Frasier Case

In: Business and Management

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9-801-447
REV: JUNE 13, 2002

GUHAN SUBRAMANIAN

Frasier (A)
Just one day into his new job at the National Broadcasting Company (NBC), and Mark Graboff had a problem. Graboff was leading the team that was responsible for renegotiating the rights to
Frasier, a popular television show that would play a critical role in NBC’s fall 2001 programming lineup. While Paramount, the owner of the show, seemed to be demanding $8 million per episode in the press, NBC had calculated that it would have to pay under $5 million in order to make a profit on the show. Multiplying by 24 episodes per season, and multiplying again by the three-year term that
Paramount was insisting on, the gap seemed insurmountable.
Making matters worse, the most likely other bidder for the show was the Columbia Broadcasting th System (CBS), a rival network to NBC and Graboff’s former employer. “On November 13 [2000], my last day at CBS, I was putting the finishing touches on CBS’s contract extension to Everybody Loves
Raymond,” recalled Graboff. “And I was thinking, ‘Thank goodness this deal is almost done.’ The next day I began at NBC, and I was faced with an equally arduous negotiation.” Graboff watched the sun set over the Los Angeles skyline as he began familiarizing himself with the background documents on the negotiation.

Industry Background
Behind the glitz and the glamour, the stars and the scandals, Hollywood is, at its core, a business.
Studios, such as Warner Brothers Television, Paramount Television Group, and Twentieth Century
Fox Television, make television shows and license them to networks, such as NBC, CBS, and the
American Broadcasting Company (ABC), for a specified period of time.a Networks, in turn, generate revenue by selling airtime that companies use to present advertisements. The higher the ratings for a…...

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