Acquired
00:46:57 · David Rosenthal, Ben Gilbert
[00:46:57] S1: Rock. Mhmm. And this is all gonna become very, very important to the financial incentives behind Seinfeld as we go here. [00:47:04] S0: Yes. So taking a step back here, you're probably like, why don't I need to know all of that, and what's the bigger picture here? Just think about the incentives. If you're Castle Rock and you own the rights, all of your returns are super backloaded. If you make a show, like, great. I'm gonna make a show for $500,000 an episode. You're only getting paid $400,000 an episode by a network to buy that show from you. [00:47:32] S1: Right. You have the rights to lose money on every episode that
00:47:32 · David Rosenthal, Ben Gilbert
[00:47:32] S1: Right. You have the rights to lose money on every episode that [00:47:34] S0: you make. Every episode you make, you're like, oh, boy. I hope this does well, but you just keep losing more and more and more money every single episode. You don't make money until five plus years down the line, again, much like the venture business, when that show goes into syndication or the foreign rights get sold or merch becomes big or home video becomes big. And same for those distributors. The the distributor doesn't do anything when a Castle Rock is selling a show to an NBC. So that whole apparatus of Castle Rock and Sony is just sitting there on their hands saying, so, when do we get to stop losing money? Meanwhile, the networks are sort of in this rental business where they are renting content to show it. I think the contracts usually say, we get to show it once and show ads against it on a big night of television and primetime. We also get to show it one more time, maybe next summer or something when there's nothing on the schedule. But after that, all the rights revert to the IP owner, to the studio. And so the the whole business of network is just we're gonna rent content that we are legally not allowed to own, and we're gonna bet that we can sell more ads than it costs us to rent. So they run a, like, very short term business while the studios and distributors run a very long term business.
00:48:49 · David Rosenthal, Ben Gilbert
[00:48:49] S1: Guess it's just like Silicon Valley. They're betting on the equity value in the long run. Yes. So back to Seinfeld's stand up diary here. Larry and Jerry having the guarantee that NBC is gonna make this thing is so valuable to any production company they work with because the idea is this is gonna be a one time special, and it's guaranteed to be made by the networks. So any production company that comes and works with them to make this thing, it's gonna air right away on NBC. Maybe it'll do a summer rerun on NBC, and then it's theirs. They get it to go sell it to HBO or Showtime or whoever, sell it internationally, run the whole business model on the back end right away, guaranteed. No need to pitch the networks. No need to put capital into developing pilots that might not get picked up, etcetera, etcetera. Awesome. [00:49:38] S0: Yep. But you don't know how big it's gonna be. Like, is this thing gonna be worth anything to sell to other networks and syndication? Probably not. It's a one time special. [00:49:46] S1: Right. Nobody's thinking about this as a sitcom. It's a it's a special. But what this allows is Jerry and Larry via Shapiro and Wes, the the managers, the agents, to negotiate huge percentage of the back end, essentially, the equity in this piece of content with the production company. Because [00:50:05] S0: nobody thinks it's gonna be worth that much, and there's no risk.
00:50:05 · Ben Gilbert, David Rosenthal
[00:50:05] S0: nobody thinks it's gonna be worth that much, and there's no risk. [00:50:09] S1: There's no risk. Jerry and Larry have all the leverage. They could take this to literally any production production company company in in Hollywood. Hollywood. Right. Right. And so choosing Castle Rock, they can essentially write the deal terms. So it's never come out exactly what the deal terms are, you know, sort of the cap table essentially of Seinfeld the show, because the only people who really know are Jerry and Larry and Castle Rock and and then Shapiro and West. But, it's reported that Jerry and Larry each own 15% of the show, which is huge. And spoiler alert, Seinfeld is gonna make billions and billions and billions of dollars, and Jerry and Larry are gonna get 15% each of that.
00:50:09 · David Rosenthal, Ben Gilbert
[00:50:09] S1: There's no risk. Jerry and Larry have all the leverage. They could take this to literally any production production company company in in Hollywood. Hollywood. Right. Right. And so choosing Castle Rock, they can essentially write the deal terms. So it's never come out exactly what the deal terms are, you know, sort of the cap table essentially of Seinfeld the show, because the only people who really know are Jerry and Larry and Castle Rock and and then Shapiro and West. But, it's reported that Jerry and Larry each own 15% of the show, which is huge. And spoiler alert, Seinfeld is gonna make billions and billions and billions of dollars, and Jerry and Larry are gonna get 15% each of that. [00:50:53] S0: And they have this very clever way of dealing with it in interviews because someone will say something like, you've made x $100,000,000, and they never quite deny it. They say, that's preposterous. That's an insane number. Right. That... That's a ridiculous number. And it's true. It is a ridiculous number, the hundreds of millions of dollars that end up coming out of this. But it's it's not... They're not saying it's wrong, or even when they do say it's wrong, they're not saying by how much. So someone throws out, it seems like you might have made over $600,000,000, and they go, oh, that's not the right number. Right. Right. Right. But you didn't say that it wasn't in the ballpark. So it's just one of these funny, it's admirable the way that they handle it because it's so true to form.
00:50:53 · Ben Gilbert, David Rosenthal
[00:50:53] S0: And they have this very clever way of dealing with it in interviews because someone will say something like, you've made x $100,000,000, and they never quite deny it. They say, that's preposterous. That's an insane number. Right. That... That's a ridiculous number. And it's true. It is a ridiculous number, the hundreds of millions of dollars that end up coming out of this. But it's it's not... They're not saying it's wrong, or even when they do say it's wrong, they're not saying by how much. So someone throws out, it seems like you might have made over $600,000,000, and they go, oh, that's not the right number. Right. Right. Right. But you didn't say that it wasn't in the ballpark. So it's just one of these funny, it's admirable the way that they handle it because it's so true to form. [00:51:34] S1: Yes. Yes. But this is why this crazy unlikely stand up special ends up becoming the most valuable deal probably in the history of television for these guys. [00:51:43] S0: So as best we can kinda figure out by what's been publicly reported, ballpark it at 65 ish percent left for Castle Rock. The interesting thing to know is usually the way a distribution deal works, because remember, Sony owns the distribution right eventually, that usually looks like 15% off the top. So that's like everyone gets diluted down 15% because whoever Sony manages to sell it to, they get the first percent off the top. And we've seen different numbers. We've seen 15. We've seen 30. There's lots of reason to believe it's 15.