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'Frasier' back as legal drama

A lawsuit over profit participation may shed light on accounting practices that studios prefer to keep secret.

October 24, 2005|Robert W. Welkos | Times Staff Writer

How can a hit television series like "Frasier" gross $1.5 billion and yet be $200 million in the red?

That's the issue at the center of a recent lawsuit filed against Paramount Pictures by two talent agencies seeking answers to how "Frasier" -- the Emmy-winning NBC sitcom starring Kelsey Grammer that ran for 11 seasons -- can claim that it never turned a net profit even though it was one of the most successful shows in television history.

For its part, Paramount Pictures said it believes the case is "without merit" and promised to vigorously defend its position. But regardless of who's right, the suit filed Sept. 29 in Los Angeles County Superior Court could offer that rare window onto one of Hollywood's juiciest disputes: profit participation.

Complaints about the way studios divvy up the profits are rampant within the industry. And it's not just the little guys doing the complaining. Director Peter Jackson is suing over DVD profits from the "Lord of the Rings" trilogy. But perhaps the most famous case also involved Paramount Pictures. The studio found itself embroiled in controversy over claims that the hit 1988 Eddie Murphy film, "Coming to America," had grossed $350 million, yet never turned a profit.

Such cases usually end in an out-of-court agreement, said attorney Pierce O'Donnell, who represented humorist Art Buchwald in the "Coming to America" case and went on to co-write a 1992 book titled "Fatal Subtraction: How Hollywood Really Does Business."

"The studios typically do not want to air their dirty-accounting laundry," he said. "Many a settlement of these kinds of suits occurs on the courthouse steps."

But if the "Frasier" case goes forward, it's sure to be followed by those who have long suspected that the industry's odds are stacked in favor of the studio.

People are fascinated by such disputes because of the names involved or the sums. But such contractual disagreements aren't all that unusual and certainly aren't limited to Hollywood, said Jason E. Squire, instructor of cinema practice at the USC School of Cinema-Television and editor of "The Movie Business Book." "But just because Hollywood is Hollywood, it gets more attention."

The "Frasier" breach-of-contract suit was filed by the Jim Preminger Agency of Los Angeles and the Kaplan Stahler Gumer Braun Agency of Beverly Hills. The agencies represented Peter Casey and David Lee, and the late David Angell, the creative team behind "Frasier," which ran 11 seasons on NBC from 1993 to 2004. (Angell died in the Sept. 11, 2001, terrorist attacks.)

Grammer's character, the pontificating Boston psychiatrist Frasier Crane, was first introduced to audiences during the third season of the hit NBC series "Cheers" and became a regular, bantering with the likes of bartender Sam Malone (Ted Danson) and blue-collar barflies Norm (George Wendt) and Cliff (John Ratzenberger) and romancing waitress Diane Chambers (Shelley Long).

When "Cheers" came to an end, though, the writers weren't quite finished with the fussy Frasier. Casey, Lee and Angell, who had been writers on "Cheers," dreamed up a spinoff.

In "Frasier," Crane leaves Boston for his hometown of Seattle, where he works as a radio psychiatrist and moves into an expensive apartment with his dad, ex-policeman Martin Crane (John Mahoney). Jane Leeves portrayed Martin's English-born physical-care assistant, Daphne, while David Hyde Pierce costarred as Frasier's psychiatrist brother, Niles, and Peri Gilpin was Frasier's producer, Roz Doyle.

Traditionally, agencies are paid an upfront commission for services rendered on their clients' behalf. But sometimes, agents are in a position also to negotiate for a piece on the "back end." The agencies involved in the "Frasier" case have already earned upfront millions during the show's run, but they also negotiated deals in which they would take a percentage once the show started generating net profits, according to the lawsuit. They contend they could be owed millions more. (Their clients are paid separately and are not involved in this lawsuit.)

Few television shows have the longevity necessary to generate profits long after everyone else has taken their share. The agents, though, believed "Frasier" would do just that.

Since then, the suit states, the agents have been keeping an eye on the accounting behind "Frasier." The suit claims that Paramount has reported collecting more than $1.5 billion in gross revenues for "Frasier." That includes almost $830 million in network licensing fees paid by NBC.

Yet "Paramount has taken the position with the [plaintiffs] that the series has never produced 'net profits' under Paramount's definition of the term and that the series has actually lost over $200 million according to its latest calculations," the suit says.

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