Backend and Residuals Are Things of a Linear Past.

After the May 2019 front cover story in VideoAge ("Blurred Windows: The Devolution of IP Rights"), the traditional business model of residuals and backend revenues has officially changed, with Disney being the company to transform how TV show creators are compensated for their work.

As of this past summer, Disney has been asking producers and other profit participants in its shows to accept a new formula offering profits earlier in exchange for renouncing any future licensing revenue.

Disney wants its payment system in place as it approaches the launch of its streaming service, Disney Plus, which is scheduled for next month.

Although Netflix and Amazon have been making such deals for their streaming services for the past few years, Disney would be the first U.S. studio to require them for all new TV shows. In effect, this would mean that Disney would control all licensing of the series to domestic syndication, streaming services, and foreign TV outlets, essentially buying out whatever share of profits are generated by those contents.

Amazon offers profit participation in the third season of a show based on a value determined by the company. Netflix pays creators for the cost of production and adds a negotiated profit payment on top of it starting with the first episode, but producers give up the rights to any backend revenue.

Disney would give producers a share of profits starting in the second season of a series and determine the value of each show by basing its estimates on the financial performance of other series from the past few years. The participants would receive negotiated points in the series based on that figure, starting in the second season. Producers will also be eligible for a series of bonus payments based on a show's success and endurance. Producers would see the value of their stakes grow each season a show is renewed. They would also be eligible for pre-negotiated bonus payments for Emmy and Golden Globe nominations, and a show's Nielsen rankings.

Compensation for revenue generated through music publishing, merchandising, DVD purchases, and video down-loads would also be paid from a bonus pool. A program's popularity on Disney Plus and Hulu would be equally rewarded.

A major benefit for Disney is that the company would...

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