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Holding the (Bottom) Line
Judge Judy is the highest-rated show in daytime television history. Its host, Judy Sheindlin, commanded an audience of millions every day.
Every several years Sheindlin gave Loeb & Loeb client CBS, the owners of the show, a nonnegotiable salary request. If her demand wasn’t met, she would leave and produce Judge Judy herself. CBS met every demand, allocating all of Sheindlin’s compensation to production costs. It was industry standard, and it made sense that the star host’s salary was a required cost of production.
But in the world of entertainment accounting, there is much more beneath the bottom line. As Sheindlin’s salary—therefore production costs—increased, it would impact anyone expecting to share in the show’s profit participation.
Enter Rebel Entertainment Partners. Rebel represented two original producers of Judge Judy. As part of a decades-old deal, they were entitled to 5% of the show’s back-end profit participation.
Even as Sheindlin’s salary increased into the tens of millions of dollars, Rebel never objected to their profit sharing deal. It was only when her salary became so large that Rebel claimed they lost their backend interest that they said Sheindlin’s salary was unreasonable and that CBS acted in bad faith negotiating with her. Now they wanted a portion of Sheindlin’s salary allocated as profit participation instead of as a cost of production—a move that would put more money in their pockets.
Rebel tried to compare Sheindlin’s salary to those of other talk and variety show hosts to demonstrate that what Rebel claimed was then a $47 million salary was unjustifiably high. The only problem? Those shows had different hosts over the years. Judge Judy could only have one host—Sheindlin herself. Not quite apples to apples.
Arguing that any TV host’s salary shouldn’t be allocated as production cost is unprecedented. Making that same argument about Sheindlin, who was herself the reason that Judge Judy existed? Even more so.
A deal is a deal. Rebel had agreed to the 5% back-end arrangement presumably knowing that Sheindlin’s salary, like every other salary of someone working on the show, would be allocated as a cost of production. It stood to reason that as costs increased, there was a chance that profits would decrease … for everyone.
CBS needed a firm that understood the intricate world of entertainment profit participation to defend their position.
Enter Loeb & Loeb. On behalf of CBS, Loeb & Loeb argued on appeal that it wasn’t unreasonable for CBS to agree to Sheindlin’s salary demands because she was uniquely able to end the show simply by walking away.
The show required Sheindlin, and that required guaranteeing her the salary she deserved for having built the most popular daytime show in history. The only way to do this was to make her salary an upfront production cost.
The California Court of Appeal agreed that CBS had no choice other than to meet Sheindlin’s salary demands.
Rebel was at the end of the line. Loeb & Loeb was proud to help CBS convince the court that while the price of the show’s success may have seemed steep, Sheindlin’s salary was indisputably a cost of production.