Neil J. Rosini and Michael I. Rudell

It is rare that a hit network television series is cancelled, as recently occurred with “Roseanne.” But when that happens the immediate and long-term implications for the network, producers, talent and other entities related to the series can be significant. The network will lose advertising revenues and the promotional value of the series, and the production company, talent and others performing services in connection with the series may lose guaranteed, and in some cases contingent, compensation in connection with the series. The cancellation of “Roseanne” and the ordering of “The Connors” not only is interesting from a creative and cultural perspective, but also provides a lens to view aspects of various arrangements in the television series business.

Guaranteed Fees for Services

Individuals and companies are engaged to render services in connection with a series in various manners. Most “below the line” (the “line” on the first page of a production budget that separates the cost of writers, producers, directors and actors—which appear “above the-line”—from the cost of the rest of the production team, appearing “below the line”) and some above the line talent may have been engaged by the production company on an episode-by-episode basis, with no guarantee or other commitment beyond payment for services rendered. For example, an actress or director who is engaged to perform services on a particular episode at a specified fee might have an expectation that she will be engaged to perform services on future episodes and thereby generate additional income, but a production company would not have an obligation to engage that person for future services.

The contract for sought-after actors and producers may provide that they are engaged for all episodes produced. An individual with this provision in her contract might expect to be paid for many episodes in a hit series like “Roseanne.” But the fact that her expectation is not met does not result in an obligation by the production company if few shows are produced.

However, some agreements provide that the actor, producer or others might be entitled to be paid for all shows produced with a minimum number of episodes specified. For example, if the performer were guaranteed payment for 13 episodes in a given season, and only nine episodes were produced, the production company would be obligated to pay the talent for the additional four episodes. It has been reported that Roseanne Barr and John Goodman each were being paid approximately $250,000 per episode; thus, the amounts involved can be substantial. This can apply to producers’ fees as well. Roseann Barr and the actress Sara Gilbert were receiving producing fees, and if their agreements provided for a minimum number of episodes, this adds to their unrealized gain. (This article does not examine the implication of contracts with termination for cause provisions or so-called morals clauses. Those clauses allow an employer to terminate an agreement, including all payment obligations, should an actor or other participant engage in conduct that might be described as “indefensible” and give rise to a “reputational incident” that materially diminishes the value of the employee’s services or of the programming in which the employee appears.)

Contingent Compensation

Adding to this is the loss in proceeds from contingent compensation incurred by individuals and entities that share in net proceeds when a hit series is cancelled. Sought-after actors, directors, producers and talent agencies are paid well for the services they render episode-by-episode, but they can derive significantly greater compensation in subsequent years through off-network syndication of the series. (“Syndication” refers to the licensing of the series on a market-by-market basis as opposed to the simultaneous broadcast of each episode throughout the country by a network, cable system or streaming service.) A series usually becomes valuable in syndication after it has been broadcast on a network for several years. The more episodes of a series broadcast on a network, the more valuable the series becomes in syndication. A network series that has been on the air for several years may generate hundreds of millions of dollars in gross revenues from syndication. Even when distribution fees, distribution expenses, recoupment of production costs with interest and overhead expenses are deducted, the amount remaining can be substantial for those who share in some form of net proceeds.

Other avenues of potential compensation also could be eliminated by a series cancellation, including revenues derived from international exploitation and merchandising.

And because “Roseanne” is the reincarnation of a previous “Roseanne” series, which is being licensed in syndication, several outlets that are broadcasting the original series elected to cancel that as well. This will result in diminished revenues for the production company and other entities sharing in proceeds derived from the exploitation of that original series.

Network Revenues

The ABC network reportedly received approximately $45 million in advertising revenues for the nine episodes produced in the first season, and it expected to receive significantly more if 13 episodes were produced in the second season. A hit series also is extremely valuable to the network in other ways: it increases the number of viewers watching the network’s other programs on the night the hit series is broadcast, and can be used to promote shows on nights other than when the hit series is being broadcast.

It has been reported that ABC has agreed to replace the cancelled “Roseanne” series with a straight-to-series (no pilot will be produced) spin-off entitled “The Connors,” which premieres with 10 episodes in the fall. (This type of spin-off, called “generic,” is a new series that contains continuing characters from the original series; this is distinguished from a “planted” spin-off in which one or more new characters are inserted in a series and they become the main characters in the spin-off). Reportedly, the production company and Roseanne Barr have reached an agreement in which “The Connors” does not include Roseanne Barr as a member of the cast. She will not have further creative or financial participation in the spin-off but will retain rights to her Roseanne Connor character and future spinoffs beyond “The Connors.”

Agreements with creators, producers and some others associated with the original series often provide that they will receive a passive payment for spin-offs of 50 percent of the guaranteed and contingent compensation they received for the original series. Interesting questions arise as to what type of passive payments those involved in the Roseanne series will receive in connection with “The Connors.”

Neil J. Rosini and Michael I. Rudell are partners in Franklin, Weinrib, Rudell & Vassallo. Both practice entertainment law and have written and lectured extensively on the subject.