Two and a half men and a $49 million baby

By Matthew Belloni

Ever wonder how much a TV network pays to air its top-rated comedy? Warner Bros. TV helpfully provides a glimpse of the license fee market in a breach of contract lawsuit filed yesterday in LA Superior Court.

Warners claims CBS, which airs "Two and a Half Men," owes about $49 million in premium fees and reimbursements for production costs based on a "deficit recoupment" schedule the parties agreed on for the show's fifth and sixth seasons. Here's our THR story and here's the full complaint, filed by John Spiegel and Lynn Scaduto at Munger Tolles & Olsen.

Attached to the complaint are the short-form deal letters between the business affairs departments at CBS and WBTV. A couple highlights and food for thought:

• CBS paid WBTV $750,000 per episode to license "Men" for the first season, with modest bumps for the next few seasons. Yet the average cost to produce the show in the first season was $1,219,894. That cost skyrocketed once the show became a hit (thanks in part, we're sure, to star Charlie Sheen's fee).

• As is typical in TV license deals, the amount of deficit recoupment was tied to the show's Nielsen rating at the end of its fourth season. If the show's ranking was in the Top 10, WBTV was eligible for 100% recoupment of the show's deficits; if it was a Top 15 show, it would get 50% of the deficits upon Year 5 and 25% on Year 6; a Top 20 rating would entitle WBTV to 50% in Year 5 but 0% in Year 6. WBTV claims "Men" is a Top 15 show.

• As far as we can tell, the complaint suggests that the parties disagree about whether there was a second ratings requirement to trigger recoupment. Some TV deals require that the show hit a certain ratings threshhold independent of the ranking vis-a-vis other shows. For instance, in another deal memo attached to the complaint, there is a "Miminum Qualifying Rating" requirement that shows achieve a Top 5 ranking AND a minimum 9.1 rating. WBTV alleges that even if there were a threshhold requirement, "Men" met it in its fourth season. But CBS might be taking the position that while "Men" is a top-rated show, like everything else on TV its ratings are down and are thus not high enough to trigger the recoupment.

If that's the case, this lawsuit is far more interesting than just a money squabble between the largest TV producer and the highest-rated network. With broadcast TV ratings plummeting across the board, are more networks going to take the position that the lucrative bonuses and recoupments they promised just don't apply in an era of lower ratings? And if so, will the entire network television model have to be rethought?