Gary Goldberger

Attorney Law Offices of Gary G. Goldberger

Entertainment Law

He was previously an entertainment industry executive and independent producer, as well as a legal counsel to the U.S. House of Representatives Committee on the Judiciary.

In the last several years, the entertainment industry has suffered upheaval due to COVID-19 and the labor strikes by the WGA and SAG-AFTRA. This article identifies just a few of the issues facing the industry in 2025.

1. Declining streaming returns/mergers: A fast-growing portion of the business has been the digital streaming services. Major studios (Disney, Paramount, Comcast Universal, and Warner Brothers Discovery) and tech companies (Apple, Amazon) have poured millions and millions of dollars into building their own services. The largest ones (not including YouTube, which, while the leader in number of viewers, focuses more on user-generated content) are Netflix (the only one not owned by a legacy film studio or a pre-existing tech company), Amazon, Hulu, Apple TV +, Disney +, Paramount +, and Max. These streamers had hoped to make a splash and establish their brand by entering into very expensive development and production deals with major producers and talent. By the time the pandemic and strikes hit, most streamers were still operating at a negative cash flow. They realized that many of their expensive deals were failing financially and creatively, prompting them to use force majeure provisions to pause or cancel numerous agreements. By 2025, many streaming services reduced their output of new products and lowered production budgets - all while seeking revenue growth and profitability. Many observers believe there are too many large streaming services and that a viable future is possible only if some of the services merge.  

2. Theatrical film woes: The growth of streaming services has caused the number of major theater film releases to decline, as streamers and the studios that own them increasingly want to forgo a theatrical run and premiere films on their service to attract subscribers. Bigger-budget films that are theatrically released are often based on pre-existing intellectual property that audiences are familiar with (including sequels to prior films) - such as "Wicked," the "Dune" and "Fast and Furious" franchises, the Marvel and DC universes, etc. Even for films that are theatrically released, the "theatrical window" - meaning the amount of time that a film is only available in theaters - has shortened so that the films can be quickly made available on streaming services. As a result, theatrical box office has been declining, as has the number of theatrical screens in the United States. While savvy theatrical operators are programming other product (concert films, opera, etc.) to help stem the tide, it is not clear what the long-term future for the theatrical business will be. The improvements in watch-at-home technology, such as bigger TVs with better pictures, and high-quality surround sound, have led many viewers to just watch movies at home, missing out on what arguably is a better overall watching experience in theaters.

3. Declining California film production: The number of productions filmed in California, particularly in the Los Angeles area, has declined. Since the greatest concentration of skilled production workers reside in California, this shouldn't be the case. Why is this happening? The single biggest reason is the greater amount of production tax credits or rebates offered by other states and countries, such as Georgia, New York, Louisiana, Canada (which offers both a national and a provincial credit to qualifying productions), the United Kingdom and many others. At its simplest, the tax credit/rebate is money provided by a state and/or country to a production based on the money the film spends there. The reasoning behind offering a tax credit to attract production is that the money given to a production will be used to hire workers in the production location, who will pay taxes on it and spend money locally with merchants who will then do the same, generating jobs and creating a multiple of revenue in an amount greater than the actual credit/rebate.

Governor Newsom has proposed to increase the amount of tax credit funds available to productions from the current $330 million per year to $750 million per year in order to attract more productions to California. In support of this, an Oct 27, 2024 press release by the California Governor's Office of Business and Economic Development stated: "A study of the tax credit program found that, for every tax credit dollar approved, it generated and created at least $24.40 in output, $16.14 in GDP, $8.60 in wages, and $1.07 in initial state and local tax revenue resulting from production in the state." Legislation to enact Gov. Newsom's proposal has recently been introduced in the California legislature.

While the proposed increase is a significant improvement and will help induce more productions to shoot in California, the proposal still falls short of what is offered by some other states and countries. In particular, California, unlike some of its competitor jurisdictions, does not consider monies spent on key "above-the-line" talent such as directors, writers, producers and actors to be qualified expenses on which a tax credit will be given. This leaves California at a disadvantage in attracting productions compared to some other states and countries.

4. Success compensation: Prior to the popularity of the streaming services, when networks,  cable channels, and theaters were the only major outlets, lead talent would negotiate agreements for a production that paid them a guaranteed fee and, depending upon their importance to the production, a share of net profits. At its essence, net profits were dependent upon whether, and how well, a show or film could be resold and/or merchandised over and over again in the United States and the rest of the world. Most TV shows and films do not make net profits because they are not successful and/or long-running (and because of convoluted studio profit definitions), but the most successful series, such as "Seinfeld,, "Friends,, and feature film box office hits, have earned tens of millions in profits and have generated additional net profits for the key talent responsible for the production's success.

The growth of production by the streaming services has changed this. Most feature films made for a streamer (excluding blockbusters) will either get a limited theatrical run or none at all, and then air only on the streamer - and most original television series will air only on the streamer and will not be re-licensed in major territories in which the streamer operates. While streamers are starting to license some of their shows to other outlets, this is not yet a widespread practice for their marquee shows. As a result, the traditional model of calculating profits does not apply to a streaming service. A major issue faced by streamers and talent, then, is how to reward the talent responsible for the show or film if the production is successful on a streaming service.

This issue involves the key questions of determining what makes a streaming show successful and how to create equitable success bonuses. The answers vary from streamer to streamer.

Ways that have been negotiated with streamers, or could be negotiated in the future, include the following: (i) paying the production company a premium over the budget to be shared with the producer and talent, (ii) paying talent a fixed sum each time a television series is renewed for a new season, (iii) paying a fixed sum if a series or film is in the top number of shows viewed on the streamer domestically within the first month after being released, and again on a yearly basis thereafter, (iv) paying a sum if a series or film is released on the streamer in major international territories, (v) paying a sum if a series or film is in the top number of shows viewed in a major international territory, and/or in all international territories combined, (vi) paying a sum if there is a direct correlation between the airing of the show and an increase in new subscribers that do not cancel within a few months' time, (vii) if, after the show's initial release, the show airs in the U.S. on a digital platform that contains ads (which are gaining in popularity), paying a sum based on advertising revenue or number of viewers, and/or (viii) paying a sum if airing the show/movie slows the streamer's normal rate of subscription cancellation (churn). The fixed amount paid each time is negotiated in the initial agreements and can vary depending upon the level and contribution of the talent. Success metrics and payment amounts will likely continue to be aggressively negotiated.

5. Section 230 of the Communications Decency Act: This is the "safe harbor" provision that protects internet platforms against being held legally responsible for content posted on the platforms by third parties over whom they have no control. Many feel that this provision has enabled the growth of the internet, since without it, a platform such as Facebook or X (Twitter) would be sued out of business because of content posted by users that contains material that infringes on third-party rights of copyright, trademark or other legal protections. Part of Section 230 also says that a platform isn't liable for taking steps to try to prevent speech that is "obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such content is constitutionally protected" (emphasis added). Some support this language as being beneficial to helping to moderate or prevent harmful and offensive online speech, while others oppose it as permitting censorship of certain points of view and thereby being a Congressionally-implemented restriction on free speech. While some in Congress have talked about reviewing and perhaps amending Section 230, this is still a work in progress.