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Will we ever see another SEC filing drop like Friday’s by AMC revealing $ 200 million settlement solving Frank? Darabontdevelopment benefits The walking dead?
It’s not just the mind-boggling figure, which ends eight years of litigation and buys the Shawshank Redemption director of his rights to any future compensation for the zombie series and its spinoffs. It’s also that the television industry has changed rapidly over the years since a cable channel once devoted to film classics tasted the spoils of original programming with Mad Men and then decided to present a post-apocalyptic drama that he mostly self-produced. In short, this settlement could be the last of its breed.
“The success of The walking dead, and even the litigation itself, have resulted in clarifications and changes to the definitions of artist profit by the studios to avoid the same issues raised by the Walking Dead case, ”says Larry Stein, partner at Russ August & Kabat.
The costume of Darabont and its representatives at Creative Artists Agency belong to the pantheon of big business “Hollywood Accounting”, with those targeting Disney’s Who Wants to Be a Millionaire and Home improvement, and Fox X-Files and BONE. These controversies come at a special time for the industry: the wave of deregulation of the 1980s and 1990s ended the “fin-syn” rules. As a result, networks were no longer prohibited from retaining financial interests in the programs they broadcast. Consolidation has taken place. Syndication flourished. And huge, vertically integrated media conglomerates were producing and distributing content.
In turn, creatives with a stake in the profits challenged the “candy” deals they witnessed between studios and affiliates. Those who receive conditional pay, the pay that comes later after a show’s success but depends on how income and expenses are defined, would sue or arbitrate their belief that they are wronged. Darabont was among them. The walking dead, once the most popular cable show, has been undersold by AMC’s studio arm to its network arm, he insisted.
In some ways, this kind of litigation has indicated the future of the industry.
Led by Netflix, today’s streamers rely even more on self-produced originals. The difference is that today’s studio negotiators, somewhat hostile to transparency and perhaps swayed by the BONE the 2019 Arbitrator’s conclusion on “objectionable” fraud, are now looking for a financial model that completely decreases the percentage-based backend. So instead of giving the creator of a show, say, 15% of the bottom line, studios start experimenting. For example, Disney combines larger upfront payouts with bonuses tied to seasons, episodes, rewards, and other challenging goals. “We are moving into a world that pays too dearly for failure and underpays for success,” said Robert Schwartz, a partner at Quinn Emanuel who has advocated all sides of Hollywood’s accounting affairs.
As buyouts become the name of the game in the TV industry and the backend becomes less lucrative, nine-figure settlements after years in court could disappear.
For now, the entertainment lawyers interviewed say they expect future lawsuits to focus on older shows added to streamers’ libraries. “Studios are hungry for content to launch and maintain their new digital services,” says Bennett Bigman at Russ August & Kabat. “Yet they are unlikely to set fair market prices, which will reduce back-end income and stakes, owed to thousands of writers, producers, directors, actors and artists. other creative talents… I have the impression that there will be a lot of complaints, and some will involve substantial amounts.
Yes, there may be shows like Friends, Office, and Seinfeld who are expected to charge an impressive license fee every time they hit the market, and when they return disappointing sums from studio-affiliated streamers, it will lead to legal action. But it’s about cleaning up old contracts, and the value of those series will continue to decline over time.
Additionally, many of these fights will remain confidential under arbitration, although creatives may consider suing streamers in open court for interfering with their profit expectations. Said Schwartz, “There are some interesting angles out there.”
A version of this story appeared in the July 21 issue of The Hollywood Reporter magazine. Click here to subscribe.
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