their upfront payments to showrunners and acting talent, ultimately resulting in Pascal’s big The Last of Us payday.

As we move into the saturation era of streaming TV, this is likely to change. Budgets will become increasingly inhibited by financing constraints (money is now more expensive to borrow on the public markets due to high inflation), and by the cold realities of the cost-of-living crisis forcing consumers to economise on their digital subscription expenditure.It is time for A-lister streaming talent to make hay while the sun still shines.