Future Entertainment Deals: Everyone Wants To Be Profit Participant?

Maybe future media/entertainment deals will all be about profit participation -- not just flat fixed fees.

The state of Louisiana is looking to change the way it doles out tax credits to film producers, which it currently does to the tune of almost $200 million a year.

That missing tax base is hurting the state’s finances -- especially now that oil prices have been dramatically sinking. A better bet? How about giving the state  a percentage of the profits if the movie's a hit?

Of course, this is never an easy thing to predict.  But the state’s Lieutenant Governor Billy Nungesser believes this it is like digging a bunch of oil wells: If one in 30 becomes a successful strike, that’s a good deal. Finding oil -- offshore and otherwise -- is something people in the state are familiar with.

Increasingly in other media/entertainment business -- like TV -- there are new business models that include this kind of business consideration, which comes under the heading of “revenue sharing.”



For example, when it comes to deals local TV stations make with their respective networks for over-the-top digital video platforms, revenue-sharing is a key component. That’s the case for CBS All Access.

One wonders if future TV producer-distributor deal-making will go this route. Perhaps pay TV providers, who pay specific subscriber fees to TV producers, might move to percentage model a based on performance. Maybe the likes of Netflix, Amazon, and Hulu would make “rev/share” deals should they hit certain goals in terms of viewership and/or promotion.

For TV advertisers, all this is might be murkier.

Decades ago, heavy TV advertisers -- P&Gs, the Unilevers, and other big consumer products companies -- actually owned much more TV programming, and/or share in producer profits.

Now TV advertisers have swung back the other way, placing all the risk -- the ups and downs -- back with TV producers. Instead, they want specific return on investments pegged to data of actual sales of products and services.

Revenue-sharing in any business should mean partners on all sides would be incentivized to make deals work. If TV networks and distributors find themselves in even more of a disruptive media ecosystem, this might be something to consider.

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