Typing Faster

July 28, 2009

Chump Insurance

Filed under: the biz — petertypingfaster @ 9:00 am

There was an interesting article in the LA Times the other day about a lesser known Hollywood business practice called Chump Insurance.

Chump Insurance is a networks attempt to hedge their bets against passing on the next big hit. The article in question focuses on a deal between HBO and ABC in regards to Flash Forward. So why does HBO have a stake in an ABC show?

That’s because the pay cable channel was pitched “Flash Forward” and passed, but not before negotiating a nice stake in return for letting the producers shop it elsewhere.

HBO will get $5,000 to $7,500 for each episode that airs and roughly 7% of any revenue the show generates from its reruns, or the “back end,” in industry parlance.

So why would ABC agree to such a deal, and why would HBO insist on negotiating it? It’s pretty simple really.

No network executive wants to be the chump who let a hit walk out the door, even if a show isn’t a good fit with the first place it is pitched. So it has become commonplace in the industry to negotiate a piece of the show as insurance or a hedge in case the program becomes a hit somewhere else.

The deals not only highlight how networks have learned to protect themselves but also how competitors such as HBO and ABC can end up on the same team. Although co-productions between two studios or a network and a studio are not uncommon and are well-known, these pacts usually fly under the radar.

The networks that are initially on board usually spend some money on development and could hang on to a script or show and let it languish for months or even years.

It’s an interesting look at what happens behind the scenes in Hollywood.

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