South Park’ Creators Win Ad Sharing in Digital Deal
LOS ANGELES, Aug. 26 — In March, the season premiere of “South Park” began by barging into typically risqué territory, with a squirm-inducing bit about the taboo of using a certain racial epithet.
To Matt Stone and Trey Parker, the creators and executive producers of “South Park,” Comedy Central’s most lucrative franchise, the clip ought to have been blazing its authorized way around the Internet, its flouting of social norms picking up ad revenue with every set of eyeballs. Instead, the clip was easy to find, but it wasn’t making any money for its rightful owners.
“If I’m overseas and have to get an episode right away,” Mr. Stone lamented, “you literally have to go to an illegal download site.”
Because of the slow entry into the digital realm of Viacom, Comedy Central’s parent, and an almost crippling deal point in Mr. Stone’s and Mr. Parker’s contract, the lewd, rude, crudely animated and mordantly funny series — one that began with a viral video before the term even existed — has barely had a presence as an avalanche of user-generated entertainment hit the Web. Meanwhile, sites like YouTube met the demand for free “South Park” clips without paying for the privilege.
Now, however, Mr. Stone and Mr. Parker and their bosses at Comedy Central, a unit of Viacom’s MTV Networks, are attempting to leapfrog to the vanguard of Hollywood’s transition into Web. In a joint venture that involves millions in up-front cash and a 50-50 split of ad revenues, the network and the two creative partners have agreed to create a hub to spread “South Park”-related material across the Net, mobile platforms, and video games.
The deal, signed Friday, begins with a three-year extension of the show and its creators’ contracts through a 15th season, in the year 2011, and gives Mr. Stone and Mr. Parker sizable raises, both in their salaries and in their guaranteed advances against back-end profits from DVDs, merchandising, syndication and international sales.
It also creates an entity called SouthParkStudios.com, to be housed in the show’s animation studio in Culver City, Calif., that is intended to be an incubator not only for new applications for characters the likes of Cartman, Kyle, Stan and Kenny, but for new comedy concepts that could one day mature into TV series of their own.
All told, people involved in the deal confirm that it is worth some $75 million to Mr. Parker and Mr. Stone over the next four years. But what is likely to draw the most attention in Hollywood is not the richness of the pact, but the network’s willingness to share its advertising revenue.
Television networks have long maintained a wall between ad revenue and the compensation they pay the talent. As recently as 2000, Leslie Moonves of CBS erupted upon realizing that Mark Burnett, the creator of “Survivor,” had been given a share of revenue from its first season — saying this was tantamount to letting the inmates run the asylum — and a new deal gave Mr. Burnett a much bigger license fee instead.
Doug Herzog, president of MTV Networks Entertainment, acknowledged that the 50-50 digital deal, which was approved by Philippe P. Dauman, Viacom’s chief, would set a precedent. “If this is seen as a bold stroke, all the better, because it’s going to take bold thinking to move ahead,” he said. But he said it was justified by the “South Park” team’s stellar track record and by the changing balance of power between the buyers and creators of entertainment.
“The landscape has shifted dramatically,” Mr. Herzog said. “The way of the Web seems to be, there’s a very low barrier to entry, so you don’t need, necessarily, a major media company to be in business, or a movie studio, or whatever it is — you just need to be able to set up shop and go. You’re seeing a lot of guys doing this, funnyordie.com being the best example.” (Funnyordie.com was started this year by the comic actor Will Ferrell and his production partner, Adam McKay.)
Adding to the likely interest in the revenue-sharing pact is that digital income is one of the key issues confronting negotiators for the Hollywood studios and the guilds representing writers, directors and actors, who want to ensure they are compensated fairly for their work for the Web, mobile devices and other technologies still in their infancy.
“Talent will look at this and say, ‘Why not us?’ ” said Warren Littlefield, a television producer and former president of NBC Entertainment. “Unfortunately, what you’ll probably find is the response is, ‘We’ll tell you why not you: because you haven’t achieved what they’ve achieved.’ This is based upon a decade of proven success; it’s not a deal that’s made on the come, it’s not a deal made with an established creator who’s about to create something new. It’s 10 years in.”
Few shows are as important to a network as “South Park” is to Comedy Central. “It put us on the map,” said Mr. Herzog, who commissioned it in 1997 when the channel was still in its infancy. Its huge popularity, particularly with young males, fueled the channel’s growth, and he credits the show with inspiring a boom in original programming on basic cable networks.
“South Park” is still the network’s highest-rated with an average of three million viewers for first-run episodes, and has generated hundreds of millions of dollars from DVDs and other types of merchandising. It reaped a record $100 million in 2003 from one of the earliest successful broadcast syndications of a cable show.
But even Mr. Parker and Mr. Stone would most likely not have been able to negotiate their new joint venture had they not years ago inserted into their contract what has proved to be a killer deal point. Comedy Central’s boilerplate reserved to the network any income generated by the show through other network divisions. But the pair’s lawyer, Kevin Morris, insisted that any “South Park” revenue not derived specifically from broadcast on the cable channel would go into the pot for calculating the men’s share of back-end profits.
This was meaningless at first, but it has taken on huge significance of late, Mr. Morris said. As Viacom struggled to change into a digitally nimble media company — making a failed bid for MySpace in 2005, suing Google and YouTube this year, and striking a retaliatory deal with Joost — the exploitation of “South Park” was subject to this nettlesome requirement. It was thus no coincidence that “South Park” was not part of the Joost deal.
Both the show’s creators and the network, therefore, stood to gain if it became easier to sell the show digitally. The brainstorming that led to Friday’s deal began a year ago in Mr. Morris’s office when Mr. Herzog proposed creating a digital animation studio led by Mr. Stone and Mr. Parker along the lines of a similar one at Nickelodeon.
The “South Park” partners now spend only about 20 weeks a year making the series, leaving plenty of time for creating or mentoring new projects. “Anything we get out of it is icing on the cake,” Mr. Herzog said.
Mr. Morris said the deal would show tech companies venturing into entertainment on the cheap that they will have to pay well for top talent, while pointing the way for Hollywood studios going digital as they compete with companies like Google and Apple.
His clients, meanwhile, said it would give them the freedom to act quickly and decisively in seizing new digital opportunities.
Mr. Stone, speaking by phone from Istanbul, added that he and Mr. Parker were particularly glad to be taking an ownership stake in their main life’s work.
“The idea that we’re getting a little piece of it back — and in five years we’ll probably be going to court and fighting about it — but in ownership terms, that’s kind of an amazing thing,” he said. “People always ask us, ‘You own it, right? No? Why’d you sign that deal?’ And I have to say, ‘Because I was sleeping on my friend’s couch.’ ”