Terms vary, but more networks demand the back end.
Cable networks typically set base license-fee agreements that cover a percentage (usually 70% to 75%) of the overall series production budget, with a predetermined cap on the cabler's fee. Broadcast networks typically set a flat license fee, usually in the neighborhood of $2 million for hourlong series, with variations for cast breakage.
These deals become more intricate when shows are co-productions between rival studios, a strategy that is becoming the new normal as networks demand longer license terms and broader rights. And then there are the in-house productions that involve an imputed license fee exchanged when the network and production entity are one and the same, an accounting device that has sparked lawsuits from profit participants alleging that they were short-changed because of self-dealing.
TV dealmaking is clearly in flux--Disney's Freeform, for one, recently implemented a new formula for some of its shows. But there are some typical structures for series orders on various platforms. Here's the rundown.
Deal template: The Netflix license fee for shows from outside studios covers the cost of production plus a premium, usually about 30% of the budget, to allow for a profit. Negotiations are toughest on setting the budget and the premium.
Back end: Limited for outside studios. Netflix buys out worldwide rights and the domestic syndication window. The license term usually extends for 10 years after airing of the show's final episode.
Deal template: Most series are produced in-house. HBO sets an imputed license fee as a percentage of the budget, in part to help determine the future profit base with participants. With outside studios, the license fee is set as a percentage of budget, with a cap. HBO emphasizes that its terms vary and that it seeks the "most appropriate" structure on a case-by-case basis.
Back end: HBO is increasingly focused on international expansion and controlling SVOD rights. In successful shows, creative talent receives high fees to make up for lack of international/syndication revenue. With outside studios, HBO has established a window after a show has been on for several seasons wherein HBO either buys out SVOD rights or will allow the producer to sell rights to previous seasons. HBO has in the past sold its shows in domestic syndication and to outside SVOD outlets after they end their run on the network.
Deal template: The license fee is set as a percentage of the production budget, with a cap.
Back end: International sales, domestic syndication/SVOD after a show's run on the network is over. However, Showtime is seeking more international rights as it expands with output deals in the U.K., Canada and other key territories. Showtime, like HBO, has also established a window after a few seasons in which it will buy out SVOD rights or allow the studio to sell previous seasons.
Deal template: Similar to Netflix, Amazon pays full production costs plus a premium. Amazon's deals including options to take specific territories and options to buy out all worldwide rights, a move that signals its expansion plans.
Back end: Limited for outside studios.
Deal template: The license fee is set as a percentage of production budget, with a cap.
Back end: International sales. Hulu has yet to expand in international markets beyond Japan and is thus focused on securing domestic rights.
Deal template: With outside studios, the Big Four pay a license fee that is negotiated as a flat rate, not a percentage of the budget.
Back end: Significant opportunities for international sales, domestic syndication and SVOD licensing after current-season airings. Because the license fees are generally lower than those paid by premium cable and SVOD, studios retain more rights. The network's hold on a show typically ends shortly after the airing of its final episode.
Deal template: The license fee pays full production costs, with a cap.
Back end: International sales. The license fee essentially buys out domestic SVOD/syndication rights in a sign of the channel's new focus on multiplatform viewing.
MOST OF BASIC CABLE
Deal template: The license fee is set as a percentage of the production budget, with a cap. License fee and budget negotiations often occur early in the development process, before a script is completed. The domestic license term can extend as long as five years after the end of each season.
Back end: Significant opportunities for international sales, domestic syndication/SVOD sales. Channels such as AMC and SundanceTV that have SVOD output deals make additional payments to the studio over time to retain domestic SVOD rights.
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|Title Annotation:||Let's Make a Deal!|
|Date:||May 17, 2016|
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