Home » Hollywood stars and CEOs, who earns more? -Fortune Chinese Network

Hollywood stars and CEOs, who earns more? -Fortune Chinese Network

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Scarlett Johansson’s lawsuit against the Walt Disney Company was once a hot topic. Scarlett claimed at the time that the company had deducted millions of dollars from the film when she starred in “Black Widow.” At the same time, people found that Hollywood’s financial situation seemed to be unsatisfactory, and epoch-making changes had taken place. For different reasons, the CEO’s salary has also undergone subtle changes. For some of the highest-income people in the world, their lives are also changing imperceptibly. You may have questions: Hollywood stars and CEOs, who earns more?

Johnson was a bit annoyed, because on the same day that “Black Widow” was released in theaters, Disney released the film on the streaming media Disney+. Her contract was signed before the establishment of Disney+, which included a huge amount of remuneration based on box office revenue. There is no doubt that Disney+ will share this part of the box office into its own pocket. Johnson said that she was paid far less than what she should have received, and she wanted the box office share and related compensation she deserved. Disney responded: “This contract has no value.”

This dispute reflects a larger trend: Movie stars and TV stars will no longer be paid as they have done in the past few decades. Top actors have long used contracts to determine their due pay. The contract stipulates that in addition to initial remuneration, stars can also obtain so-called back-end benefits. The back end of the movie may also be part of the income. Johnson claims that the compensation she should get for filming “Black Widow” falls within this category. For TV series, the back-end is usually part of the joint sales after the TV series is broadcast. The resulting salary is less certain and is apportioned annually, but it may be much higher than the fixed salary.

Now, in the world of streaming media, this model is increasingly meaningless. Netflix, Amazon Prime, Disney+, HBO Max and many other streaming companies have produced a lot of content specifically for the service, but none of them have a backstage. Regarding when or whether to put the content into the theater, sometimes it will be decided later in the project. There is no such thing as a syndicated TV show in the streaming world. (TV program syndicate is a program distribution system in which program distributors sell the broadcasting rights of the same new program or old program to different TV stations, and expand the influence of the program by the method of “one draft, multiple contributions”.-Annotation ) The hits “The Crown” (The Crown, produced by Netflix) and “The Marvelous Mrs. Maisel” (The Marvelous Mrs. Maisel, produced by Amazon Prime) can be broadcast live on streaming platforms.

As a result, more and more top stars are getting paid the old way: a generous check. In the past, first-line stars can get up to $20 million in initial rewards before entering the backend. Now, Variety magazine reports that Warner Bros., the sister company of the streaming service HBO Max, has provided Denzel Washington and Will Smith in The Little Things and King Richard The characters in (King Richard) paid $40 million each. The reason is: “Considering the drop in box office caused by the premiere of streaming media.” According to “Variety”, Dawn Johnson may appear in Amazon Studios’ “Red One” for $50 million. Red One).

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The future of streaming seems very clear. Richard Rushfield wrote in his popular Hollywood newsletter “The Ankler”: “The back end is disappearing. This is a shift. If the old contract ceases to exist, some people will take the case, some People choose not to express their views. But this is actually meaningless. In the end, everyone’s results are the same.”

For high-income CEOs, the trend is just the opposite. The back end is becoming the entire game, or almost so. Take a look at any list of bosses with the highest annual salary. Those nine-figure and ten-figure salaries are almost all based on stock awards. These awards may or may not increase in the next few years, depending on performance. Driving this trend are activist investors and increasingly independent boards of directors who want to motivate their bosses more effectively than ever before.

The CEO’s salary-the equivalent of the initial salary of the stars-has become insignificant or even non-existent. Elon Musk, the CEO of Tesla, doesn’t have any salary. He is a founder, but the CEO hired is also paid on the back end. Take General Electric’s chief executive Larry Culp as an example: 99% of his 2020 salary will come from the back end, including a stock award worth $72 million. Due to the new crown epidemic, he rejected most of his salary and all bonuses, but even if he did not do so, even if the future of GE’s stock is uncertain, his salary based on the stock will still exceed 90%.

With the divergence of salary trends, this uncertainty directly points to the core question-who is richer? Hollywood stars are also CEOs. The answer is likely to be: CEO. The back end of Hollywood is disappearing, because in the streaming world, there is less and less data on the back end. Because celebrities’ remuneration depends more on monthly subscriptions, and box office revenue will account for a smaller and smaller share, fans’ favorite actors earn less and less money. In the current period of transition, huge checks still flow to stars who have proven their worth in the box office era (such as Washington, Smith, and Johnson). But 10 years later, how does the producer know who (if this person exists) is the must-have talent? Losing the risky but potentially profitable back end, the actor also lost the bargaining chip.

In contrast, CEOs have at least a chance to make much more money than before. Even in the market downturn, if their performance is better than their peers, they can also profit from it, depending on their remuneration package. If they perform poorly, they may have to survive on a meager salary for a period of time, usually only a mere US$1 million to US$2 million. But in response, the board of directors usually set up a generous new stock award mechanism to incentivize the CEO to improve performance on a new or lower basis.

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The general principle is that people’s work performance needs to be measured objectively. If they perform better, they will be paid more for it. This seems a bit strange, because most people don’t like their work performance being measured too strictly. But whether you like it or not, movie stars will eventually regret the unsatisfactory performance evaluation, and the CEOs will be happy because of the unsatisfactory performance evaluation. (Fortune Chinese Network)

Compiler: Yu Xin

When Scarlett Johansson recently sued the Walt Disney Company for allegedly knocking several million dollars off her pay as star of Black Widow, she turned a klieg light on an epochal change in Hollywood finances. Less visibly, and for different reasons, CEO pay is also being transformed. Life is changing for some of the world’s most highly paid people, and you’ve got to wonder: Who’s coming out ahead?

Johansson is miffed because Disneyreleased Black Widow in theaters on the same day it began offering the movie on the Disney+ streaming service. Her contract, signed before Disney+ existed, includes hefty bonuses based on box-office receipts. Since Disney+ undoubtedly siphoned revenue away from theaters, Johansson claims she’s getting paid far less than she ought to, and she wants monetary and punitive damages. Disney responds that “there is no merit whatsoever to this filing.”

The spat exemplifies a much larger trend: Movie and TV stars will no longer be paid as they have been for decades. Top-tier actors have long negotiated contracts that give them so-called back-end compensation in addition to an initial fee. The back end for a movie might be a percentage of the revenue, which is what Johansson says she is getting for Black Widow. For TV series, the back end has generally been a piece of the syndication sales after the show’s network run. The resulting pay is less certain, and spread across years, but potentially much larger than a flat fee.

Now, in a world of streaming services, that model makes less sense every day. Netflix, Amazon Prime, Disney+, HBO Max, and many other streamers produce much content exclusively for the service, where there is no back end. Decisions on when or whether to put content in theaters are sometimes made late in the game. TV syndication doesn’t exist in the streaming world; hit series like The Crown (Netflix) or The Marvelous Mrs. Maisel (Amazon Prime) can just stay on the service forever.

So top stars are increasingly being paid the old-fashioned way: with a big, fat check. In the old world, initial fees before the back end for A-list stars topped out at $20 million. Now Warner Bros., a corporate sibling of the HBO Max streaming service, has paid Denzel Washington and Will Smith $40 million each for their roles in The Little Things and King Richard respectively, Variety reports. The reason: “to account for diminishing box office in light of streaming premieres.” Dwayne Johnson could get some $50 million for Amazon Studios’ Red One, says Variety, once the price of the back-end buyout is agreed on.

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The future seems clear. “Backends are going away,” writes Richard Rushfield in his popular Hollywood newsletter, The Ankler. “This is a transition as old contracts are converted, some with more screaming and table-pounding, some with less. But the destination is the same.”

For high-earning CEOs, the trend is exactly the opposite. The back end is becoming the whole game, or nearly so. Look at any list of the year’s most richly rewarded bosses, and those nine- and ten-figure pay numbers are almost entirely stock-based awards that may or may not pay off years down the road, depending on performance. Driving the trend are activist investors and increasingly independent boards of directors, who want to incentivize bosses more strongly than ever.

Salary—the CEO equivalent of the stars’ initial fees—is becoming insignificant or even nonexistent. Tesla CEO Elon Musk receives no salary at all. He’s a founder, but hired-hand CEOs are also paid primarily on the back end. Consider General Electric chief Larry Culp: His 2020 pay was 99% back end, consisting of stock-based awards valued at $72 million. He declined most of his salary and all his bonus in light of the pandemic, but even if he hadn’t, his pay package would still have been over 90% based on GE stock’s uncertain future.

That uncertainty goes to the heart of who’s better off as these pay trends diverge—Hollywood stars or CEOs. The likely answer: CEOs. Back ends are disappearing from Hollywood because in the streaming world there’s ever less data on which to base them. As revenue comes increasingly from monthly subscriptions and less from ticket sales, dollars-and-cents evidence of fans’ favorite actors becomes scarce. In the current transition period, mammoth checks still go to stars who proved their worth in the box-office era (like Washington, Smith, and Johnson). But in 10 years, how will producers know who—if anyone—is must-have talent? In losing their risky but potentially lucrative back ends, actors also lose their bargaining leverage.

CEOs, by contrast, gain at least a chance of making far more money than ever. Depending on their pay package, they could cash in even in a market downturn if they outperform their peers. If they underperform, they may have to scrape by on salary, typically a measly million or two, for a while. But boards often respond by creating rich new stock-based awards that will incentivize the CEO to improve performance from a new, lower base.

The overarching principle is that when people are paid for performance, objectively measured, they tend on average to perform better and get paid more. That may seem strange, considering that most people don’t like having their performance at work measured too closely. But like it or not, movie stars will eventually be sorry that measurement of their performance is decreasing, and CEOs will be glad it’s increasing.

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