Netflix Grapples with Unprecedented Hollywood Challenge
NYT. Amid the streaming boom of fall 2018, half a dozen studios and video platforms vied for lesser-known director Carl Erik Rinsch. He directed only one movie, 47 Ronin, which turned out to be a commercial and critical disappointment. Universal had to incur a substantial loss, writing off a significant portion of its $175 million budget. However, Hollywood has a short memory, and the thirst for fresh content is insatiable. In a mere decade, the number of scripted TV shows has surged from 200 to over 500, with the introduction of new streaming platforms like Disney, Apple, and NBCUniversal. Against the backdrop of this fervor, the project Rinsch pitched, a sci-fi series exploring artificial beings tentatively titled “Conquest,” quickly became a sought-after gem for Netflix. At least, that was the initial impression.
After a fierce bidding process, Rinsch and his representatives informally settled with Amazon for a substantial eight-figure sum. That being said, just as they were about to formalize the agreement, Netflix stepped in and won. However, its enthusiasm was short-lived. The Rinsch project ended up being a costly debacle, epitomizing the era of wasteful spending that Hollywood studios are striving to put an end to. Netflix #NFLX invested over $55 million in Rinsch’s show, granting it a full budget and creative freedom, yet did not receive a single finished episode.
The agreement featured two noteworthy provisions: Netflix granted Rinsch exclusive final editing rights, a privilege reserved for a select few directors. What’s more, Netflix committed to ensuring that both he and his wife would be “assigned for life” to all forthcoming seasons and spin-offs. Despite multiple warning signs, Netflix overlooked crucial factors. Firstly, the project had a troubled history, with Rinsch already in conflict over the script with 30West and other early investors. Secondly, the series lacked a pre-existing script. Thirdly, there were concerns about Rinsch’s erratic reputation and unusual behavior.
Netflix’s miscalculation led to Rinsch losing a significant portion of the money received in the stock market. As per statements, Rinsch moved $10.5 million from a portion of the funds to a personal brokerage account at Charles Schwab, engaging in risky options trading. One bet involved the surge of biotech company Sciences, testing a drug on COVID patients, while the other speculated on a further decline in the S&P500, which at the time had already dropped over 30%. Within several weeks, Rinsch incurred a $5.9 million loss. He also moved around $4 million from the Schwab account to Kraken and invested in Dogecoin. Unlike the stock market investments, luck was on his side this time around: after the liquidation of his positions in DOGE in May 2021, his balance totaled approximately $27 million. That being said, Rinsch didn’t halt there; instead, he started to spend actively. He acquired five Rolls-Royces, a Ferrari, a Vacheron Constantin watch priced at $387,630, along with luxury furniture and designer clothes worth millions.
However, there’s more to the story. Interestingly, a confidential arbitration process is currently unfolding between Rinsch and Netflix, initiated by Rinsch himself. He claims that the company breached the contract terms and owes him a minimum of $14 million. Netflix refutes any indebtedness to Rinsch, labeling his demands as extortion. A resolution appears imminent. At the same time, Netflix faces another looming challenge—a particularly inopportune moment when studios, pressured by investors, must trim extravagant expenses, and prioritize profits over expanding streaming subscribers at any cost—a process set to intensify. On top of that, recent agreements to increase pay for writers and actors by studios will likely have an adverse impact on future profits.