Netflix is Making More Money But Getting Worse

Netflix made over a billion dollars last quarter while neglecting to pay writers a living wage and cutting lower-cost services for consumers

Photo: Nick Wall/ Netflix

Netflix has long been considered the pioneer of the modern streaming era, with its original series like Orange is the New Black and House of Cards popularizing the binge-watch model and encouraging people to cut ties with cable in favor of a virtual hub where people around the world could tune into their favorite movies and TV shows on their own time without commercials. When it first launched its video on demand streaming service in 2007, Netflix was this new and exciting thing where viewers could find almost anything they wanted to watch, and creatives could begin to experiment with stories beyond the confines of network television.

However, as many members of the Writers Guild of America (WGA) and the Screen Actors Guild – American Federation of Television and Radio Artists (SAG-AFTRA) have told their horror stories of working for Netflix and other streaming services during their strike for fair wages and working conditions, it’s become clear that even back then, Netflix was building an empire on the backs of its film and TV crews without giving them a piece of the pie, and it’s only gotten worse since.

You’d think that while streaming CEOs like Warner Bros. Discovery’s David Zaslav, Disney’s Bob Iger, and Netflix’s Ted Sarandos are making millions of dollars a year, that the actors and writers that work for their companies would be paid a fair wage and given proper residual payments. The residual payment system that the industry currently uses was created in 1960, the last time that the WGA and SAG (before it became SAG-AFTRA) were on strike together. This system gave performers and writers a percentage of the earnings made by studios for views of a TV episode or movie after its initial air date, including reruns, syndication, and DVD releases. This system has sustained broadcast and cable writers and actors for decades, but while these CEOs make enough money to buy yachts, actors like Orange is the New Black star Kimiko Glenn have been making pennies in residuals for streaming service programming.

Actor Sean Gunn also brought up an important point while on the picket line at Netflix regarding the current residuals model. The show Gilmore Girls, which Gunn has appeared in 130 episodes of, has been exclusively streaming on Netflix for years. Netflix pays a licensing fee to Warner Bros. for the show, which Gunn and other cast members receive some residuals from, but they aren’t given any percentage of the money that Netflix makes from views as they typically would from syndication of the series on broadcast TV.

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Netflix is one of the few streaming services that’s considered “profitable,” and yet it doesn’t pass on this money to its creatives. According to the company’s Q2 2023 earnings letter (via The Hollywood Reporter), Netflix had a reported revenue of $8.2 billion and net income of $1.5 billion. And yes, you read that number correctly, Netflix made billions of dollars last quarter. 

This is due in part to their recent crackdown on password sharing that forces people not in the same household to pay extra per month on their current account or to create a new account entirely in order to access the service. This change contributed to 5.9 million new subscribers according to the earnings report.

Another added source of income for Netflix was the addition of a new, cheaper ad-based tier. However, despite making over a billion dollars last quarter, Netflix has decided to make things worse for their consumers as well by scrapping their lowest paid tier without ads. The “Basic” plan was $9.99 a month, only a few dollars more than their “Standard with Ads” plan, which costs $6.99 per month in the U.S. Now the difference in cost between the cheapest tier without ads and the ad-based tier is $8.50, with the “Standard” plan costing $15.49 a month. Over $15 a month isn’t terrible if you’re able to split the cost among family members and across different households, but now that Netflix has forced so many people to buy their own accounts, this will likely force more people into the ad-based tier.

While on the picket line during the early days of the WGA strike, Shadow and Bone writer Christina Strain talked to the New York Times about Netflix’s shift to ad-based revenue, saying “If they make money doing ads, my guess would be that ads will become a bigger revenue stream for them. And then we’re just working for network television without getting network pay.”

As news of Netflix’s revenue last quarter has spread, other striking writers and actors have taken to Twitter to similarly point out how ad-based revenue gives Netflix the resources of a broadcast or cable network and how they’re being unreasonable for insisting that they don’t have the money to pay their crews fairly.

And they’re right! If ad-based revenue is contributing to billions of dollars of quarterly revenue for Netflix, then why aren’t the writers and actors seeing any of this money? If Netflix is going to force consumers into subscribing to the worst parts of broadcast TV – commercials, only being able to watch things in a certain place, and canceling shows before they get a proper ending – then why can’t they bring back the broadcast compensation and residual system that let writers and actors do their jobs without starving or becoming homeless?

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Netflix has made more money this quarter than most of us will ever see in our lifetime while continuing to alienate the people who made them this money in the first place. They have the money to pay their employees. They have the money to keep the $9.99 “Basic” plan available for consumers rather than forcing those who can’t afford to upgrade onto a lower quality tier. Money seems to be the only thing that Netflix and other members of the Alliance of Motion Picture and Television Producers (AMPTP) understand, so hopefully when the studios finally return to the table, SAG-AFTRA and the WGA will be able to use Netflix’s earnings as proof that their work is worth billions.