Behind The Hot Take Headlines: Louis C.K.'s So-Called Money-Losing 'Horace And Pete'

On a regular basis, I take a deep dive into an entertainment or media story that is generating a lot of aggregated stories and breathless hot takes. I'm most interested in cases where the basic facts of the story get buried underneath the aggregation.

A story in Monday's Hollywood Reporter about the finances behind Louis C.K.'s new series Horace And Pete relayed some quotes from a recent interview the comedian did with Howard Stern. In the interview, Louis C.K. said that he had lost money on his self-produced web-only series and he acknowledged that he might have been smart to have promoted it a bit more when it was first released.

He told Stern that he had hoped to recoup a $2 million personal investment after offering the first four episodes for sale via his web site. When that didn't happen, he was forced to get a line of credit to finance the rest of the 10 episode season. Those episodes have been available from his web site at a cost of $2-$5 an episode.

As you might imagine, with such a clicky headline, the story frantically bounced around social media on Monday, sparking dozens of hot takes about whether it was a wise decision by the comedian to produce a full season of a series outside the traditional studio system.

For instance, here's one in Salon, which uses the news as a way to illustrate the 'limits of unbundling':

But C.K. has apparently lost millions on the show, which costs about $500,000 per episode to make. He sells his standup performances as audio files online – you can buy his Madison Square Garden show, for instance, from his website for anything from $1 to $85. Episodes of “Horace and Pete” costs between $2 and $5 apiece. And not enough people bought them.

Then there's this Slate piece, which seems to be a bit vague on the distinction of "selling" various rights to a show versus selling the entire package. Or this piece on Time.com, which is most notable for having a URL that implies it's a review of the show, even though at one point the writer admits that he only watched one episode.

And most of the hot takes miss the core point. Yes, Louis C.K. is in the financial hole right this second. But he's not going to lose money on the project and it's not a reflection of the limits of selling TV directly to the viewer.

First, it's instructive that the comedian didn't give an interview to a trade publication (like the Hollywood Reporter) discussing the finances of the show. That would have involved serious follow-up questions that didn't come up in the Stern interview. In fact, Louis C.K. was upfront about why he was discussing the costs of the show. He was trying to encourage more people to download (and pay for) the episodes. So he's in the middle of a mini-media tour talking about the show.

In the Stern interview, the comedian said the episodes cost about $500,000 each and he had paid $2 million out of his own pocket to finance the first four. He said he had hoped to sell enough episodes to finance the rest of the season but when sales fell short, he was forced to seek money elsewhere.

But aside from his contribution, it's difficult to know the overall finances of the series. He doesn't say where the rest of the money came from, although for a star of his caliber it would not be uncommon for his production company to be able to negotiate what is essentially a production budget bridge loan against the finished product. There's also no way of knowing what sort of deal he made with series co-star Steve Buscemi. Although you might suspect that Buscemi worked for a combination of a small salary and a piece of the back-end (which is most likely a salary bonus and not an ownership percentage).

I believe Louis C.K.'s claim that he has lost money in the short term on Horace And Pete. But I feel pretty confident in saying there is no way the series is a money-losing project in even the medium term. Which makes a number of the headlines floating around today a bit disingenuous.

Louis C.K. - arguably as big a name in television comedy as anyone right now - owns a 10-episode series that has so far only been sold through his web site. It hasn't been available for purchase in secondary markets such as iTunes or Google's Play Store. Despite having a first-look deal on his TV projects, FX apparently allowed the comedian to produce the show under his own banner. As a result, the TV broadcast rights haven't been sold and it hasn't been available on demand. And even more importantly, there are the global streaming rights.

It's difficult to know what these rights would nab, especially since I don't know underlying rights might already have been contracted for as part of the initial production deal. There are also a lot of variables, including whether Louis C.K. continues to make his web site the exclusive digital sales hub for the series.

But based on conversations with an SVOD company and some industry figures familiar with this type of negotiations, we can make at least a ballpark guess. In the medium term - say 3 years - each episode of Horace And Pete is likely to conservatively generate at least $1.2 million in revenue. Perhaps much more, if the comedian is more aggressive with digital sales. For example, cutting a windowed-exclusive iTunes deal. Or if he negotiates a streaming deal for global rights, which would be of more value to a company such as Netflix or Amazon.

So the bottom line is that while the "Louis C.K. Is Going To Lose Money" aggregated hot take might be narrowly correct right now, it's a gross misstatement of the reality of the overall deal. And it has very little to do with the future of cord-cutting or unbundling.

There's nothing wrong with Louis C.K. beating the publicity drum in order to generate sales. The press attention will also make the show more valuable in secondary markets. But the real story and the hot take headlines don't seem to have a lot in common in this case.