Imputed license fee

Similarly, AMC owns all of the streaming rights to the Dead shows, and while they could have sold them off and shared the profits from those sales with the plaintiffs they have decided to keep them for themselves as part of the plan to make AMC a player in the streaming service game, much like CBS All Access.

No, they are generally taking issue with AMC's accounting period. There is a famous term called "Hollywood Accounting," where Hollywood can manage to hide profits and turn hit shows and movies into technical failures by using profits from one project to pay for costs of another project.

This is made a lot easier when you are dealing with vertical integration, because it is all one company, so it is very easy to theoretically hide money here or there. There are many other claims like that in the complaint. In a lot of ways, this is an "audit" lawsuit, meaning that it is mostly trying to get AMC to prove its accounting is legit and if it cannot, then pay those monies to the plaintiffs.

The plaintiffs have not made a specific claim for money as of yet. Compare that with a traditional television licensing deal, in which the network airing the first run of the show pays a fee of only 60 to 70 percent of the show's production cost, according to one executive who negotiates TV deals.

The production company then makes money through licensing deals, syndication and other opportunities, especially if the show is a big hit.

Netflix didn't create the cost-plus model. HBO has used similar models in the past for its programming. But Netflix has popularized it. The model is also being adopted by other streaming platforms like Amazon and Apple , sources said, and networks are negotiating more ownership rights into their contracts as well in order to remain competitive when going after new programming. Many networks license shows from production companies.

Through this structure, the production company retains the majority of the rights. These rights can become lucrative, especially as the show hits later seasons. On a traditional TV network, deals are typically renegotiated after the first few seasons to cover more show production costs, recoup losses on earlier seasons and incorporate additional bonuses. In the rare cases when a show reaches 80 to episodes, it may go into syndication, with past episodes licensed by multiple networks.

The majority of revenue still goes to Fox. Only 2 to 5 percent of shows will make it this far, according to two industry executives. However, another executive said, the syndication success of one or two shows could bankroll 35 other productions. Because Netflix's deals are ownership deals, the production company signs away the majority of future revenue opportunities to the company for a larger cut up front.

But even that bigger up-front payment doesn't necessarily mean production companies take home profits after the first season. That's because, although Netflix buys the show, it typically deducts a fee for distributing the show and bakes this cost into the contract as an "imputed license. This leaves the production company at break-even in the best cases, and most times it's still losing money the first year. More commonly, contingent payment is based on a percentage of gross minus defined deductions.

This article will provide a most general overview of basic provisions covering contingent compensation structures in literary publishing, live theater, television and theatrical motion picture agreements.

Authors of fiction and non-fiction books sold by major trade publishers e. The fixed compensation they receive, paid in stages, can range from small amounts to well into seven figures.

These payments are considered advances, recoupable from royalties primarily generated from sales of the work. Authors of books sold in print form by trade publishers are unique among rights holders in entertainment in that their contingent compensation in the form of royalties is computed on a gross amount even greater than what the publisher receives.

The publisher most often is paid a wholesale price for each book sold; the author usually is paid a percentage of the suggested retail price irrespective of the price at which the book actually is sold to the consumer. It has been suggested that the intention behind the rates based on retail prices of physical books is to pay the author an amount equal to roughly half of the profit earned by the publisher per copy sold, without having to calculate what the profit actually is.

Whether or not this is the case, the same rationale did not carry over to the digital world. In smaller theaters, including many not-for-profits, authors still are paid in this fashion, as are authors of dramatic plays for star-driven Broadway revivals. Authors also may receive fixed compensation in the form of option payments and advances.

Beginning in the s, an evolution of contingent compensation began. More recently, the calculation of contingent compensation for Broadway productions — particularly musicals — has evolved from royalty pools to individually negotiated participations based on weekly operating profits.