cageymaru
Fully [H]
- Joined
- Apr 10, 2003
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Fox has been hit with a $179 million ruling in a case involving its hit show "Bones" after an arbitrator concluded "Fox executives lied, cheated and committed fraud at the expense of the show's stars and executive producer Barry Josephson." The dispute was centered around the worth of the show and alleged "sweetheart" self-dealing between Fox's studio and Hulu as Fox refused to share profits with Josephson and others. Fox contended that Bones lost money and charged Hulu extremely low licensing fees for the streaming rights to the show. Fox has a 30% stake in Hulu, so it was in the best interest of Fox to charge its sister company lower licensing fees for the rights to stream the show. Meanwhile, Hulu collected subscription fees from its customers and advertising revenue that increased its value and positively affected Fox.
At one point, Fox executives signed both sides of a contract that determined how much money they made off the streaming rights for Bones on Hulu. Instead of requesting fixed episodic license fees or a minimum guarantee, the studio chose to license the digital rights to Hulu based on a "share of speculative advertising revenue." This was the first time that such an agreement had been reached by a studio. The arbitrator determined that "The obvious inferences of self-dealing, conflict of interest and the lack of any arm's length negotiations leap off the page." Similar hit shows such as Blue Bloods and CSI charged a current episodic fee of $685,000 on Hulu. Thus the arbitrator determined that Fox owed $178,695,778.90. The ruling may open Pandora's box for attorneys in the entertainment industry.
It's possible that the studio just isn't charging enough for rights to exhibit the show, whether it's streamed online or broadcast on a television. Streaming platforms hawk subscriptions. Television networks sell advertisements and take in additional revenue from cable and satellite companies. Such money doesn't directly go to profit participants. So if a studio is within the same corporate structure as a streamer or broadcaster, an underhanded way for the parent company to derive the spoils from a show (to the detriment of executive producers and stars) may be to undercharge licensing fees to its sister companies. That's exactly what the Bones profit participants alleged was happening.
At one point, Fox executives signed both sides of a contract that determined how much money they made off the streaming rights for Bones on Hulu. Instead of requesting fixed episodic license fees or a minimum guarantee, the studio chose to license the digital rights to Hulu based on a "share of speculative advertising revenue." This was the first time that such an agreement had been reached by a studio. The arbitrator determined that "The obvious inferences of self-dealing, conflict of interest and the lack of any arm's length negotiations leap off the page." Similar hit shows such as Blue Bloods and CSI charged a current episodic fee of $685,000 on Hulu. Thus the arbitrator determined that Fox owed $178,695,778.90. The ruling may open Pandora's box for attorneys in the entertainment industry.
It's possible that the studio just isn't charging enough for rights to exhibit the show, whether it's streamed online or broadcast on a television. Streaming platforms hawk subscriptions. Television networks sell advertisements and take in additional revenue from cable and satellite companies. Such money doesn't directly go to profit participants. So if a studio is within the same corporate structure as a streamer or broadcaster, an underhanded way for the parent company to derive the spoils from a show (to the detriment of executive producers and stars) may be to undercharge licensing fees to its sister companies. That's exactly what the Bones profit participants alleged was happening.