Frasier - $1.5 billion in profits, but still lost money

Ah, Hollywood Accounting strikes again!

While something is clearly dodgy, that’s $1.5B in revenue, not profit.

Every contract I’ve ever seen that discusses shares of revenues and/or profits has a reasonably detailed section spelling out which revenues are included and which costs are deducted. Sometimes there is fuzziness at the margins, and even disputes that arise from that, but my guess is that they just have a bad contract.

Phil,

It’s been known for years that Hollywood studios really fudge the numbers.

Holy shit - this dispute is because the AGENTS negotiated for a piece of the backend and got it. The “clients” (Grammar, etc…) are not involved. The agents already got their cut of millions, but they got stiffed on the backend, so they say.

The fucking AGENTS.

Traditionally, agencies are paid an upfront commission for services rendered on their clients’ behalf. But sometimes, agents are in a position also to negotiate for a piece on the “back end.” The agencies involved in the “Frasier” case have already earned upfront millions during the show’s run, but they also negotiated deals in which they would take a percentage once the show started generating net profits, according to the lawsuit. They contend they could be owed millions more. (Their clients are paid separately and are not involved in this lawsuit.)

And yes, hollywood movie productions basically never turn a profit… Case in point: Spiderman and the Stan Lee debacle.

Hmmm…Frazier was the Thursday night lead on NBC after Seinfeld called it quits. As I recall, the network was willing to pay a LOT of money for the top Thursday night show, since it kind of set up the whole weekend of viewing. It could very well be that the ad revenue from that 30 minute Frazier slot didn’t offset the cost to NBC to fund the show, but that NBC made more money on other shows as a result.

Think of shows like Seinfeld, Frasier, and Friends being loss-leaders designed to get viewers funneled to other shows, get advertisers to sign package deals that included advertising on crappy shows in order to get an ad slot on Seinfeld/Frasier, etc. It might be difficult to show the actual impact in revenue generation a show like Frasier had.

Only problem with that theory is that the people are suing Paramount, the folks that owned Frasier, not NBC. NBC was the one who paid Paramount a huge amount to license the show, and Paramount also made huge amounts on syndication (that’s where all the real money is) as well as DVD sales.

A hit show pretty much effects only the other shows that night, and really only has a significant impact for that hour. From the rate cards I’ve seen (local insertions, small market), where a hit like Fraser would bring in $2,000 for a 30-second spot, whatever the hell they had following would usually be in the $1,000-1,500 range. Lower rated shows later would dip into the normal prime time rate of $500-1,000. I suspect that national rates would follow a similar trend. For advertisers, the only loss leader is the $30 spots when no one is watching. Prime time is the money maker, not the loss leader.

I don’t even think it’s a situation where the network spends more on Fraser to attract viewer to Random Domed Show That We Put On After Fraser. Well, maybe a little, but not so much as to lose money on Fraser. Consider these $1.5 million in revenue. If salary costs averaged $1m/ep, you’re still looking at well over a billion dollars in production costs on reusable sets, a couple of bits of music to clear, writers, camera rentals, etc… You could make three LOTR trilogies on that budget. Fraser was a well produced show, but it sure wasn’t a billion dollars well produced.

The thing that make me scratch my head, though is, if everyone knows the studios rig their books so that nothing ever turns a profit, why do so many contracts base their percentages off the profit?

A hit show pretty much effects only the other shows that night, and really only has a significant impact for that hour. From the rate cards I’ve seen (local insertions, small market), where a hit like Fraser would bring in $2,000 for a 30-second spot, whatever the hell they had following would usually be in the $1,000-1,500 range. Lower rated shows later would dip into the normal prime time rate of $500-1,000. I suspect that national rates would follow a similar trend. For advertisers, the only loss leader is the $30 spots when no one is watching. Prime time is the money maker, not the loss leader.

I don’t even think it’s a situation where the network spends more on Fraser to attract viewer to Random Domed Show That We Put On After Fraser. Well, maybe a little, but not so much as to lose money on Fraser. Consider these $1.5 million in revenue. If salary costs averaged $1m/ep, you’re still looking at well over a billion dollars in production costs on reusable sets, a couple of bits of music to clear, writers, camera rentals, etc… You could make three LOTR trilogies on that budget. Fraser was a well produced show, but it sure wasn’t a billion dollars well produced.

The thing that make me scratch my head, though is, if everyone knows the studios rig their books so that nothing ever turns a profit, why do so many contracts base their percentages off the profit?[/quote]

Hey now, I know for a fact that a certain Tom Chick appeared on Frasier, and we all know that he doesn’t come cheap!

Yeah, but if you know he’s coming, I’m pretty sure you can get a on-staff beret maker for somewhere in the neighborhood of $125-150 million. Surely, his stuffed cow needs don’t exceed $50 million, so where does the other $700 million go?

Probably because the film crews can’t get any other contract signed. Since every studio is offering similar terms there’s no alternative if you want to make a movie, unless you’re already very famous and/or self-finance the production. That would be my guess, anyway.