This is one thing that fascinates me about the streaming model.

At some point it boils down to {cost per customer} vs {revenue per customer}.

However, because of residuals, {cost per customer} doesn't scale down as user count scales up. You ammortize the non-residual chunk of production, but that's a weird equation that likely drives the incentives we see playing out.

I'd assume residuals are lower / non-existent on the much-bemoaned formulaic Netflix fodder movies? Hence why they keep getting stuffed in services.

> I'd assume residuals are lower / non-existent on the much-bemoaned formulaic Netflix fodder movies? Hence why they keep getting stuffed in services.

As I understand it, the residuals are for things beyond the original contract. So if you have a broadcast show, that gets paid out. Then it goes to syndication - residuals get paid. Then it goes to streaming - residuals get paid.

However, with an in house production by a streaming service... from the Fortune link ( and http://web.archive.org/web/20231001022043/https://fortune.co... if you have trouble with the link)

> So shows originally produced for broadcast television aren’t an issue. When “Friends,” which was originally an NBC sitcom, generates $1 billion dollars on streaming platforms, the five leads each earn 2%, or $20 million apiece. But a show like “Stranger Things” – produced and owned by Netflix – never goes to a secondary market as long as it is aired only on Netflix, so the stars earn only their original pay.

> The problem, then, comes from the fact that the existing residual model, per the expiring SAG-AFTRA contract, doesn’t take streaming into account.

> In the streaming era, all new shows produced by streaming platforms are concurrently reruns and original runs. Actors want 2% of streaming revenue generated by the show or film to replace this line of income.

Netflix could have made the residuals per-viewing. They don't want to disclose those numbers however. So a fixed number is the only option.

>They have to pay the people who were part of the making for having the content available - even if no one streams it.

And no one seems to stream the interactive stuff, so it makes sense to get rid of it. Shame they didn't do the residuals so that they could just keep this stuff around though.

Sort of surprised it doesn't work sort of like Spotify, residuals based on performance. So unused content gets nothing, but also being cheap to have it available.

Spotify works under a royalties for musical performers - not residuals.

Netflix (and all other streamers and broadcasts) work under a residuals system.

Two different groups of content producers (musicians and actors) negotiated different models for how the long tail of licensing the content they helped create worked. Some of the economics of residuals changed with the contract that was negotiated last year with SAG.

Spotify’s model is broken though, apparently every subscriber pays money to all the shit top artists even if you never play their music. What a racket