The Economist - USA (2021-11-13)

66 Business TheEconomistNovember13th 2021

created  a  “sellers’  market”,  says  Spencer

MacDonald  of  Bectu,  a  union  in  Britain,

where  Netflix  makes  more  shows  than

anywhere  outside  North  America.  In  the

United States the number of jobs in acting,

filming and editing will grow by a third in

the ten years to 2030, four times America’s

total job­growth rate, estimates the Bureau

of Labour Statistics.

The  streamers’  hunger  for  variety

means their seasons have half as many epi­

sodes as broadcast shows, and are less fre­

quently  renewed.  That  means  “people  are

having to hustle for work more often,” says

one  script  supervisor.  A  fatal  accident  on

the  set  of  “Rust”,  a  movie  starring  Alec

Baldwin,  has  stirred  a  debate  about  the

frantic pace of production. But the stream­

ers’  short,  well­paid  seasons  allow  more

time  for  cv­burnishing  side­projects,  and

the  work  is  more  creatively  rewarding.

iatse,  a  union  which  represents  60,000

below­the­line  workers  in  America,  has

reached an agreement with studios for bet­

ter  pay  and  conditions;  its  members  will

begin voting on the deal on November 12th.

More  controversial  is  the  streamers’

payment  model,  which  is  creating  new

winners  and  losers.  Creative  stars  used  to

get  an  upfront  fee  and  a  “back­end”  deal

that  promised  a  share  of  the  project’s  fu­

ture earnings. For streamers, a show’s val­

ue is harder to calculate, lying in its ability

to  recruit  and  retain  subscribers  rather

than  draw  punters  to  the  box  office.  Stu­

dios  also  want  the  freedom  to  send  their

content  straight  to  streaming  without

wrangling  with  a  star  like  Ms  Johansson,

whose  pay  is  linked  to  box­office  takings.

The  upshot  is  that  studios  are  following

Netflix’s  lead  in  “buying  out”  talent  with

big  upfront  fees,  followed  by  minimal  if

any bonuses if a project does well. 

That  suits  most  creatives  just  fine.

“Buy­outs have been very good for talent,”

says  Mr  Whitesell.  “You’re  negotiating

what  success  would  be...for  that  piece  of

content, and then you’re getting it guaran­

teed to you.” Plus, instead of waiting up to

ten years for your money, “you're getting it

the day the show drops”. America’s 50,000

actors made an average of just $22 per hour

last  year,  when  they  weren’t  parking  cars

and  pumping  gas,  so  most  are  happy  to

take the money up front and let the studio

bear  the  risk.  Another  agent  confides  that

some famous clients prefer the streamers’

secrecy  around  ratings  to  the  public  dis­

section of box­office flops.

For the top actors and writers, however,

the  new  system  is  proving  costly.  “People

are being underpaid for success and over­

paid for failure,” says John Berlinski, a law­

yer  at  Kasowitz  Benson  Torres  who  repre­

sents a­listers. The old contracts were like

a “lottery ticket”, he says. Create a hit show

that  ran  for  six  or  seven  seasons  and  you

might earn $100m on the back end; make a

phenomenon like “Seinfeld” andyoucould

clear $1bn. 

A few star showrunners suchasShonda

Rhimes,  a  producer  of  repeat  tvhitscur­

rently at Netflix, can still swing nine­figure

deals. But creators of successfulshowsare

more  likely  to  end  up  with  bonusesofa

couple  of  million  dollars  a  year. And

though  actors  are  receiving  what sound

like  huge  payments  for  streamers’mov­

ies—Dwayne Johnson is reportedlygetting

$50m from Amazon for “Red One”,forex­

ample—in  the  past  they  could  makedou­

ble that from a back­end deal. 

Some  creative  types  grouse that the

newcomers  simply  don’t  understand

showbusiness.  With  its  “phone­company

mentality”,  at&t,  a  cable  giant that ac­

quired WarnerMedia in 2018, turnedHolly­

wood’s most storied studio into “oneofthe

last  stops  you’d  make”,  complains one

agent.  Disney’s  new  boss,  Bob Chapek,

came  up  through  the  company’stheme­

park division. The Silicon Valleystreamers

are  more  comfortable  with  spreadsheets

than stardust.

But  their  unwillingness  to  veneratea­

listers also has an economic rationale.The

star system, in which actors likeArchibald

Leach were transformed into idolslikeCa­

ry Grant, was created by studiostode­risk

the financially perilous businessofmovie­

making. A blockbuster, which todaymight

cost $200m to shoot plus the sameinmar­

keting,  has  one  fleeting  chanceto break

even  at  the  box  office.  The  gambleisless

risky if a star guarantees an audience.

Today, studios are de­risking theirmov­

ies  not  with  stars  but  with  intellectual

property. Disney, which dominatesthebox

office, relies on franchises suchasMarvel,

whose success does not turn onwhichac­

tors  are  squeezed  into  the  spandex leo­

tards. Amazon’s priciest projectsofarisa

$465m “Lord of the Rings” spin­offwithno

megastar attached. Netflix’s biggestacqui­

sition is the back­catalogue of RoaldDahl,

a children’s author, which it boughtinSep­

tember for around $700m.

What’s  more,  streaming’s  approachto

generating hits is different. Whereaswin­

ning at the box office required bettingbig

on  a  few  mammoth  projects, Netflix’s

method is “more like a random walkwhere

‘hits’  are  first  discovered  by  their users,

then amplified by...algorithms,” notesMof­

fettNathanson,  a  firm  of  analysts.Netflix

served  up  824  new  episodes  inthethird

quarter of this year, more than fourtimes

as  many  as  Amazon  Prime  or  Disney+.Its

biggest  success,  “Squid  Game”,hasa cast

that is largely unknown outsideSouthKo­

rea. “Competition is not limited towhohas

the  best  content;  it  is  also  framedaround

who  has  the  best  tech”  for  discoveringit,

says MoffettNathanson. In the newHolly­

wood,  stars  are  neither  made nor born:

they are algorithmically generated.n

Commercialproperty

Labrats

O

xfordnanopore’sMinionisatiny

but powerful device. When a hotel

workerinSydneytested positiveforco­

vid­19inMarchlastyear,theportabledna

sequencertracedtheinfectiontoa flight

attendantforanAmericanairline,avoid­

inga generallockdown.Thesuccessofbio­

techfirms—anothercelebrityisBioNTech,

ofCovid­19vaccinefame—issuckingcapi­

talintolifesciences.Whensuchcompa­

niesexpand,theydosonotwithofficesor

shopsbutbymeansofwhite­walled,shi­

ny­surfacedscientificlaboratories.

Commercial­property investors have

longbankedonoffices,retailandindustri­

albuildings.Lessconventionalassetslike

mobile­phonetowerswerethepreserveof

specialists.Nowthebiggunsofrealestate

arecompetingoverthemtoo.Thuslabora­

toryspacehasbecomecommercialreal­es­

tate’shottestproperty,alongwithotherfa­

cilitiesthatpowerthedigitaleconomy.Da­

tacentresandinfrastructurethatconnect

smartphonesarebooming.

Theinvestors’motivationisclear.The

pandemicconvulsedcommercial­proper­

ty prices globally. American retailers

closed nearly15,000 shops in 2020. By

mid­October,withpeopleattachedtore­

motework,officeswereonlya thirdfull.

The risk profile of some conventional

propertyassetshasdeterioratedsharply.

Incontrast,demandforassetslikelabs

anddata centres has never been stron­

Scienceandtechnologyliftsthegloom

forpropertyinvestors

Laboratory conditions

US, investor-owned laboratories, total inventory

Q3 2021, million square feet

Source:JLL *Q2 2021

Vacancy rate, %

302520151050

1.8

20.1

11.9

8.0

7.1

19.8

29.2

2.7

7.7

    .7

Houston*

Pittsburgh*

LosAngeles*

Seattle

Philadelphia

Denver-Boulder*

Greater New York

Greater Washington, DC

San Diego

Raleigh-Durham

San Francisco Bay Area

Boston