How to Master Refund and Underage Negotiations with Networks

As an unscripted producer, you should always strive to maintain a good relationship with the network while being compensated fairly. However, it can be difficult to achieve this balance when negotiating refunds and underages with a network. 

No one wants to ruin their relationship with the network by demanding a huge refund/underage. Because the stakes are so high, negotiating with network executives can be intimidating. 

To guide you through this process, we’re breaking down the best practices to follow during negotiations.

What are refunds and underages?

Before we dive in, let’s define refunds and underage in the context of unscripted content production. 

For example, unscripted production companies often spend their own money developing the idea before pitching a show to the networks. Once a show is greenlit, the network owns it, and the proposed budget might not include your initial investment. In such scenarios, the production company can negotiate with the network to recoup their initial investment as a refund.

Similarly, producers are incentivized to reduce production costs because doing so could increase their margins. A common example involves shooting in a different state to qualify for production tax credits. 

However, producers might not be rewarded for doing so because the network might feel entitled to the tax rebate. The production company will instead have to negotiate the tax rebate and other generic underages with the network to benefit from reducing production costs.

Now, let’s take a look at the best ways to prepare for a negotiation. 

Know your production figures

The first step to negotiating a refund or underage is determining how much money you are entitled to. 

In a conversation about accounting for unscripted production, Margot Ransom, CEO of Prod Co Accountants, mentions how she encourages producers: 

“Find and scrutinize any legitimate bill backs they can do.”

To do so, producers must have their ducks in a row. If you are seeking a refund from the network, you must be able to explain why a particular cost was necessary for the show’s development phase. Therefore, it is absolutely essential that your production accounting and cost reports are entirely up to date.

The cost report should accurately represent the production’s finances and explain precisely where and how the producers spent the money. With an up-to-date cost report, unscripted producers can review their spending and highlight line items they could bill back to the network.

The importance of retrospectives

Running a post-show retrospective is an excellent way for the production company to review the cost report and production reports. It allows the producers, production coordinators, and line producers to analyze the production costs and determine which costs require a refund.

If you’ve never run a post-show retrospective, use Wrapbook’s post-show retrospective checklist to help guide the discussion.

Don’t misrepresent

While evaluating the cost report for refunds, only include expenses directly contributing to the show's production. The network will do its due diligence, so honest reporting is a must. As Margot so simply put it,

“Don’t misrepresent anything, obviously.”

The relationship between a production company and a network is built on trust. Don’t ruin this relationship by misrepresenting expenses for a higher refund. It could harm the production company’s ability to produce and release shows in the future. 

Be ready to talk about specifics

The network might challenge and question specific line items from the cost report as part of the refund negotiation process. So, you must understand the production’s finances and be prepared for any budget-related questions the network may have.

If a network executive challenges you on the cost of a particular item, you must know the story behind the expense to support your claim. The cost report is a valuable tool for getting a deeper understanding of the production expenses. Use it to make a case for why a particular expense deserves a refund. 

Pursue an agreement both sides are happy with

When it comes to negotiating with the network, producers shouldn’t be focused only on securing the refund or underage. The goal of the negotiation should be a mutually beneficial agreement that leaves both parties feeling satisfied. 

Communicate openly

Be transparent when negotiating with the network. This begins even before the negotiation with honest cost reporting.

During the negotiation, lay out your argument for why a refund is necessary. If the network challenges you, you must also carefully listen and consider the opposing position. Showing a willingness to understand their perspective is vital for a successful negotiation. 

Bruce David Klein, President of Atlas Media Corp, emphasizes,

“Have an honest back-and-forth. Over time, you get a reputation for being fair. That’s really your best strength when it comes to all negotiations.”

Invite the network to help you find the best solution. Position the negotiation as an opportunity for you and the network to work together on a solution.

If you are on opposite sides of the table, finding a successful resolution becomes much more complicated and can hurt future collaboration. 

Be open to compromise

Know the variables you can control and be flexible. Avoid a take-it-or-leave-it situation. Instead, be willing to compromise.

Maybe the network and the production company can split the tax rebate. Or they take the entirety of the refund but greenlight the show for another season. There are a variety of options available at your disposal. Think outside the box and work with the network to get the best deal possible. 

Losing a refund might hurt in the moment, but it could pay dividends in the future. Part of a successful negotiation is finding a resolution that leaves both parties excited to collaborate on future shows. 

Track the outcome

Once the negotiations are complete, keep an open line of communication with the network regarding the outcome and ensure that all sides keep their end of the bargain.

Internally, you can also evaluate how the process went. Consider the following questions as part of your reflection:

• What was your initial objective?
• Were you satisfied with the resolution? Why/why not?
• What can you do better next time?
• What worked in the room? What didn’t?

Honest self-evaluation ensures that you are better prepared for future negotiations.

Use your successful negotiations for future collaborations 

If the negotiations go smoothly, the producer and network should both feel satisfied. Successful negotiations are the pathway to future collaboration.

Breaking into a network's orbit as a production company in the unscripted market is difficult, to say the least. While it’s essential to be compensated fairly, establishing and maintaining long-term relationships with networks is equally important in this industry. Don’t hold a grudge if the negotiations don’t go your way. Be gracious and always position yourself on the same team as the network. 

The entertainment industry is built on relationships, and the number one rule is to never burn bridges. 

Wrapping up

When negotiating refunds and underages with networks, aim to maintain a collaborative relationship while being compensated fairly. Preparedness, transparency, and mutual satisfaction are key. Finding the balance between compromising and being firm can be tricky, but practice and self-reflection are the best ways to learn. 

Watch our conversation with Margot Ransom and Bruce David Klein to learn more about Accounting for the Reality of Unscripted Production. Producers can also visit our resource center for all things unscripted. 

Want to simplify your production accounting? Watch our demo and get started today!