Inside 'American Idol' Season 12 Negotiations
The show suffers from the too-many-cooks-in-the-kitchen complex as it preps for its next round.
When Simon Cowell departed American Idol last year, it seemed fair to wonder whether TV's Death Star would finally dim. Turns out, Idol was still a ratings powerhouse without the snarky judge who seemed to define it. Fox already has Idol locked up for season 11, but thanks to season 10's resurgence, the network could be looking at a nasty battle over the contract for the years beyond.
As has been the case from the beginning, Idol is the child of many parents -- and, to put it mildly, they don't share the same interests or necessarily like one another. There are three key players: Fox, a unit of Rupert Murdoch's News Corp.; production company FremantleMedia, owned by Germany-based Bertelsmann; and CKx, which owns 19 Entertainment, the British company founded by Simon Fuller, who created Idol.
When Idol came to the U.S. in 2002, Fremantle, Fox and 19 agreed on a "surprisingly simple" contract, says a source, largely because no one anticipated how valuable the show would become. The deal (amended the following year) called for Fremantle to create 37 hours of programming for which Fox would pay $950,000 per episode, plus ratings bonuses. Fremantle and 19, perfectly aligned in their interests in those early days, agreed to split the profits 50-50.
Three years later, with Idol ensconced as America's most-watched show, Fuller sold 19 to CKx for $200 million, bringing a new player into the game. Founded by Robert F.X. Sillerman, CKx also owned branding rights to such stars as Elvis Presley and Muhammad Ali. CKx promptly notified Fox that it wanted higher fees as the number of Idol hours on the air was creeping up. (By year 10, the show was clocking in at 54.5 hours.) The parties managed to hammer out a somewhat uneasy multiyear deal. For instance, while they worked out a compromise to escalate fees, they did not agree on the minimum number of hours Fremantle was required to produce. Instead, they settled on a provision that beyond 45 hours, CKx had a "creative veto."
Despite these frictions, all parties reaped vast profits from the Idol juggernaut. Still, since Sillerman purchased 19, his company's stock price has tumbled more than 50 percent as the show has suffered four years of ratings declines (despite this season-10 uptick).
Now CKx is being acquired by private equity firm Apollo Global Management for $509 million. According to sources familiar with the negotiations, Apollo is looking for a long-term TV deal for the show -- a minimum of five years. But even though Idol flourished in its first season without Cowell, there's no guarantee that its momentum won't fade, and Fox reality head Mike Darnell is said to prefer an annual contract.
Adding to the pressure is the impending launch of the U.S. version of Cowell's U.K. show, The X Factor, also produced by Fremantle. The company -- whose top U.S.-based executive, Cecile Frot-Coutaz, is a powerful figure behind Idol and now X Factor -- insists that its work on the Cowell-helmed show won't interfere with Idol. But clearly the shows will be competitive, even though they air at different times of the year. Indeed, sources loyal to Fuller -- who has broken off from CKx but still receives 10 percent of net profits from Idol and remains involved in key decisions like bringing Jennifer Lopez on board as a judge (she has yet to sign on for season 11) -- believe Fox's priorities have shifted from Idol to X Factor. And Fremantle is said to be getting a better deal with Cowell's Syco Television than the one it has to produce Idol. So it is no longer clear that Fox, Fremantle and CKx are perfectly aligned in their interests.
But with so much money on the table, the parties have every reason to find common ground. For one thing, CKx and Fremantle aren't free to shop Idol elsewhere. "It's like a marriage where divorce is not an option," Frot-Coutaz told THR in April. And they're doing pretty well where they are: A source estimates that Fremantle and CKx cleared between $40 million and $45 million from Idol last year, and Fox makes close to $19 million an hour. That means the series accounts for 10 percent of the value the market attributes to the network. And that kind of money should suffice to paper over a lot of differences.
THE PRINCIPAL PLAYERS: These five executives stand to gain or lose the most in a new American Idol deal
- Cecile Frot-Coutaz: Fremantle North America's CEO has said her company is "in the Simon Cowell business."
- Leon Black: Apollo founder's firm paid $509 million for CKx, which derives 60 percent of its revenue from Idol.
- Mike Darnell: Fox's reality head was first to champion Idol, and the show is "his baby."
- Simon Fuller: Founder of 19 Entertainment and the show's creator, he profits as long as Idol is on the air.
- Robert F.X. Sillerman: Resigned as CEO of 19 owner CKx in May 2010 but still owns a 20.6 percent stake.
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