AMC’s zombie apocalypse drama “The Walking Dead” quickly became one of the most successful shows in television history after its debut in 2010. But its creators are now claiming they haven’t gotten their fair share of its record-setting profits.
On Monday, many key members of the show’s creative team – including co-creator Robert Kirkman and series producers Glen Mazzara, David Alpert and Gale Anne Hurd – sued AMC in Los Angeles Superior Court, claiming the network hasn’t fairly compensated them.
Kirkman’s comic books provided the source material for the show.
The lawsuit follows one filed by the show’s other co-creator, Frank Darabont, who was fired in the second season. Darabont also claimed the network hasn’t fairly compensated him, especially considering the show’s tremendous success.
They contend that the alleged rip-off stems from the fact that AMC owns both the company that produces the show (AMC Studios) and the one that airs it (AMC Network), which is a relatively new form of “vertical integration” in the television world.
Understanding the lawsuit and its potential significance requires some background on how television shows have ordinarily been made.
Traditionally, two separate parties, a studio and a broadcast or cable channel, are involved. The studio creates the show and the broadcast/cable channel airs it.
“Seinfeld,” for instance, was produced by Castle Rock Entertainment but aired by NBC.
This set-up dictated how the profits were managed. The production company would allow the network to air its show for a licensing fee, as much as it could get. It would then pay the talent – writers, producers, actors, etc. – a percentage of that fee.
“The money that talent gets is dependent on the licensing fee that’s paid from the cable channel to the production company,” Jonathan Handel, a University of Southern California’s law school lecturer and author of “Entertainment Residuals: A Full Color Guide,” told The Washington Post.
By an FCC regulation called the Financial and Syndication or Fin-Syn Rules, instituted in 1970, the production company and the broadcast/cable channel had to be completely separate entities. They could not have financial ties to each other.
But during the Clinton administration, those rules were eliminated after heavy lobbying by the networks, allowing a studio and a production company to be owned by the same corporation. This led to some big mergers, such as ABC with Disney.
It also led to smaller channels like AMC owning their own production studio. Having both companies – in this case, AMC Studios and AMC Network – owned by the same parent company created the potential for financial abuse.
“Since money is changing pockets in the same pair of pants, there’s an incentive for the production company and the cable channel to agree on what might be something of a lowball figure,” Handel said. “Because it’s all just money being transferred within the same corporate parent.”
That’s exactly what the plaintiffs claim happened in “The Walking Dead” case. They say that because AMC owns both the studio that creates “The Walking Dead” and the channel that actually airs it, the two made a sweetheart deal.
Since AMC was essentially paying itself for the show, the lawsuit alleged, AMC Studios had little incentive to negotiate a high licensing fee from AMC Network.
“So the accusation here is that in fact AMC yielded to temptation and was lowballing the licensing fee – the money that changes hand within the same corporate family,” Handel said.
As a result, the money passed along to the creators, they say, was much less than it might have been.
The lawsuit pointed to three other shows – “Breaking Bad,” “Better Call Saul” and “Mad Men” – that aired on AMC but were produced by outside studios. According to the lawsuit, the licensing fee was higher in all three instances, meaning the talent involved with it made a higher percentage of the shows’ net profits.
In the case of “The Walking Dead,” “There can be no question that, if AMC Studios and AMC Network were not part of the same conglomerate, the story would be very different,” the lawsuit stated.
In a statement to The Post, AMC said dismissed the lawsuit as run-of-the-mill and predictable whenever a program is successful.
“These kinds of lawsuits are fairly common in entertainment and they all have one thing in common – they follow success. Virtually every studio that has had a successful show has been the target of litigation like this, and ‘The Walking Dead’ has been the #1 show on television for five years in a row, so this is no surprise,” the statement read.
“We have enormous respect and appreciation for these plaintiffs, and we will continue to work with them as partners, even as we vigorously defend against this baseless and predictably opportunistic lawsuit,” it added.
However, Handel said the statement was somewhat misleading.
“The lawsuits are becoming increasingly common because over the years there’s been increasing consolidation of these entities,” Handel said. “It’s a little perhaps disingenuous for AMC to say these lawsuits are common and it’s blown out of proportion. The allegation here is these lawsuits are common because misconduct is common.”
He predicted the lawsuit will be settled before it’s considered by the court in an effort to maintain the status quo.
“That is what often happens with cases, precisely to avoid setting a precedent,” Handel said. “AMC will come under pressure from other studios that are potentially in the same boat to settle to avoid creating an adverse precedent.”