It’s a giant chess game out there in the entertainment world, with streaming giants and known content producers vying for the upper hand. Mark Millar signing with Netflix and Robert Kirkman going with Amazon made headlines on their own, but a new lawsuit makes the reason for Kirkman’s new home even more apparent.
On August 14, The Walking Dead’s series co-creator Robert Kirkman, joined producers Gale Anne Hurd, Glen Mazzara and David Alpert in a complaint filed against the AMC television network. The complaint alleges breach of contract, tortious interference, and unfair or fraudulent business acts under California business code. The damages being sought could exceed $1 Billion dollars.
Filed at Los Angeles Superior Court, the suit alleges that AMC “exploited their vertically integrated television structure” to keep “the lion’s share of the series’ profits for itself.” The Hollywood Reporter has provided a great breakdown of the major claims in the suit. The complaint alleges the network in effect reduced series profits using various means, thereby diminishing the percent owed to the named plaintiffs. One of the ways this was accomplished, the suit claims, is by AMC Network paying a lower than fair market licence value than the show is worth–a violation of the plaintiff’s signed agreements.
Here’s the complaint:
A major component of this case is vertical integration. The vertical integration of cable television has been increasing in recent years to help offset rising costs and maximize profitability. An example of this would be a network who both creates and broadcasts content, like AMC. This integration allows AMC Network to pay, or in some cases choose not to pay, AMC Studios, the producer of the series, to broadcast TWD and associated content. The complaint also names other TWD associated content including: Fear the Walking Dead and Talking Dead and the web-series distributed online.
The AMC Network does not pay AMC Studios a licensing fee for the right to broadcast the show. This, the suit claims, is a violation of the agreement signed with creator Robert Kirkman in November 2009. Additionally, and because the network doesn’t pay a licensing fee–which would be standard if AMC had purchased the show from another studio–a stand-in fee is used instead. This stand-in fee is called an imputed licensing fee or ILF. It’s the number used to help figure the dollar amount of profits owed.
[AMC shall be deemed to have received an amount (the “Imputed License Fee”) equal to sixty-five percent (65%) of the Cost of Production of the Series up to a cap of…[One Million Four Hundred Fifty Thousand Dollars (1,450,000) þr each episode of the Program of a one-hour series, subject to five percent (5%) annual, cumulatíve increases for each Seríes Year following the first Series Year. . . ]
The ILF is the core of the dispute as the plaintiffs allege AMC has improperly configured the ILF in an effort to undercut profits they believe are owed to them. The Walking Dead is the most financially successful and popular scripted television series in AMC’s history, especially with the coveted 18-49 age demographic. The complaint cites the shows popularity and scope of exhibition rights maintained by AMC (the right to air TWD in perpetuity) as reasoning for why the ILF arrived at is improper.
Robert Kirkman and artist Tony Moore created the eponymous comic, published by Image comics. Kirkman’s agreement with AMC stipulates a 5% take on profits left over after the show’s production and other costs are factored in. He is also seeking damages associated with rights maintained as the original creator of the series related to TWD merchandising.
[Owner also reserves all merchandising, videogame and theme park rights based on the Work (as opposed to merchandising, videogame and theme park rights básed on the Series or any other þroduction prodúced by-aVC or its licensees, which’ merchandising, videogame and theme park rights but specifically excluding the ríght to use text or images from the
Work not used ín the Seríesl are included in the Granted Rights.]
The AMC television network is currently embroiled in another contentious lawsuit with The Walking Dead’s first showrunner Frank Darabont. Darabont is seeking $280 Million in damages. The case is currently working its way through the New York Superior Court. A hearing scheduled on August 24 pending AMC’s motion for summary judgement. The eighth season of The Walking Dead is scheduled to air on October 22, 2017 on the AMC television network.
Sounds like Hollywood Accounting. Interesting to read about vertical integration.
This is the same kind of lawsuit David Duchovny filed against FOX after “The X-Files” went to FX 15 years back or more. (FOX sold it to itself at a discount, instead of going for a full-on bidding war which someone else might have won and would have paid better.)
Sounds like Hollywood still hasn’t learned its lesson from that one.
Please don’t discuss money it is gauche.
I would hate to see The Walking Dead leave Netflix.
I would hate to see The Walking Dead leave Netflix.
@Augie: The Siegel heirs filed a similar suit over DC selling the Superman rights to WB at a low rate (I believe over Smallville and Superman Returns).
DC/WB won; IIRC the judge ruled that, while the deal *was* probably slightly below market value, it wasn’t significant enough to break the law. WB got a good deal, but not so good it was illegal.
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