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May 5, 2023 | Employment

No Walk In the Park: Why Warner Bros Is Suing SouthPark

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Author(s)
Carlianna Dengel

Associate Attorney

Matthew Fulton

Associate Attorney

The landscape for streaming film and television programming is constantly changing.  Streaming services, both independent and network-owned, are constantly vying for exclusive rights to popular shows and content.  In 2019, Warner Bros. made a groundbreaking deal when they entered into an agreement with South Park Digital Studios LLC (SDPS) for the exclusive streaming rights to the iconic animated show South Park.  The deal included the back catalog of 303 episodes, as well as the upcoming 24th, 25th, and 26th seasons.  However, the agreement has since been marred by controversy, largely due to Warner’s lawsuit alleging that SDPS and Paramount engaged in deceptive practices to subvert South Park content away from Warner’s deal and license it to Paramount+.

General Background on the Warner-SDPS Agreement

In 2019, South Park Digital Studios LLC (SDPS) and Warner entered the bidding process for streaming rights to South Park’s existing 303-episode library and the future episodes to be available for streaming on Warner’s HBOMax platform.  According to Warner, SDPS advised that they would reject any bids that were not based on a flat fee per episode.  Warner structured its bid on a valuation of $1,687,000 per episode, for a total of 333 episodes, which included the 303-episode library and 30 new episodes for seasons 24-26.  The agreement provided for exclusivity, and the parties signed a binding term sheet memorializing the terms of the deal, which was worth over $500 million, and the term extended from June 24, 2020, through June 23, 2025.

The agreement provided for two types of licensed content: 1) long-form episodes that premiered on a non-streaming platform and 2) all season 24-26 episodes that did not meet the premiering criteria.   According to Warner, the agreement gave Warner the exclusive right to stream the first 23 seasons of South Park, and SPDS would deliver three more 10-episode seasons.  Delivery of the first episodes of season 24 was set for March 2020, but production was halted due to the COVID-19 pandemic.

A Changing Environment: “Pandemic Specials” and the Launch of Paramount+

In September 2020 and March 2021, SDPS produced two 50-minute “Pandemic Specials” that initially premiered on Comedy Central.  SDPS allegedly told Warner that these specials were not part of Season 24 but did fall under the second category of content in the Agreement.  The parties agreed on a license fee of $3.3 million for the specials: double the fee negotiated for a regular episode.

However, in January 2021, Paramount announced the launch of its own streaming platform, Paramount+.  In August 2021, South Park creators Trey Parker and Matt Stone signed a separate $900 million deal with MTV, a subsidiary of Paramount, which included 14 “made-for-streaming” South Park movies that would premiere on Paramount+.  On October 27, 2021, Paramount announced two South Park “events” that would appear exclusively on Paramount+.

Warner alleges that SDPS then reversed their stance on the “Pandemic Specials” and, in January 2022, announced that those two episodes alone would count as the entirety of season 24.  They also announced that season 25 would consist of only six episodes, which directly violated the agreement that each new season under the 2019 Agreement would include at least 10 episodes, for a total of 30 new episodes.  As of February 9th, these eight episodes are the only new content that SDPS has delivered to Warner.

Warner’s Claims

Warner/HBO filed a lawsuit against Paramount, alleging that Paramount, along with MTV and SDPS, planned to divert as much new South Park content as possible to Paramount+ to boost the nascent streaming platform.  Warner/HBO claims that SDPS, Paramount, and MTV used grammatical sleight-of-hand to sidestep SDPS’s contractual obligations.  Warner/HBO alleges that it was misled and significantly overpaid in its bid.  Additionally, Warner/HBO claims that Paramount is liable for unfair enrichment through conspiracy, as Paramount has seen a big boost in subscriptions since the South Park content launch, with upticks following subsequent releases of “events.”  Warner/HBO alleges that this represents $200 million in damages.

Paramount Response

Paramount Global has responded to the lawsuit filed by Warner/HBO over alleged breach of contract regarding the streaming of “South Park”.  According to a spokesperson, the company continues to adhere to the contract between the two parties by delivering new episodes of the show to HBO Max.

The statement also pointed out that Warner/HBO has failed to pay license fees that it owes to Paramount for episodes that have already been delivered, and which HBO Max continues to stream.  The implication is that if Warner/HBO is alleging breach of contract, then they themselves may be in breach of their own obligations.

This latest development highlights the complexities of content licensing and streaming agreements, which can involve multiple parties and complicated legal language. It remains to be seen how the lawsuit will play out and what impact it may have on the streaming landscape going forward.

Regardless of the outcome, it’s clear that the popularity of “South Park” continues to drive significant interest and engagement from audiences. The show’s irreverent humor and willingness to tackle controversial topics has made it a cultural touchstone over the years, and its ability to adapt to changing times and new platforms is a testament to its enduring appeal.

Conclusion

The ongoing legal battle between Warner/HBO and Paramount raises questions about the extent to which companies can leverage contractual loopholes to gain a competitive advantage in the market.  It also shows how lucrative streaming rights for popular shows like “South Park” can be, with millions of subscribers signing up for Paramount+ following the release of new content.  The outcome will likely impact the way that streaming platforms acquire and distribute content, and whether contractual disputes will become more common in the future.  Our team of qualified entertainment attorneys can help you navigate through these and other considerations in the streaming landscape.  Contact us for next steps.

Photo by Hannah Wernecke on Unsplash
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