1. Case Study: The Frasier Negotiation
Guhan Subramanian Douglas Weaver Professor of Business Law, Harvard Business School Joseph Flom Professor of Law & Business, Harvard Law School
August 2017
Copyright © President & Fellows of Harvard College. 1

2. Frasier Press Coverage
Like a mighty fortress on a bluff, impervious to attack and threatening to all that dare to invade its territory, NBC’s Thursday night lineup has towered over the rest of the television industry through an entire generation of viewers
It has been armed with the biggest guns in the business: “E.R.,” “Seinfeld,” “Friends,” “Cheers,” “L.A. Law,” and a roster of hit shows going all the way back to “The Cosby Show” in 1984.
Now NBC’s total command of Thursday -- and the massive advertising revenue that pours in because of it -- is being challenged, and the stakes are enormous.
NBC draws more advertising money on Thursday night than on all other six nights combined, according to several current and former network sales executives.
The challenge, by CBS, sets up the most important battle in recent prime-time history.
Source: New York Times (Jan. 18, 2001)

3. Core Party Map Viacom NBC CBS Paramount Television NBC West Coast
Sumner Redstone
Bob Wright
CBS
Paramount
Television
NBC West
Coast
Les Moonves
Nancy Tellem
Kerry McCluggage
Gary Hart
Marc Graboff
Scott Sassa
Jeff Zucker
Kelsey
Grammer
ABC

4. NBC Offers Paramount Offers
Patterns of Concession #1 #2
NBC Offers #3
$8.0 “floated
in the press”
$6.0 #4
$4.75
Paramount Offers #5
$5.5
$5.0
Impasse at $5.0, $5.5 MM “best and final” offers

5. Negotiating Process Month-long exclusive negotiating period.
If no agreement by the end of the month, Paramount submits a Last Offer to NBC.
If NBC accepts, then deal. If NBC rejects, then Paramount can shop the show to other buyers.
If Paramount reaches a deal with someone else that is less favorable (to Paramount) than the Last Offer, NBC can match.
If Paramount reaches a deal with someone else that is more favorable (to Paramount) than the Last Offer, NBC has no right to match.

6. Frasier Aftermath (Part I)
Deadline expires but Paramount does not make a Last Offer to NBC.
Negotiations continue with new issues:
Cancellation right if Kelsey Grammer or David Hyde Pierce leaves
Price reductions if other stars didn’t return
Reduction in the number of episodes to be purchased if Writers Guild or Screen Actors Guild strike
NBC gets some re-run rights
March 5: NBC and Paramount agree on purchase price of $5.4 million price per episode, for three years.

7. Frasier Aftermath (Part II)
Kelsey Grammer “ecstatic” that Paramount and NBC reached a deal: “spent last month biting my nails, lost in controlled frenzy”
June 6: Paramount reaches deal with Grammer to keep him on Frasier for NBC extension period
Fee: $1.6 million/episode
Makes Grammer highest- salaried TV actor in history!

8. Step #1: Three-year pickup guaranteed
Frasier Party/Issue Sequencing
Step #2:
License fee
Dev. Commit.
Strike Protection
Actor Protection
KG & DHP guarantees
Paramount
NBC
Step #3:
KG guarantee
KG compensation
Step #1: Three-year pickup guaranteed
Kelsey
Grammer

9. Step #1 Revisited
“Scott went and talked to Kelsey, and asked him squarely, ‘Is three years really that important to you?’
And Kelsey basically said, ‘Look, at the end of the day, you’re not going to be embarrassed here, because we’re not going to do it just to do it.’
So that gave us the comfort we needed to say okay, the issue was off the table.”

10. Frasier Ranking

11. Frasier Epilogue
Boston Globe (May 16, 2010): “The final years of Frasier were lackluster and obligatory, with repetitive story lines and tiresome fallout from the union of Niles and Daphne.
By the time Frasier ended in 2004 after 11 seasons, everyone – those on the show as well as viewers – seemed more than ready to let it go ”
Compare: “Look, at the end of the day, you’re not going to be embarrassed here, because we’re not going to do it just to do it.” (Kelsey Grammer, 2001)