After Netflix’s Ryan Murphy Mega-Deal, TV May Need New Ways to Lure Talent

Netflix's Ryan Murphy Mega-Deal: How Will it Change TV?

When Ryan Murphy was asked at the Television Critics Assn. press tour in January how the Walt Disney Co.’s pending acquisition of 21st Century Fox might impact his future at the Murdoch-owned company, he joked, “Three months ago, I thought I would literally be buried on the Fox lot.”

He has since picked a new plot on a greener pasture.

Murphy’s overall deal with Netflix, set last week, takes the “9-1-1” and “American Crime Story” creator away from 20th Century Fox Television, the studio he called home for a decade and a half. Its announcement had at least as much shock-and-awe value as Netflix’s move last year to lure “Grey’s Anatomy” creator Shonda Rhimes away from ABC. And it proved that traditional TV’s creative standard-bearers face a moment in which they appear unable to stop their digital challengers from poaching top talent at will.

Until it happened, Murphy’s departure from Fox seemed unthinkable. He helped establish FX as a premier brand in the Peak TV era with “Nip/Tuck,” “American Crime Story” and “American Horror Story.” The Fox network’s “Glee” proved he was a broadcast hitmaker; this season’s “9-1-1” showed he still is. And Murphy’s relationship with Fox extends beyond business. Fox Television Group co-chairman and CEO Dana Walden is godmother to his children. At TCA, he described learning about the Disney deal as an “emotional” experience.

But friendship and feelings were not enough. Murphy has expressed public concern about his potential new corporate overlords. At TCA, he said he told Bob Iger in a courtesy call from the Disney CEO, “You know, the stuff that I do is not specifically Disney,” before adding that Iger assured him that the integrity of the Fox brands would be respected.

Eric Palma for Variety

And Murphy’s close relationship with Walden became less of a factor in his decision-making with her contract and that of longtime colleague Gary Newman set to expire this summer. Disney has, since announcing a deal to acquire much of Fox, offered no plan for integrating its business units or executives into a combined company.

Further complicating matters are hints that Comcast may make another bid for Fox after watching its initial offer be rejected in favor of Disney’s last year.

“If you’re a producer like Ryan Murphy, and you have a great relationship with Fox, and you hear that Fox is going to be part of Disney or Comcast but aren’t sure what their role in this new company is going to be, that’s some uncertainty,” said media consultant Brad Adgate. “Someone like Netflix is going to give you a lot of money and a lot of freedom in what you can do.”

Netflix did not return a call for comment by press time.

Murphy’s deal is valued at $250 million to $300 million. Rhimes’ is worth $100 million. Asked about the Murphy deal on a Feb. 16 earnings call with investors, CBS Corp. CEO Leslie Moonves said, “They offered him hundreds of millions of dollars. He had to take it.”

“If you’re Ryan Murphy, and you hear that Fox is going to be part of Disney or Comcast, that’s some uncertainty.”
Brad Adgate, consultant

The traditional TV universe as ruled by companies like CBS, NBCUniversal, Disney, Sony Pictures, Warner Bros. and — until the ink dries on his deal with Iger — Rupert Murdoch’s 21st Century Fox is simply unable to offer a talent like Murphy a deal as rich as the one Netflix did. Netflix is able to spend at an alarming rate as it increases revenue and market share, even as it loses money annually. This year, the company expects to spend $8 billion on content. A November projection by analyst Gene Munster predicts that by 2022, Amazon will be spending $8.3 billion per year on content, and Apple $4.2 billion.

That spending far surpasses what traditional media conglomerates with significantly smaller valuations can do. For a company with an $8 billion budget, a deal the size of Murphy’s is manageable.

Not everyone can get $300 million. When Amazon lured “The Walking Dead” creator Robert Kirkman from AMC last year, it did so with a deal valued at $1 million to $1.5 million annually. The streaming services, however, are able to offer broad creative freedom in addition to big checks up front.

But established television players have an arsenal of selling points, too, as they prepare to go to war to retain other top creators.

“I don’t think they’re going to be handing out $300 million deals every other week at Netflix,” said Jonnie Davis, creative affairs president at 20th Century Fox TV. “That’s a rogue way to deal. We know they’re out there, and they’re capable of doing that. But for us, our model works when we have big hits.”

Twentieth launched one of television’s biggest hits of the past few years with Dan Fogelman’s “This Is Us,” which serves as a model for what an established television studio can still offer. When Fox Broadcasting opted to pick up Fogelman’s “Pitch” for the 2016-17 season, Twentieth sold “This Is Us” to NBC. Before its first season had ended, “This Is Us” scored a rare two-season renewal. It finished 2017-18 as broadcast’s No. 1 freshman drama in the 18-49 demographic.

“Talent likes to work for a studio that produces for all platforms and across all genres,” said Sony Pictures Television Studios president Jeff Frost. Sony last year sold David Shore’s “The Good Doctor” to ABC and watched as it quickly became broadcast’s No. 1 drama in the key demo. Frost feels that producers may be willing to take less money up front to be able to make a killing in success later in a show’s run.

Linear hits like “This Is Us” and “The Good Doctor” have long monetary life spans, able to reap producers back-end cuts of money made from streaming-video, syndication and international deals. Studio heads argue that the long tail makes a linear hit potentially more valuable than a typical deal at Netflix and Amazon, which retain all rights, giving creators no opportunity to make money on the back end. And talent reps have been consistently frustrated by perceived lack of marketing muscle behind some shows at Netflix and Amazon, where series can be easily lost in a sea of content.

Yet in an era of declining linear ratings, hits like “This Is Us” and “The Good Doctor” are fewer and farther between.

Disney is buying Fox’s entertainment properties to grow its content pipeline as it prepares to challenge Netflix in the streaming arena. A company whose fortune has for two decades been tied to ad-supported television is now talking up a new focus on direct-to-consumer products such as an ESPN subscription-video service set to launch this spring; a Disney branded service planned for next year; and Hulu, in which Disney will own a controlling stake should the Fox deal go through. Murdoch was compelled to sell to Disney after realizing that his entertainment operation was no longer positioned to compete with emerging digital competitors. Even in the executive leadership space, digital players are draining talent from traditional TV, as exemplified by Jennifer Salke’s decision last week to leave NBC, where she was entertainment president, for the top job at Amazon Studios.

In such an environment, with so many signs pointing to a shift in power away from traditional television and toward a streaming future, it’s inevitable that many top creators will move with the flow.

“You see that people like Shonda Rhimes and Ryan Murphy are going over there,” Adgate said. “Why wouldn’t you sit and listen to what people have to say? And if there’s more certainty and more money, why wouldn’t you take it?”