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Everyone and their agent is mad at WarnerMedia. Following the company’s game-changing announcement that it would be releasing the entire Warner Bros. 2021 slate to HBO Max day-and-date, producing partners, talent, and agents were left reeling — most of them having been informed of the move just two hours before it was announced to the public. And while much has been said about how this decision could impact theaters, things are even messier behind the scenes, where agents are scrambling to get their talent the proper pay, and production companies are wondering if they’ll get the money they’re owed.

Upsetting the Talent

New reports from The New York Times and The Hollywood Reporter give us a glimpse at the scramble behind the scenes in the wake of WarnerMedia’s industry-shattering announcement.

The New York Times paints a picture of irate major agencies and talent management companies ready to sever ties (or at least go to court) with Warner Bros., one of the few traditional “old-line” studios that, until now, was considered the “best home for talent. And Gal Gadot — whose film Wonder Woman 1984 preceded the Warner Bros. 2021 announcement, thus affording her and director Patty Jenkins a nice upfront paycheck — is stuck right in the middle. Now, other agencies are jostling for what’s being called “Wonder Woman money,” per THR. The New York Times writes:

The surprise move left agencies on a war footing. Representatives for major Warner Bros. stars like Denzel Washington, Margot Robbie, Will Smith, Keanu Reeves, Hugh Jackman and Angelina Jolie wanted to know why their clients had been treated in a lesser manner than Ms. Gadot. Talk of a Warner Bros. boycott began circulating inside the Directors Guild of America. A partner at one talent agency spent part of the weekend meeting with litigators. Some people started to angrily refer to the studio as Former Bros. “For the longest time, Warner Bros. has been known as the best home for talent, and that has been a significant competitive advantage,” Michael Nathanson, a founder of the MoffettNathanson media research firm, said in a phone interview. “With this move, they alienated the very talent they have worked so hard to attract. These aren’t engineers you can just replace.”

Due to the sudden nature of the release plan — with most agencies and companies only being notified shortly before the announcement — and the lack of consultation, it seems that many feel betrayed by Warner Bros., making it possible that some actors and directors may be unwilling to work with the studio in the future.

“Warners was the quintessentially talent-friendly, filmmaker-friendly studio,” one agent told THR. “Now Warners isn’t the first place, second place or third place you want to go.”

Per THR, those unhappy with this release plan include Dune director Denis Villeneuve, who “is said to be among those who felt most strongly that a traditional big-screen release was essential for his film”; a “shell-shocked” In the Heights director Jon M. Chu “who along with Lin-Manuel Miranda went through an intense courtship with multiple suitors for In the Heights and who had turned down a huge Netflix offer for Crazy Rich Asians because he cherishes the communal theatrical experience”; and even “platform-agnostic” The Suicide Squad director James Gunn, who “was not pleased when the studio followed its shocking announcement by floating a lackluster formula for compensating him and other profit participants in the film.”

The Question of Pay Packages

It all comes down to the issue of pay. If the idea of Hollywood celebrities not getting their million-dollar paychecks makes you scoff, look at it from another angle. I’ve seen a great comparison of the Warner Bros.-HBO Max release plan to Spotify’s abysmal payment of artists. The artists deserve to get paid, whether it be the multi-millionaire stars or the below-the-line crew members. And that becomes an issue when the box office model is completely done away with in favor of this hybrid day-and-date model.

It works like this. Studios compensate A-list actors, directors, writers and producers by two separate checks: one guaranteed upfront fee, and one that comes from a portion of ticket sales after a studio has recouped its costs. Per the New York Times:

If a film flops, the second payday never comes. If a film is a hit, as is often the case with superheroes and other fantasy stories, the “back end” pay can add up to wheelbarrows full of cash. That money trickles down through Hollywood’s financial ecosystem to agents, lawyers and managers — funding Pacific Palisades mansions, the latest Porsche and $1,000-per-person Urasawa dinners.

It is unclear whether Warner Bros. has a legal requirement to renegotiate back-end arrangements for the 17 movies, as it did with “Wonder Woman 1984” heavyweights. Mr. Kilar said in a phone interview on Friday that, while these changes might be jarring to those who expected one thing for their movie and were now getting something very different, the end goal was to honor talent relationships as the studio had done in the past.

This is why agents are trying to get that aforementioned “Wonder Woman money,” in which HBO Max paid Gadot and Jenkins millions of dollars upfront based on the projection that the film would be a billion-dollar box office hit during non-pandemic times. According to the New York Times, a few stars from films like Dune agreed to lower their upfront fees to reduce production costs, with expectations for back-end paydays.

But under the WarnerMedia plan, HBO Max will pay “Warner Bros. a licensing fee for the 31-day concurrent rights. The fee will be equal to the studio’s portion of ticket sales in the United States. (Ticket sales are generally split 50-50 between studios and theaters),” the New York Times writes.

This becomes an issue of self-dealing — a topic that has become a source of litigation since the ’90s, when studios started to consolidate media superconglomerates. Agents believe WarnerMedia might be acting in self-interest or in bad faith, and that the company has an obligation to “maximize value for the profit participants — to make a good-faith effort to see what prices other companies might have paid for the Warner Bros. movies before selling them to itself,” per THR. Not to mention, this licensing fee is not at all related to how many subscriptions HBO Max gets or views the films get.

Warner Bros. should ready itself for an army of lawyers, led by Legendary Entertainment, which has reportedly sent letters of litigation regarding the releases of Dune and Godzilla vs. Kong, which it majority financed. WarnerMedia might have set aside the money it could have earned at the box office, but it hopefully has set aside enough money for these courtroom battles.

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