And speaking of publicists…

Now, here’s the main event…

Have you seen this new HBO pay scheme? Executives at the network and the soon-to-be re-renamed HBO Max sent a 13-page document to key talent agents and lawyers this week dubbed, in the most low-key language possible, “Performance-Based Contingent Compensation.” That’s the technical term for “backends,” of course, and the doc lays out new guidelines for how the company’s talent partners will be paid above and beyond their per-episode fees when their shows are deemed hits—and, importantly, the data used to determine what qualifies as a hit. The title may be boring, but the fresh HBO rules represent the first major change in how the town’s most prestigious outlet pays people in more than two decades. It’s definitely a big shift. Until now, HBO has been operating mostly on so-called “net profits” definitions, as opposed to gross, which means it was notoriously difficult for stars and writer-producers to make much of anything on the backend, even on supposed hits. Instead, HBO has famously made up for those poor definitions by awarding its key talent outsize overall deals that generated big windfalls—and locked them into their hit shows. See, for instance, how Craig Mazin scored an eight-figure, four-year renewal of his overall deal right after his The Last of Us hit big, or what Mike White is getting for The White Lotus. At times, HBO has even provided advances against net profits, even if those net profits never actually materialize. That’s the thing about HBO: Agents trust them. Glenn Whitehead, the top dealmaker, has a great reputation, and everyone from Martin Scorsese to Steven Spielberg has been willing to work on a net definition because HBO, for the most part, makes it right. It’s how the network earned and maintained its reputation for being talent-friendly: The backends may not be great, but they have always taken care of the creatives who mattered. Now everything’s changing—at least on paper. After a months-long process that involved input from talent reps, those net definitions are disappearing. Instead, HBO is moving to a “bonus” system based on thresholds of “success” in different categories. It’s all contingent on how HBO defines those levels of success, and not dissimilar to how other outlets do it. I’ve written a bunch about Disney’s notorious “Series Bonus Exhibit,” which fundamentally changed how the Disney studios and platforms like Hulu and Disney+ paid talent—and which extinguished huge windfalls. And even streamers like Prime Video and Apple TV+, both of which used a buyout model to avoid the “home runs” that contingent compensation deals once enabled, have recently experimented with a performance-based (yet capped) backend model.

Anyway, here’s how the HBO guidelines break down, per the new document, with the caveat that these are guidelines, subject to negotiation: 1. Viewership Bonus: This is what it sounds like: Fixed escalating rewards (everything’s a “bonus” now) tied to domestic audience levels and budget, and shared among eligible talent based on how many “points” in the show each person has negotiated. So there’s a viewership floor to be eligible, and the threshold increases for high-budget shows, meaning it would have been easier to get the viewership bonus for, say, White Lotus Season 1, which cost less than $5 million per episode (it’s way more expensive now) than for Last of Us or House of the Dragon, which cost more than $20 million per episode, per HBO. Regardless, with viewership bonuses kicking in immediately, this mechanism provides backend on hits earlier than might have been expected with the previous profit-participation model, according to a couple agents I surveyed. That’s good news for talent.

But… the all-important question: How is viewership calculated? HBO says it’s the cumulative minutes viewed of each episode in a season in the first 90 days in the U.S., divided by the runtime. That’s becoming the industry standard “view” metric, and it includes linear HBO plays, HBO Max views, and V.O.D. numbers, all multiplied by Nielsen’s household measurement (where applicable). Nielsen and “partners” are listed as data sources, but obviously HBO uses some first-party data that it doesn’t share publicly, and the guidelines explicitly deny audit rights. So it’s a bit of a trust me situation, though a C.F.O.-level executive will “attest to the accuracy of the information reported,” which at least provides some accountability. I know, famous last words…

2. Viewership Ranking Bonus: This is an additional $2 million bonus, per season/film, shared among participants based on their “points,” if the show or film ranks “in the top 3 for average episodic viewership in a given calendar year.” This is designed to account for success on HBO platforms and is similar to how streamers, which all have different subscriber numbers, have judged their content against stuff in their own unique ecosystem. It’s an acknowledgement that, unlike in the cable TV era, not all platforms have the same reach. Ten million viewers on, say, Apple TV+ is a way bigger deal than 10 million viewers on HBO Max. 3. Renewal Bonus: No bonuses for a Season 2 renewal, but it’s $1 million for Season 3 in scripted, going up to $7.5 million for Season 6, again shared among participants based on their points.

4. Emmy Wins Bonus: This has long been a fixture of premium TV deals, especially at HBO, which cares very much about awards. Interestingly, a comedy series win is considered less valuable than a drama or limited series win (sorry, Hacks):

That’s just series bonuses—which, again, will be shared by the participating talent according to those prenegotiated points. Individual stars and creatives can negotiate separate bonuses for their own categories. And the series money goes up 25 percent for subsequent wins, which would have been great for Jesse Armstrong and the team behind three-time winner Succession. 5. An “Extended Availability Bonus”: All of the above bonuses apply to the show during its initial window (usually seven years). Then the participants will get a percentage of their renewal and viewership bonuses starting at 15 percent for years eight through 10, and down to 2.5 percent after year 25. The proverbial mailbox money. 6. The “Separate Pot”: For those that qualify, there’s another way to profit based on a more traditional share of “transactional revenue streams” (like merchandising, video games, and home entertainment purchases), as well as off-platform domestic deals (like cable syndication, after the show’s initial window). It’s a complex formula, similar to the adjusted gross receipts scheme that I’m pretty sure only one or two lawyers at each studio fully understand. But some outlets don’t offer the separate pot, so it’s something… Got all that? Remember, these are just the guidelines for HBO negotiations. Top talent will invariably negotiate more—like, for instance, Emmy nomination bonuses. But overall, it’s a big change and, arguably, a lot clearer for talent and their lawyers to understand.

So… why is HBO doing this? Officially, a rep declined to comment, but the reasoning communicated to the town has been that after 20-plus years, it’s time to catch HBO up with the movement away from complex profit definitions and toward a more digestible and easily accountable bonus structure. Which is how a lot of platforms have characterized their shifts. As I’ve reported, streamers in particular want to evolve from costly “buyouts,” which pay talent as if their projects are all hits, to a more performance-based regime. I saw a recent Amazon film backend contract, which eliminated the usual streaming “buyout” and replaced it with a “streaming imputed revenue” calculation for movies that go to Prime Video within 70 days of release in theaters. Ashley Cullins recently reported that Apple is using a variation on the points and ranking system based on engagement, cost efficiency, and subscriber acquisition. (HBO doesn’t seem to be using sub gains as a factor.) Netflix has proposed something similar in film, but as of now the vast majority of its talent has chosen to take the up-front money. The fear for talent working at HBO, of course, is that the new backend scheme codifies how even the biggest hitmakers should be paid in success, and that the ultimate goal here is to reduce those extra-large make-good overall deals that have served to pave over net definitions with gold. Now that there’s a formal “bonus” structure, HBO’s top executive, Casey Bloys—or, rather, his business affairs army—will deploy that shield and deflect requests for big overalls, especially for talent not at the very apex of demand. After all, HBO is still, as of today, owned by Warner Bros. Discovery, which is swamped in debt and plagued by cost-cutting. C.E.O. David Zaslav and C.F.O. Gunnar Wiedenfels certainly don’t want to pay people more, especially if they don’t absolutely have to, and you can almost hear them questioning why HBO would cut fatter checks to stars or creators if their contracts don’t actually require it. To some, talent relations is a rich person’s game, and both WBD and HBO are certainly not the profit machines they once were. Now, Zaslav can point to the new backend guidelines and say, essentially, that’s it—and still feel good about air-kissing stars at the Emmy party. “This is certainly not about being a partner and maximizing the upside,” one top agent told me. Is that the real goal here? We’ll see. Like I said, HBO has thrived because dealmakers trust them. Darren Star continued to get paid on Sex and the City despite quitting the show—not because HBO had to, but because HBO looked at the big picture and the kind of people they want to be in business with. There are a bunch of similar examples. I don’t think the A-plus people will be impacted by this new system, but below that? The HBO shift continues a trend seen across the industry: The relationship between studios/networks/streamers and the talent that creates their product is becoming more like employee/employer, subject to bonuses with specific and enforced caps, rather than the true partnerships that defined the television era—mutually beneficial relationships where networks (and their executives) would create billion-dollar franchises and allow the talent to become phenomenally wealthy in the process. Maybe the HBO largess will continue, but maybe it becomes yet another casualty of a system that is turning home runs into doubles, and the TV pot of gold into a streaming bucket of quarters.

See you Monday, Matt This issue was created with research assistance from Maya Tribbitt. Got a question, comment, complaint, or a thoughtful review of Netflix’s ‘Trainwreck: Poop Cruise’? Email me at Matt@puck.news or call/text me at 310-804-3198.

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