November 10, 2011 9:33am PT by Eriq Gardner
Viacom, Bad Boy Records Agree to Pay $7.5 Million to Settle 'Making the Band' Lawsuit
Viacom and Bad Boy Records have agreed to pay $7.5 million to the bankruptcy trustee of Trans Continental Television Productions to resolve a dispute that arose when P Diddy took the reins of MTV's Making the Band from boy band impresario Lou Pearlman. The settlement agreement has been blessed by a bankruptcy judge and cuts short a three-week trial that was scheduled to begin this month.
Pearlman was the founder of Trans Continental and hit it big by forming the Backstreet Boys and 'N Sync. In 1999, he starred in the initial season of Making the Band, a reality show where contestants attempted to show they had what it took to be in a superstar boy band. The first two seasons were broadcast on ABC before the show transitioned to MTV.
On MTV, the boy band format continued for another season, but at the same time, the network ordered a new iteration of Making the Band that featured P Diddy doing a search for hip hop talent. The Diddy format would last several more seasons.
Meanwhile, Pearlman's fortunes went south. He would be convicted in 2008 of perpetrating one of the biggest Ponzi schemes in American history, having defrauded investors of more than $300 million. Trans Continental filed for Chapter 11 bankruptcy.
Soneet Kapila was appointed the trustee of Trans Continental and filed a lawsuit in 2010 against various entities from Viacom and P Diddy-founded Bad Boy for breaching contract and copyright by not sharing profits with Trans Continental over the later seasons of the Making the Band franchise.
The parties had an agreement that included the following contractual term:
“The parties will jointly exploit any features, spin-offs, sequels, made-for-TV movies, direct to video, non-theatrical, radio or other projects based upon the Series [defined as “an untitled Boy Band series for ABC”] or the band, subject to good faith negotiation.”
However, Viacom, represented by Andrew Ehrlich, argued that the joint venture deal was amended several times, that the provision was unenforceable, and even if it was, the format of the show had changed significantly enough that Trans Continental no longer owned a co-copyright on Making the Band.
The case produced over 1 million pages of documents and led to more than two dozen depositions.
James Sammataro, the attorney for the Kapila, countered MTV's arguments by attempting to show why the Diddy iteration of the show was indeed a derivative under the joint venture agreements.
Did the change from a “boy band” to “hip hop” genre and the accompanying replacement of Pearlman with Diddy make it a different show?
Sammataro offered the expertise of entertainment industry veteran Richard Marks, who also provided crucial testimony for Celador in a $319 million jury win against ABC over profits on Who Wants To Be A Millionaire. This is what Marks had to say:
“Diddy’s stepping into Mr. Pearlman’s role on Making the Band as the on-air talent who selects the band is akin to a cast change and, to draw upon a contemporary analogy, is no different than American Idol’s initial addition of Kara DioGuardi to its three (3) judge panel of Simon Cowell, Randy Jackson and Paul Abdul, or its subsequent replacement of Paula Abdul with Ellen DeGeneres, or its still later replacement of Simon Cowell, Kara DioGuardi and Ellen DeGeneres, with Jennifer Lopez and Steven Tyler. Despite the change in the panel of judges, and the accompanying changes that are attendant to the new judge’s personalities, American Idol, is still the same show and series.”
But before the case was fully adjudicated, including the resolution of other questions such as imputed license fees and distribution of advertiser and subscriber fees, the parties got together and hashed out a deal. After a bankruptcy judge blessed the agreement, a district judge dismissed the lawsuit officially this week.