Shine Plans to Sue Channel 5 For Unpaid 'Believing' Bills
Says the channel has not shelled out $1.6 million.
LONDON -- Should production companies carry a share of the risk when a show doesn't work out?
That is the proposition about to be tested in what looks like a pretty high profile spat breaking out between Elisabeth Murdoch's Shine Group and Channel 5, newly-acquired by publishing mogul Richard Desmond.
Murdoch's Shine let it be known Monday that it plans to sue Channel 5 for allegedly not paying bills totaling £1 million ($1.6 million) relating to Don't Stop Believing, a talent show that was commissioned before Desmond's media publishing group Northern & Shell bought the channel in July.
The disputed costs are understood to relate to the show's perceived underperformance and marketing costs, although Shine maintains that ratings flailed because the talent show was repeatedly moved around in the schedule.
By retrospectively disputing costs relating to shows that have already been commissioned, Channel 5 is putting its suppliers on notice that it plans to do business differently and is prepared to use its heft to negotiate in a way that has never been standard industry practice.
That could mean that future contracts the broadcaster offers include paying less if the show rates poorly - something that is currently unheard of.
The British norm is for the commissioning broadcaster to pay a fee to fund all or part of the production process ahead of transmission, and for the fee to be paid regardless of whether the show is a success or not.
Elisabeth Murdoch has reacted furiously to the attempt to change existing contracts - accusing the channel's new owners of using heavy-handed tactics to re-negotiate contracts that have already been agreed in good faith.
Unusually, Shine has also taken the fight public and offered legal support to small production companies who it claims are being similarly affected by Channel 5's new negotiating style.
"Northern & Shell has a reputation for taking an overtly aggressive stance towards its suppliers and whilst this may have been effective for them in the past, it is not acceptable within the U.K.'s independent TV production sector," a spokesman for Shine said.
"Shine cannot tolerate a new owner of a public service broadcaster reneging on contractual commitments made by Channel 5's previous owners RTL and has instructed litigators Reed Smith to use all legal recourse to recover the near million pound debt."
As many as 10 smaller indies are understood to be disputing changed payments terms from Northern & Shell, according to John McVay, chief executive of Producers' trade body Pact, who warned that some of the smaller companies could not financially sustain delayed payments.
Whether such opposition is sufficient to deter Desmond, a self-made publishing mogul from who has successfully transformed the cost bases of other acquisitions in the Northern & Shell portfolio is unclear.
The publisher -- who numbers of OK! Magazine, the Daily Express and the Daily Star among his businesses - has a track record of challenging industry norms in publishing, and it should surprise no-one that he is looking to achieve a similar transformation in network television.
Whether the independently wealthy Elisabeth Murdoch, who has her own reputation for determination, will back down, also remains to be seen.
A spokesman for Desmond's Northern & Shell maintained that evaluating all costs going out of the Channel 5 was an approach that made solid business sense.
"The have very recently acquired the business and of course they are going to open up the books and evaluate all the costs - that is just part of an overall financial review."