The Globes Go to Court

 Illustration: Nick Illuzada

As the 2010 golden Globe Awards kicked into high gear, members of the Hollywood Foreign Press Association had reason to smile. Despite persistent rain showers outside the Beverly Hilton, the red carpet at the HFPA's annual film and television awards show again was packed with international media and entertainment elite: The Blind Side star Sandra Bullock mingled with Avatar director James Cameron and the cast of Mad Men. The Globes telecast would draw 250 million viewers worldwide and become that week's highest-rated entertainment program on U.S. television, continuing a streak of stunning success for the event thrown by a ragtag group of foreign journalists.

But what the HFPA didn't know that chilly January night was that Dick Clark Productions, longtime producer of the Globes, was about to hatch a secret plan to wrest control of broadcast rights to the lucrative telecast even as its long-term deal was expiring. By October 2010, DCP chief executive Mark Shapiro would quietly seal a seven-year contract renewal with NBC without telling anyone at the HFPA, the show's owner, about the negotiations.

In fact, immediately after the show in January 2010, HFPA president Philip Berk, unaware, began preparing to haggle with Shapiro about whether DCP would be involved with the Globes at all. Berk had sent DCP a letter in late 2009 stating that the producer was not authorized to "seek or agree to any subsequent broadcast licensing agreement with NBC (or anyone else)." Already having struck a deal with NBC, Shapiro responded to the HFPA in writing that he "would never make a move on a network renewal or new home without your involvement." DCP lawyers later would say Shapiro did not mean that "involvement" is the same as requiring HFPA's ultimate approval.

Months of fruitless negotiations had begun in February 2010. The HFPA wanted the company to reduce its 50 percent take of Globes profits (after expenses), while DCP insisted on the same split as in the past. The HFPA also wanted DCP to open up bidding to all networks to maximize the license fee. By that summer, Shapiro was convinced the talks had stalled, so he simultaneously opened dealmaking with NBC's West Coast president of business operations, Marc Graboff. But he never told the HFPA that he had essentially given up on making a new deal with the organization.

So Berk and the 83-member HFPA were blindsided in October 2010 when they received two letters -- one announcing the new deal (what DCP called "great news") and another unilaterally exercising its option to produce the show based on contracts dating to 1993. The relationship between the longtime partners quickly exploded into litigation, with both sides lining up top-notch Hollywood lawyers to argue over the interpretation of a few short sentences in two key contracts signed in 1993 and 2001.

DCP says the contract language, which grants it rights to produce the Globes "for any extensions, renewals, substitutions or modifications of the NBC agreement," means it can work on the telecast as long as it remains on NBC. The company argues that it single-handedly built the Globes into the international showbiz event it has become, more than justifying its perpetual rights.

The HFPA, on the other hand, argues that its cherished awards show has been hijacked, potentially costing it millions in unrealized value. "No organization with a 50-year track record would ever agree to release all of its rights and control over its sole asset," the HFPA wrote in its legal filing, "especially if that asset is the basis for the organization's existence in the first place."

Much of the case will come down to the meaning and intent of a few ambiguous sentences in those contracts, plus amendments that have been added over the years. As the closely watched case heads toward a Sept. 6 trial date in U.S. District Court in Los Angeles, at stake is nothing less than control of a franchise worth hundreds of millions of dollars that serves as one of Hollywood's biggest awards shows and a key stop on the road to the Oscars.

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As with most Hollywood fights, the battle for the Globes is a matter of equal parts pride and money. The $7.5 million that the HFPA receives annually from NBC for television rights is virtually its entire source of income, a bounty that supports the infrastructure of the Beverly Hills-based group and its philanthropic endeavors, which this year amounted to more than $1.5 million in gifts.

The HFPA believes -- correctly, some observers say -- that it could make up to twice as much as NBC is offering via a real auction of TV rights. Among the witnesses scheduled to testify at the trial is CBS Corp. president and CEO Leslie Moonves, who is expected to say that his network is offering at least $10 million more per year than the new NBC deal would pay. DCP squandered that value, the HFPA argues, by negotiating the secret deal with NBC in order to preserve its place as show producer.

Shapiro, on the other hand, argues that leaving the HFPA in the dark was part of a deliberate plan to secure a better deal from NBC. Shapiro used what he called in a deposition a "big brother, Wizard-of-Oz-behind-the-curtain strategy" to increase his negotiation leverage by telling NBC that any deal had to be approved by the tough-minded HFPA while keeping DCP's own arrangement with the group secret. After all, if NBC execs knew DCP needed the show to air on NBC, Shapiro testified, the network could have driven a harder bargain.

NBC executives have testified that they never asked the HFPA about the negotiations because the network had always spoken directly with DCP. The NBC execs were told by the company's WME agents that the producer needed to make the deal with NBC, but Shapiro assured the network that he would also require approval from the HFPA. Even with conflicting signals, NBC proceeded.

The big money at issue is almost secondary to the personal issues in play for the HFPA. For years, its credibility has been questioned. In the 1960s, the show was knocked off the air for a time amid an investigation by the FCC into its voting procedures. In the early 1980s, the Globes lost a TV deal with CBS after the group named Pia Zadora "newcomer of the year" amid accusations that her then-husband, billionaire Meshulam Riklis, offered favors for votes. As recently as 1999, Sharon Stone was nominated as best actress for The Muse after sending voters Coach watches (the HFPA told its members to return them).

The group has worked hard to establish rules to prevent those headlines. It wants the world to see the Globes as an important precursor to the Oscars, and it resents the notion that DCP, not the HFPA, made the Globes a success. Says Mark Litwak, an attorney familiar with the case but not involved, "Their reputation is on the line."

So although there is no scenario by which the Globes could be taken from the HFPA, it could lose control over the TV rights. For a group so sensitive about its image and reputation, that itself would be a powerful blow.

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As big as the stakes seem for the HFPA, they are even greater for Dick Clark Productions.

The Globes' preshow and telecast fees, coupled with domestic and international licenses, represent nearly one-third of the company's $80 million in annual revenue and provide a major calling card for DCP, which also produces the American Music Awards, the Academy of Country Music Awards and, with another producer, So You Think You Can Dance on Fox.

"How important is this to Dick Clark? It's obviously important enough that they are going to spend a lot of money on lawyers fighting for these rights," notes Litwak.

After all, the relationship goes back to 1982, when the HFPA turned to TV legend Dick Clark in the wake of the Zadora scandal. Clark, known as the squeaky-clean host of American Bandstand and the head of the production company he founded in 1957, brought the group instant credibility.

During the next few years, Clark secured a new TV deal, first in syndication, then on cable with Turner Broadcasting and finally with NBC beginning in 1995. Ratings have risen steadily. The January 2011 telecast, hosted by comedian Ricky Gervais, drew 17 million U.S. viewers and was the highest-rated entertainment show on NBC in the 18-to-49 demo since the Globes in 2010.

Clark sold his namesake company in 2002 for $136 million to Mosaic Media Group. It was sold again in 2007 for $175 million to Red Zone Capital, a private investment firm run by Daniel Snyder, the billionaire owner of the Washington Redskins, and Dwight C. Schar, executive chairman of Fortune 500 home builder NVR Inc. A minority interest of 40 percent was also sold to Six Flags, the amusement park company that Red Zone had acquired in a hostile takeover in 2005.

Red Zone had hired Shapiro, then 35, as CEO of Six Flags in 2005 after his tenure as an executive at ESPN frequently raised storms of criticism.
At the time of the DCP acquisition, Red Zone touted the synergy with Six Flags. They arranged a deal in 2007 to incorporate images from the Globes and other DCP-produced events into Six Flags rides, restaurants and the overall decor. However, their efforts at synergy fizzled, and in 2009, Six Flags' debt and the global recession drove the company into bankruptcy.

Snyder found a more friendly playing field in Hollywood. In 2010, Red Zone engineered a $165 million junk bond sale secured by DCP assets that allowed it to cash out $105 million. The private-offering memo prominently boasted that DCP held rights to the Golden Globes "in perpetuity," or as a footnote explained, at least as long it continues on NBC.

That cash-out left DCP saddled with debt that has to be repaid beginning in 2013, spawning rumors that Red Zone is looking to sell. A spokesman for the company says DCP "is not formally for sale, but we have a fiduciary responsibility to follow up on indications of interest as they arise and have done so at multiple times over the course of our ownership."

There is also pressure to sell from Six Flags, where the new post-bankruptcy managers have identified DCP as a noncore asset.

The situation adds an extra level of urgency to the HFPA litigation. It appears that any potential sale is on hold until at least after the first phase of the trial, which will determine who controls broadcasting rights to the Globes. The second phase, set to begin sometime next year or the year after, will deal with contractual issues such as the preshow, digital rights and more.

If DCP loses phase one of the trial, the company's prime asset would be in jeopardy, threatening a sale and putting NBC in position to sue for damages if it loses the Globes to another bidder.

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The nonjury trial, which is expected to last eight to 10 days in front of U.S. District Court Judge Valerie Baker Fairbank, promises some courtroom fireworks, if only because there is such bad blood on all sides. One lightning rod will be Mirjana Van Blaricom, a Yugoslavian journalist who, as president of the HFPA in 1993, signed the key contract with Dick Clark Productions that is now at the center of the dispute.

In 1996, Van Blaricom was forced out of the HFPA in a bitter battle. Later that year, she formed the International Press Academy, which hands out the Satellite Awards.

In an op-ed written in August, Van Blaricom makes clear she won't be supporting her former colleagues in the trial. "After years of denying my efforts and 20-year contribution to their association," she wrote, "HFPA wants to focus attention away from their own internal politics and motives to shift the emphasis to me, their much-maligned past president."

That dissension could set up a testy cross-examination by HFPA lawyers Linda Smith and Daniel Petrocelli. Conversely, DCP's legal team, led by Martin Katz and Bradley Phillips, hope to use Van Blaricom to show that the HFPA understood it was making the deal in perpetuity and how valuable DCP has been to the evolution and success of the Globes.

Snyder, Shapiro and DCP president Orly Adelson all declined comment, as did Aida Takla-O'Reilly, who was elected HFPA president in June.

If DCP prevails, the 2012 Globes -- set for Jan. 15 -- will air on NBC as planned. But an HFPA victory likely would mean an open bidding war among all the networks for the right to broadcast the Globes. In addition to CBS and NBC, Fox has expressed interest, according to sources.

And if the HFPA prevails, the first thing the organization would likely do is fire DCP as producer of the Globes, ending a 28-year partnership that has generated hundreds of millions of dollars and led to one of Hollywood's most dominant awards shows. The message from the HFPA is clear: the organization will do what it needs to protect its prime asset.

"It's beyond dispute that thanks in large part to the Golden Globes, we have a degree of influence and are given importance by studios and producers," an HFPA member says. "It's understandable that some people on the outside wonder how this bunch of 85 or 90 people with an accent reach such a degree of influence. I share some of the critiques, but it is how we make our living, and we will work very, very hard to keep it going."           

ON THE WITNESS LIST: Hollywood insiders expected to testify during the trial to determine the future of the Globes

Dick Clark: The retired TV legend and company founder, 81, is expected to testify about the history of Dick Clark Productions' relationship with the HFPA and the intent of the 1993 contract to produce the Globes.

Marc Graboff: The NBC executive will testify about Dick Clark Productions CEO Mark Shapiro's representations during negotiations to extend the network'sdeal to air the Globes until 2018.

Leslie Moonves: The CBS Corp. president and CEO could be called to discuss talks with the HFPA about bringing the Globes to CBS for $10 million more than what NBC was offering.

 

GLOBES BY THE NUMBERS

  • 67: Years old
  • 28: Years produced by DCP
  • $13.3 million: License fee (in 2010 from NBC)
  • $6.98 million:DCP gross profit from Globes
  • 24: Percentage Globes represents of DCP annual revenue
  • $7.5 million: HFPA gross profit for license fee
  • 17 million: U.S. viewers (January 2010)

 

 

 

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