“The Simpsons” defy biz model change – for now

01Nov11

Weeks ago, news anchors savored the rare pleasure of peppering audiences with catchphrases such as “aye carrumba,” “cowabunga,” and “don’t have a cow, man,” when word emerged that “The Simpsons” may be cancelled due to a contractual stalemate between producer 20th Century Fox Television and the voice actors for the show’s many characters.

The agreement that ended the dispute – extending the aging animated enterprise for a 24th and 25th season [meaning Bart could be an assistant professor by now, though Lisa would probably have tenure] got far less attention. Yet the subject matter of our latest “Media Work” readings – and some digging into “Simpsons” history – reveals some interesting dynamics about a production that may be one of the last holdouts of the old Hollywood studio business model.

Launched in December 1989, the sitcom created by Matt Groening currently reigns as the longest-running scripted TV in U.S. history and is older than most of IU’s undergrads. In those days, the business model for movie production [and similar operations] saw studios that “financed the development and production of a slate of movies [or a TV series], drawing on a roster of stars and filmmakers [or creators such as Groening], and presided over their distribution …”

During the show’s early days [until about 1998], cast members such as Harry Shearer [Mr. Burns, Ned Flanders], Nancy Cartwright [Bart], Hank Azaria [Moe, Apu], Yeardley Smith [Lisa], Dan Castellaneta [Homer, Grandpa, Krusty the Clown], and Julie Kavner [Marge] earned around $30,000 per episode. By 2008, their earnings had soared to more than $400,000 per episode [not counting Simpson’s-related voiceovers in commercials or merchandise] – all while parent company News Corp. [you know, Rupert Murdoch] rolled in more than $1 billion over the show’s history.

But times change, if Fox executives are to be believed. According to the network, audiences for “The Simpsons” have shrunk by 20 percent since 2006 and with costs now at $5 million per episode, it is described by “people familiar with the matter” as a loss-leader for Fox – meaning it no longer profits from Homer’s hijinks.

From here – flash back for a moment to “Media Works” [p. 172] and see what Variety columnist Peter Bart has to say about today’s studio model:

“These days, production costs increasingly are being outsourced to hedge funds and other financing groups. And overseas entities often cover marketing and distribution costs in distant territories. Essentially, every aspect of studio overhead is now under serious scrutiny by corporate numbers crunchers.”

The “crunching” sound that Shearer, Cartwright, and their cohorts heard earlier this year was studio executives seeking a 45 percent pay cut to $240,000 per episode – presumably so Fox could earn profits again. But here’s where it really gets interesting – and starts to fit like a glove into Bart’s [not the animated one] aforementioned scenario:

As a counteroffer, Shearer and his cohorts proposed a 70 percent pay cut – that’s right, 70 percent – but along with that “a small share of the eventual profits.” As Shearer himself put it [note his mention of shifting business models]:

Fox wants to cut our salaries in half because it says it can’t afford to continue making the show under what it calls the existing business model. Fox hasn’t explained what kind of new business model it has formulated to keep the show on the air, but clearly the less money they have to pay us in salary, the more they’re able to afford to continue broadcasting the show. And to this I say, fine – if pay cuts are what it will take to keep the show on the air, then cut my pay. In fact, to make it as easy as possible for Fox to keep new episodes of “The Simpsons” coming, I’m willing to let them cut my salary not just 45% but more than 70% – down to half of what they said they would be willing to pay us. All I would ask in return is that I be allowed a small share of the eventual profits.”

Although terms of the new deal were not disclosed, the studio is said to have resisted the cast’s proposal. But why were Shearer and crew so interested in that? Well, it seems that financial analysts – those guys who advise hedge funds and “other financing groups” – did a little number crunching of their own and discovered that the death of “The Simpsons” would breathe new life into Fox’s bottom line:

“Ironically, the cancellation of the show would allow News Corp. to finally sell off-network syndication rights into cable channels (and potentially to online distributors),” wrote David Bank, a managing director at RBC Capital Markets. Bank estimated that News Corp. could generate as much as $750 million in new rerun deals. It can’t do anything with the reruns though until the show stops production, which would lead to the expiration of the original rerun deals signed in the mid-1990s.”

In other words, once “The Simpsons” depart the “existing business model” around 2013 or so, they could very well end up as “zombies” with their own dedicated cable channel in the “new business model” – something News Corp. Deputy Chairman Chase Carey hinted at last month at the Bank of America Merrill Lynch Communications and Entertainment Conference in Beverly Hills. Another collection of folks who advise hedge funds and “other financing groups.”

Somehow, a rather apropos thought as we emerge from the Halloween holiday …

Reference sources:

http://en.wikipedia.org/wiki/The_Simpsons

http://latimesblogs.latimes.com/entertainmentnewsbuzz/2011/10/simpsons-salary-dispute-analyzed.html

http://www.deadline.com/2011/10/simpsons-co-star-speaks-out-on-salary-negotiation-stalemate/

http://latimesblogs.latimes.com/entertainmentnewsbuzz/2011/10/simpsons-cast-strikes-new-deal.html

http://latimesblogs.latimes.com/entertainmentnewsbuzz/2011/09/could-homer-simpson-get-his-own-channel.html

— Bill W. Hornaday

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