What Netflix’s Changing Compensation Models Might Mean for Nollywood

Before Netflix transformed Nollywood’s financial landscape in 2020, Nigerian filmmakers navigated a labyrinth of revenue streams that shaped the industry we know today. Understanding this history—and the revolutionary impact of streaming—becomes crucial as Netflix contemplates a shift in its compensation model. The story of how filmmakers generated revenue begins in the post-colonial era, decades before Netflix’s arrival transformed the market. To trace its evolution, we go back to 1972, the year General Yakubu Gowon enacted the indigenization decree, requiring foreign owners to return film theaters to Nigerian control—a shift that catalyzed the screening of more local productions, with venues like the National Arts Theatre in Lagos becoming cultural hubs for Nigerian cinema.

The early 2000s ushered in a golden era for film rental services, with Nollywood emerging as a powerhouse of content creation. The industry’s output was staggering: 50 films per week, totaling over 2,500 movies annually. Classics like Living in Bondage, Blackberry Babes, and Nneka the Pretty Serpent defined this era. These productions, though modest in budget, captured audiences with their melodramatic storytelling and nostalgic appeal, laying the foundation for modern Nollywood. During this period, filmmakers primarily generated income through DVD sales. However, this business model proved unsustainable—the market became oversaturated, with supply far exceeding viewer demand, ultimately forcing the industry to evolve.

Still in the 2000s—specifically in 2006, Kunle Afolayan released and produced Irapada, the first Nigerian film to screen at the Pan African Film Festival. In 2009, he released The Figurine, which is regarded as the film that sparked a shift to the cinemas and a new filmmaking era. This new wave of filmmakers, which also included Stephanie Linus and Obi Emelonye, strategically steered Nollywood back to theatrical releases. The transition—filmmakers moving from haggling with roadside distributors in Ojuelegba to navigating complex revenue-sharing agreements with theaters and corporate distributors—was not an easy one.

The advent of streaming platforms, however, disrupted this model entirely. By eliminating intermediaries, these platforms offered filmmakers direct financial opportunities. Netflix’s acquisition of Genevieve Nnaji’s Lionheart in 2018 exemplifies this shift—the streaming giant reportedly paid 3.8 million dollars (approximately 1.4 billion Naira at the time). To put this in perspective, Omo Ghetto, one of Nigeria’s highest-grossing theatrical releases, generated 636 million naira ($848,000) before deducting cinema and distribution costs, earning far less than what filmmakers got from Netflix.

While Netflix’s compensation may vary based on factors like director reputation and project scope, their model has historically favored substantial upfront and continuity payments. However, recent industry whispers suggest potential changes brewing in Hollywood—rumors of Netflix considering reduced initial fees plus contingent unguaranteed payment tied to viewership metrics, audience engagement, or other success indicators. Though Netflix’s chief content officer, Bela Bajaria, has dismissed these claims, the possibility raises intriguing questions about the future of Nollywood’s streaming economy. This revised approach could benefit Netflix and its talent in the long run. For Netflix, it would help manage content investment risks more effectively, especially as streaming competition intensifies. For filmmakers and producers, particularly in Nollywood, a hybrid payment model could create opportunities for greater earnings.

The past five years have marked an extraordinary evolution in Nollywood, characterized by technological leaps and landmark deals. Funke Akindele’s dominance—claiming the top three spots for highest-grossing films—runs parallel to Netflix’s ambitious moves in the market since 2020. The streaming giant’s partnerships with visionaries like Mo Abudu and Kunle Afolayan signal a new era, while originals like Kenneth Gyang’s Oloture, Afamefuna, Adire, and Postcards showcase the industry’s artistic growth. 

“Netflix’s compensation model ensures filmmakers are paid according to their work’s value, following internal screening and licensing,” explains Kunle Afolayan, the acclaimed filmmaker behind KAP Film Village and Resort, Nigeria’s pioneering film village. “Priority changes, and if Netflix’s current plan is a diverse film catalog that will appeal to different audiences, the quality threshold wouldn’t matter.”

His observation gains weight when examining Netflix’s inclusion of films like Adeniji Joseph-Omobulejo’s Ololade and The Ghost and the Tout (2018)—productions that critics widely regard as falling below industry benchmarks. These additions suggest that, at least initially, Netflix’s strategy may have prioritized catalog expansion over strict quality control. The presence of such content prompts a crucial debate: Does the current upfront payment model inadvertently discourage creative risk-taking? While Netflix’s library certainly includes outstanding Nollywood productions, the inclusion of subpar content cannot be overlooked. The looming question becomes whether a shift away from upfront payments might incentivize more thorough, well-researched storytelling (for instance, Robert Peters’ Hijack 93 historical inaccuracy), or if filmmakers’ primary motivation would remain to secure a spot on the global platform.

“Distribution has always been our greatest challenge,” Afolayan reflects when I ask him about Netflix’s impact on Nollywood. “Now our films reach global audiences, opening doors for international co-productions and partnerships as the world witnesses Nollywood’s capabilities firsthand, but that doesn’t mean we should rely only on Netflix.”

The streaming giant’s influence is undeniable. In 2022, Netflix disclosed a 9 billion Naira investment in Nigerian cinema since its informal 2016 market entry. However, Afolayan notes a crucial dynamic: Netflix reinvests revenue from Nollywood content into commissioning new projects. Recent subscriber decline could trigger a strategic pullback. The platform’s second price hike in months—amid Nigeria’s economic challenges, competition from platforms like Showmax, and piracy challenges especially from unauthorized Telegram channels—has predictably impacted subscription numbers.

“We’re being complacent as filmmakers by placing all our hopes on Netflix,” James Amuta, the producer behind acclaimed films like Oloture and Elesin Oba: The King’s Horseman, tells me. “There are countless filmmakers globally and multiple streaming services. Our focus should be creating universally compelling content that attracts other platforms like Disney+ to buy into the industry. That’s how we’ll foster fair market competition.”

The industry faced a significant setback in early 2024 when Amazon Prime suspended its Nigerian operations, shrinking filmmakers’ access to global platforms. Perhaps it was this vacuum that led to the surge in YouTube releases—a familiar platform experiencing renewed interest as creators seek alternative distribution channels.

“Netflix’s price increases are justified until we make our market more attractive to foreign investors, we need other alternatives,” Amuta observes, highlighting a deeper industry challenge.

While Netflix has undeniably elevated Nollywood, the platform’s sustainability in Nigeria faces mounting pressures. Beyond subscriber decline and economic headwinds, a new threat looms in Netflix’s potential shift in compensation structure. Though currently limited to select Hollywood projects, the prospect of this model reaching Nigerian shores—or worse, Netflix’s complete withdrawal from Nollywood—raises serious concerns. The implications would be far-reaching: disrupted funding mechanisms, the end of high-budget Netflix originals like Blood Sisters, Anikulapo, and Shanty Town, and a possible creative drought since quality filmmaking fundamentally requires substantial financial backing.

Yet within these challenges lie opportunities. The fierce competition for audience attention—evident in the current marketing battle between Funke Akindele and Toyin Abraham for Christmas box office supremacy—demonstrates how creative rivalry can elevate the industry. Such healthy competition breeds innovation and excellence, and if Netflix disappears, more variants of Akindele and Abraham, desperately vying for the public’s attention, will appear.

However, the broader solution extends beyond individual filmmakers’ success. Africa needs its streaming powerhouse. While YouTube offers temporary refuge and Netflix provides global reach, the industry must strengthen its traditional theatrical foundation. 

“The solution lies in accessibility. Community cinemas charging just 500 naira could emerge and revolutionize distribution,” Amuta suggests. “You can’t generate a billion dollars from 80 cinemas, as opposed to thousands of cinema screens in the United States. Expanding our theatrical footprint directly correlates with audience growth, and only then would Netflix deem it fit to pay filmmakers even more.”

Netflix’s potential compensation shift should serve as a catalyst, not a setback. It’s time for local stakeholders and veteran filmmakers to look beyond Western platforms and architect an African entertainment ecosystem. The future of Nollywood—indeed, of African cinema—depends not on chasing global streaming giants, but on building sustainable, homegrown infrastructure.