TV URBAN LEGEND: Despite being one of the biggest ratings successes of the mid-1980s, Mattel's deal with the TV stations who aired He-Man and the Masters of the Universe didn't involve the stations paying any license fee at all.
He-Man and the Masters of the Universe was a sensation in the mid-1980s, as the He-Man toys sold over $400 million in sales in 1986 alone. The TV series based on the toy line was one of the most popular shows in all of syndication and yet, at the height of its powers, Mattel did not actually receive a licensing fee from the TV stations who aired the show. Instead, the toy company worked out a deal that worked out really well for it at the time, until the federal government actually specifically shut this avenue down in 1990.
As I have detailed in the past, children's television went through a major shift in the 1980s. Parents groups had successfully petitioned the government to reduce the amount of licensed cartoons to almost non-existent numbers, at least in terms of toys. It just wasn't a thing anymore.
That changed when Ronald Reagan became President, as he pushed to de-regulate a number of industries and children's television programming was one of them. He named Mark Fowler as the new head of the Federal Communications Commission and Fowler basically gutted all of the restriction in children's animation, arguing that the marketplace should figure itself out.
Well, the marketplace quickly figured out that now they could sell a lot of toys via licensed animation series where the cartoons would be, in effect, commercials for the toys, and then, well, you know, they would then have actual commercials, as well! The big breakthrough in this regard was when Hasbro released its G.I. Joe: A Real American Hero toyline in 1982. At the time, the regulations were still a bit strict in terms of toys being advertised on TV (you could do it, but you couldn't use animation in the commercial), so Hasbro put out animated commercials advertising the Marvel G.I. Joe comic book series, which was essentially an ad for the toys and it was a huge success. The ads for the comic book were actually just short cartoons featuring the G.I. Joe characters and naturally, that led to the following year where an outright G.I. Joe cartoon debuted.
However, by that point, Mattel had beaten its competitor to the punch (by a week) as Mattel debuted its toy tie-in series, He-Man and the Masters of the Universe in syndication on September 5, 1983, making it the first cartoon based on a toy to appear in syndication.
Syndication, in case you are unfamiliar with the term, simply means airing TV programs not on a specific network, but selling to multiple TV stations who would each acquire the show individually. In other words, in 1983, there were cartoons that aired on specific networks like ABC, NBC and CBS (who would each have a deal with local affiliates in various cities, which is why the channel numbers are different in each city) and then there were ones that aired in syndication on a bunch of different TV stations, independent of the networks. For example, when He-Man debuted in the fall of 1983, NBC had deals with the following cartoons: Flintstone Funnies, Shirt Tales, Smurfs, Alvin and the Chipmunks, Mr. T and Incredible Hulk and Spiderman. Those six cartoons would only appear on NBC.
The standard way that a TV show would appear on a TV station via syndication is that the TV station would pay a licensing fee for the series. This became a big deal with the proliferation of cable channels in the 1990s, when each network was competing with each other to air the reruns of popular network shows, to the point where FX was paying $600,000 per episode of X-Files that it aired in 1996 and TNT was paying $1.2 million per episode of ER that same year.
The same basic idea applied to shows on local TV stations (just not at those price levels). You'd license a show for X amount of money and then sell ads on it for presumably some amount greater than X.
He-Man and the Masters of the Universe, however, was done a different way. It was what we call "barter syndication." Mattel would receive no license fee from the TV stations and in exchange, the toy company would receive a percentage of the advertising during the program (possibly also on different shows on the station, depending on the deal). The most common deal was called a 7/5 deal, where the company giving the show (Mattel) would get 7 minutes out of every 12 minutes of advertising. This is where things got huge for Mattel. So it had a hit TV show, the TV show itself was essentially a giant advertisement for He-Man toys, but now it also had advertisement DURING the program where it could DIRECTLY advertise its toys to little consumers. "You enjoying that He-Man cartoon, sonny? Well, check out this He-Man action figure ad!"
Eventually, in 1990, the FCC (amusingly, during a Republican presidential administration, but a Democratic Congress) was forced by the Children's Television Act (CTA) of 1990 to halt the practice of shows advertising products connected to the show during the show itself. That same Act also required TV station to do a certain amount of educational children's programming every day. Amusingly, though, the restrictions were so light that stations were able to meet the standards through literally airing old He-Man and G.I. Joe cartoons (the whole reason for these new laws!) because technically the lessons at the ends of the episodes qualified as "educational."
Later in the 1990s, another Act would make things a lot stricter and so educational and informational children's programming has become so ubiquitous that cable TV is where most kids go to watch cartoons nowadays.
The legend is...