The Directors Guild of America has lobbed the latest complaint against WarnerMedia over the media company’s landmark announcement last week that it will release its entire 2021 Warner Bros. slate on streaming service HBO Max, the same day it premieres these movies in theaters.
Citing unnamed sources, The Hollywood Reporter said the DGA sent a “sharply worded letter, ” signed by DGA national executive director Russell Hollander, to Warner Bros. CEO Ann Sarnoff, expressing consternation over how films will be valued in the business model.
Notably, the guild seems to accuse WarnerMedia of reneging on agreements hammered out by the conglomerate’s previous top-level leadership, former WarnerMedia Entertainment Chairman Robert Greenblatt and ex-HBO Max Chief Content Officer Kevin Reilly, who were both pushed out in August.
Also read: WarnerMedia's Math Problem: It Needs 8.4 Million More HBO Max Customers
The THR source said that in a “wide-ranging” meeting on Nov. 17, 2019, Greenblatt and Reilly laid out agreeable basic valuation terms for content featured in WarnerMedia’s new subscription streaming platform, HBO Max, which would launch seven months later.
WarnerMedia, of course, has pursued a much different content agenda under new CEO Jason Kilar, one in which the DGA said it wasn’t offered a role in helping to shape.
“The spirit of it was to get a fair, free-market value,” the THR source said of the November 2019 meeting. “What they’ve done is a departure from anything discussed in that meeting.”
As expected, WarnerMedia’s decision to go “day-and-date” with 17 movies in 2021, extending well beyond the expected end of the current pandemic, has produced a lot of public commentary from relevant stakeholders.
In his own public letter, filmmaker Christopher Nolan lambasted WarnerMedia’s decision as making “no economic sense.” Meanwhile, high-profile equity analyst Richard Greenfield responded with an investor note of his own, suggesting that WarnerMedia was embarking on the only coherent distribution strategy left, given the state of consumer demand, a model with common sense already laid bare by Netflix.
Speaking to investors Tuesday, WarnerMedia CEO John Stankey also defended the strategy, saying, “because we care about theatrical and we care about streaming, it ensures that we’re doing this in a way that we still show respect for theatrical venues and distribution, and not go and push all of our content on a direct to streaming exclusively construct, or hand it off to our competitors that aren’t as invested in the theatrical business.”
Regardless, this DGA press release, dated March 7, 2020, and headlined “Significant Gains Made in Streaming Residuals, Pension, Wages, and TV Creative Rights,” seems to show that the guild was genuinely caught off guard, believing it had basic deal points for “made-for-SVOD” services, including HBO Max, already secured, only to have them reneged upon.
That announcement touted, “ A nearly 50% increase in residuals for members working on original SVOD series, bringing the three-year residual for a 60-minute series on the highest subscriber SVOD services to more than $73,000. To put the accomplishment in perspective, when combined with the gains from the 2017 agreement, the residual is up nearly fivefold from under $15,000 in 2016, and exceeds the average residuals earned from all markets for the most popular network series.”
The major issue is now, not only is the definition of “made for SVOD” now skewed, there doesn’t seem to be a ton of clarity on projected revenue for each title.
MoffettNathanson does seem to concur with movie maker Nolan on the broad assumption that the movies will bring in less money, with the equity research firm projecting a $1.2 billion revenue hit for WarnerMedia in 2021.
