Acquired
00:33:59 · Ben Gilbert, David Rosenthal
[00:33:59] S0: In general, you're probably gonna get eyeballs if you bring in a a brand name star or a star in a show. Yep. [00:34:05] S1: Young male comic. You want your young male audience, you know, in urban areas, etcetera, etcetera. Great. But two, more important, at the end of the day, this is just a one off ninety minute special that they're talking about here as a commitment. This is not a big deal. Like, if it doesn't work, it doesn't work. They decide in the meeting, great. Okay. Fine. Let's call this thing Seinfeld's stand up diary. [00:34:30] S0: I never caught this. Yeah. Oh, before that's the name before the name. [00:34:34] S1: That was the original working name for the show when it was still in this conception as a one off special that was gonna be about how Seinfeld got his material. And then the the premise was gonna be at the end of the special, you would see him on stage doing his stand up material Ah. That he got throughout the episode. [00:34:53] S0: Ah, okay. What's the name again? [00:34:55] S1: Seinfeld's stand up diary. [00:34:57] S0: Okay. This is so fun to see how, like, all the rough edges get sanded off so it eventually becomes the thing we know.
00:34:57 · Ben Gilbert, David Rosenthal
[00:34:57] S0: Okay. This is so fun to see how, like, all the rough edges get sanded off so it eventually becomes the thing we know. [00:35:03] S1: Totally. Totally. Okay. So the deal. What's the deal? Why is it so valuable? How much is NBC gonna gonna pay these guys? Well, actually, NBC isn't gonna pay them anything directly. Because at the time, NBC could not legally own the show. Thanks to rules from the FCC at the time, broadcast networks were prohibited from actually owning the content that they broadcast on the networks a set of rules called financial interests in syndication or FinCEN. [00:35:43] S0: Yes. So time for a little history lesson, listeners. So today, you know about these, like, media conglomerates. But before that, the TV networks were entirely separate companies than the production studios. So NBC was its own thing, totally separate from Universal. CBS, just a broadcast network, nothing to do with Paramount. ABC, separate from Disney. So the networks, ABC, CBS, NBC, right when TV production started in the fifties, they need to hire the production studios to make stuff for them to broadcast on their networks. Some of these studios were very large, like Paramount or Universal or Warner Brothers or Disney. Some of them were really small, like MTM Entertainment, which is named after the Mary
00:35:43 · Ben Gilbert, David Rosenthal
[00:35:43] S0: Yes. So time for a little history lesson, listeners. So today, you know about these, like, media conglomerates. But before that, the TV networks were entirely separate companies than the production studios. So NBC was its own thing, totally separate from Universal. CBS, just a broadcast network, nothing to do with Paramount. ABC, separate from Disney. So the networks, ABC, CBS, NBC, right when TV production started in the fifties, they need to hire the production studios to make stuff for them to broadcast on their networks. Some of these studios were very large, like Paramount or Universal or Warner Brothers or Disney. Some of them were really small, like MTM Entertainment, which is named after the Mary [00:36:25] S1: Taylor Moore Show. Yep. Or Desi Liu of Desi Arnaz and Lucille Ball. Yes. Interestingly, the big guys, the big Hollywood studios getting into making TV, talked about on our Disney series. It was Walt Disney that started doing that. Originally, the Hollywood studios kinda boycotted TV because they were worried about it as a threat to the film business. Walt was the first one who was kind of the visionary. Said, no. No. No. These these broadcasters, there's so much money that's gonna be made here as television sweeps the nation, and we're gonna be the best arms dealer for them. [00:36:57] S0: And if we flash all the way forward, way more money was in TV [00:37:02] S1: than Way more. Way more money in TV.
00:37:02 · David Rosenthal, Ben Gilbert
[00:37:02] S1: than Way more. Way more money in TV. [00:37:04] S0: Walt was incredibly right. When you look at where the cash gushers are in the entertainment industry, you know, over the last forty, fifty years, it's come from TV, not from movies. [00:37:13] S1: It's kinda, you know, one of these, jokes in in Hollywood that we really learned about studying for this episode of, you know, all the glamour goes to the movie stars and the movie directors and the movie executives. The richest people in town were always the TV guys. [00:37:27] S0: Yep. Yep. Okay. So back to the, call it, sixties. The way that the deals worked between the networks and the studios were called deficit financing. And this is crazy that this is how it works, but but it is. The networks would not fund all the production costs of the show. So they would greenlight something, find the the production company to make it, and say, we'll pay you 60 to 80% of what it costs to make the show. Because we're [00:37:54] S1: Like, in this case, this special with Seinfeld and Larry David. [00:37:57] S0: Right. Because historically, these networks are cash conscious, and so they'd rather save 20 to 40% of the budget of the show. And we'll give up some future upside, but, you know, that's okay. [00:38:08] S1: Right. Well, in return, the production company would own the show.
00:38:08 · David Rosenthal, Ben Gilbert
[00:38:08] S1: Right. Well, in return, the production company would own the show. [00:38:11] S0: Yes. So because NBC is not totally covering the costs, they're leaving this deficit. They just get a license to the show to air it on their airwaves once, twice, very limited license. But that meant that the studio was still in the hole for the rest of the funding to make the show. But, you know, it is sort of fair. The studio gets to own the rights to that show in the future to monetize it when there's things like international ways that they could license it or merch or later home video or the eventual huge cash cow of syndication or reruns of the episodes on other networks or on cable channels or something like that in the future. But then the network started including one deal term that was, very, very favorable to the networks. They overreached, and they demanded a large cut of the future syndication revenue even though they were not fully funding the cost to produce the shows. [00:39:09] S1: I didn't realize Back in the sixties. A period in the sixties where the networks could own syndication rights. Yes.
00:39:09 · David Rosenthal, Ben Gilbert
[00:39:09] S1: I didn't realize Back in the sixties. A period in the sixties where the networks could own syndication rights. Yes. [00:39:16] S0: So studios, of course, as you would expect, complain to the government, and they say, this is ridiculous. Like, they're not funding the whole thing, but they're making it so we can't make money now, and we can't make money in the future. So in 1970, the FCC issued the thing that you mentioned, David, the financial interest and syndication rules or FinCin. And these rules prevented the networks from owning a financial interest, which mostly meant from participating in the future syndication of shows that they were buying from the studios. So this created a true separation between networks that aired the shows and the studios who make the shows. You've got a buyer. You've got a seller. It's very clean. [00:39:55] S1: Yep. Yep. [00:39:56] S0: But then by the late nineteen eighties, flash forward, I don't know, twenty years or so, the networks are now the ones complaining. Cable shows up, and a lot of the consumer attention is leaving the network and going to cable. And the networks argued, well, we need more latitude in operating our businesses to effectively compete and make profits. You might remember this from our, our Disney episode where we talked all about what opened the door for Disney to eventually buy ABC. So by 1993, the networks won. FinCEN is repealed. The net of this is networks actually can produce their own shows from nineteen ninety three, four, five, onward.