Reps for actors, 20th TV and ABC work to close contract gap

It may have been an overly dramatic gesture, but it worked.

The lawsuit filed last week by “Modern Family” actors against 20th Century Fox TV in connection with their salary renegotiations was seen as a bit of theatrics designed to prod the studio into increasing the last offer on the table. And that’s exactly what it did, as the sides reached an agreement Friday afternoon after nearly a year of wrangling.

But in a side effect of the litigation, however briefly it existed in L.A. Superior Court, business affairs execs will now likely pay closer attention to the calendar when setting pilot deals for actors.

The “Family” thesps’ suit, which was dropped as part of the salary pact, challenged the validity of the five actors’ original agreements with 20th Century Fox TV on the basis that the contract terms ran longer than seven calendar years. That’s a legal no-no for personal service agreements in California thanks to the battle waged in the early 1940s by actress Olivia de Havilland against Warner Bros.

The “Family” lawsuit asserted that deals for five of the show’s stars — Julie Bowen, Ty Burrell, Jesse Tyler Ferguson, Eric Stonestreet and Sofia Vergara — were “illegal and void” because they bound the thesps from the time their pilot deals were struck in early 2009 (with the exception of Vergara) through June 30, 2016. That time frame covers seven television seasons but runs longer than seven calendar years.

In the “Family” squabble, it was clear to anyone who has been through a bare-knuckle renegotiation fight that the actors had no intention of trying to get out of the contracts en masse. But industry insiders said business affairs execs may be forced to craft mitigating language to guard against future challenges where an actor may really want to get out of a deal.

Sources close to the situation asserted that the negotiations would have intensified last week even without the filing because the actors’ summer hiatus period was about to end. In the end, the sides met somewhere in the middle of the number the actors had sought and the offer on the table before the lawsuit and table read protest erupted. Industry insiders said the five thesps wound up with a deal that will pay them around $180,000 per episode for the upcoming season (up from about $65,000 per seg last season), with escalators for subsequent years.

In exchange, the thesps extended their deals to cover an eighth season.

The thesps also will get a quarter-point of backend stake apiece. For a show poised to earn hundreds of millions of dollars in syndication, a quarter-point will yield significant coin over the long haul.

Ed O’Neill, the sixth adult star of the show, also reached a new deal with the studio but at a higher level. O’Neill started out on the show with a bigger paycheck reflecting his status as the most member of the “Family” ensemble at the outset.

Sources involved in the negotiations described the talks as arduous in part because they were prolonged. Although “Family” is poised to mint money (to the tune of $2.5 million an episode) when its syndication run on USA Network and local stations begins in fall 2013, the economics of primetime for studios and networks have become tougher. With thinner profit margins, studios depend on hits to offset their misses.

ABC, meanwhile, had incentive to keep “Family’s” above-the-line costs from ballooning because the network is on the hook to cover all of 20th TV’s production costs on the show starting with its fifth season. That’s a deal term that has become standard for high-end series as networks sought a means of circumventing the “ER” syndrome, or the prospect of a facing a blockbuster license fee renegotiation with a studio once a show blossoms into a hit.

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