As Movies Go Direct to Streaming, Talent Bonuses "Just Go Out the Window"

Melissa McCarthy JJ Abrams - H - 2019

Contracts haven't kept pace with studios' stepped-up efforts to forgo theatrical releases for direct-to-consumer options: "There is no recourse."

When the Melissa McCarthy comedy Superintelligence was jettisoned Oct. 17 from Warner Bros.' New Line label to the upcoming HBO Max service — weeks before its Christmas Day release — agents all over Hollywood took notice.

Although a handful of films already have transferred from the cineplex to the living room at the eleventh hour, including the J.J. Abrams-produced The Cloverfield Paradox (Paramount to Netflix) and the Michael Peña-Lizzy Caplan sci-fi feature Extinction (Universal to Netflix), Superintelligence marked a first for the Bob Greenblatt-led HBO Max, which launches in May 2020. 

To reps, it also offered a stark sign of things to come. "We're all proceeding with caution and skepticism, but ultimately, this is the new world and we need to use leverage when we have it to make the best of it," says talent lawyer Tara Kole, noting that backend compensation and box office bonuses typically disappear in such a move. 

Despite McCarthy's clout, Warner Bros. opted not to buy out her backend, a source familiar with the Superintelligence dealmaking tells The Hollywood Reporter

"I think we’re going to be seeing this from every studio. Not just Warner Bros.," says a source. "They tested this movie. If it had been a crowd-pleaser, they would have released it theatrically and paid the $30 million to market it. More people will watch it now, and she’ll still make plenty of money."

A typical talent contract offers no protection if the film bypasses theaters. Instead, stars can be stuck with terms similar to if the movie were shelved, flopped at the box office or got a day-and-date release. "There is no recourse," says an agent with a client caught in a theatrical-to-streamer crossfire. "Potential bonuses just go out the window."

Cloverfield Paradox stars like Daniel Brühl and Elizabeth Debicki initially were denied contractual theatrical bonuses. But after the stars' reps complained, Netflix wrote checks to cover the lost income. In late 2018, Paramount Players offloaded the horror film Eli, weeks ahead of its Jan. 4 bow, to Netflix, which released it nine months later (Eli star Sadie Sink was already a known quantity to Netflix from her two seasons on Stranger Things).

The Anna Kendrick holiday-themed film Noelle was pulled from a theatrical release and will instead bow on Disney+ on Nov. 12, the day the streaming service debuts. The trend is expected to pick up steam as major studios move to a tentpole-only diet.

Still, reps are now seeking ways to protect clients against streaming pitfalls. Those with actors appearing in independently financed films are including streaming bonus language. And if the sale of a film eclipses a certain amount, talent bonuses increase (think HBO Max acquiring Hugh Jackman's Bad Education in September out of Toronto for $20 million). Kole adds, "Of course, people are nervous because it's new, but being nervous doesn't help your clients."

This story first appeared in the Oct. 30 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.