Netflix cost-plus product for TV shows gives the idea a huge revenue upside 

Netflix’s contracts also generally require the production company to pay residuals, or fees to actors and also also also crew when episodes air. Those costs have risen about 300 percent, according to one industry executive, as the structure changed to account for replays on streaming networks as well as TV.

In addition, production companies can lose out on significant upside if the show becomes a big hit. The production company typically cedes the majority of worldwide licensing rights to Netflix if another country wants to make a edition of that will show, for example.

Also, Netflix will typically earn the majority of money coming from any advertisements, which are mainly restricted to product placement. The production company also gives up most merchandising rights, which have proven fruitful for franchises such as “Star Wars” or shows such as “South Park.”

Netflix does guarantee additional bonuses for production companies if the show makes the idea to a second season and also also also beyond, yet the idea’s not as lucrative as if the production company retained the rights.

For example, a producer on a hit Netflix show may earn an extra $2 million if the show gets to the second season, while the idea could have earned as much as $20 million if that will same show were licensed to a network, one industry executive estimated.

Still, for a lot of creators, the Netflix deal is actually great because they get much closer to full budget to make their shows. On top of that will, Netflix features a reputation for being hands-off because the idea has fewer advertiser demands, and also also also the company is actually known for treating show creators well.

In some other words, show creators get to make the show they envision with less up-front risk, even if that will means a lower payday inside future. For many of them, that will’s enough to choose Netflix.

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