The Walking Dead Creator Frank Darabont Sues AMC Over Profits

By Alicia Lutes 2013-12-19 10:05:06 discussion comments
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Zombies might not use money, but they sure make a lot of profits — which is probably why AMC is getting sued. The Walking Dead series creator and former executive producer Frank Darabont and his agency CAA have picked a fight with the network, alleging they’re owed quite a few pennies. And not just for wrongful termination (although the suit has that going on, as well), but also for what Darabont and the CAA believe are shady, self-dealing license fees in order to shirk payment to its profit participants.

These “unspecified money damages” the lawsuit seeks on behalf of Darabont and the CAA are seeking hinge on the argument that AMC’s last-minute decision to produce The Walking Dead themselves (rather than via Lionsgate and Warner Brothers television, who were up for the job), allowed the network to circumvent paying those involved in the profit participation program. The profit participation program — a way to pay those involved after the costs of the show’s production are factored in — agreed to by all parties stipulated that Darabont would receive 12.5 percent of the profits, with the CAA receiving 7.5 percent.

"Despite four seasons of unprecedented programming success and profitability for defendants, Darabont has not received and may never receive one dollar in profits for developing the series," the suit alleges.

Where the problem lies, it seems, is with the accounting habits of AMC. By producing the series itself, AMC was able to negotiate “an unconsciously low license fee formula” (from which the profit participation program takes its funds) without reporting the “tens of millions in tax credits” (which amount to about 30 percent of the costs) the company received to produce the show while simultaneously capping its license fee at $1.7 million per episode. This was an unfair circumvention done with the purpose of cutting profit participants out of the financial gains of the series — and something they had been given “assurances from AMC that [both the CAA and] Darabont would obtain protections against improper self-dealing.”

For a bit of contrast, other AMC series Mad Men (which is produced through an “arms length” negotiation tactics, the very ones Darabont alleges AMC promised to utilize in their own dealings) obtained a fee of $3 million per episode for its fifth season, even though it earns less than 25 percent of The Walking Dead’s gut-busting and truly impressive 13 million-strong average audience. The series’ midseason finale episode for season four premiered on December 8 of this year.

Because of all this, AMC is able to produce The Walking Dead on a deficit for every episode — meaning that anyone in the profit participation program does not earn a penny from the gargantuan ratings-and-adsales-revenue-driving series, because the books say there is no profit, technically.

Tthough the series rakes in some of the highest numbers on either cable or network television, The Walking Dead (which is based on the Robert Kirkman comic books) “had an unconscionably high deficit of greater than $55,000,000 before the third season premiered.” And with that, the expectation the deficit would “increase exponentially” each season “because the production costs and interest charges will grow at a greater rate than the improper self-dealing license fee.”

The lawsuit goes on to allege that Darabont was also wrongfully stripped of his executive producer credit even though his contract stipulated he would be “locked as executive producer for the life of the series.” AMC and its lawyers did not respond to the suit and the time of its court filing.
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