I appeared on the first season of Shark Tank ('The Factionist' t-shirt company) and I can confirm that this is true.
The 5% equity choice is new, but doesn't surprise me. When I was on the first season it was only the 2% lifetime royalty. It's not actually that bad of a deal because the royalty was taken out of net income - NOT top-line revenue. So, even if Zynga was on Shark Tank they wouldn't have owed ABC a lot of money.
I was called about once a year after the show by the show's lawyers to collect the royalty. I had shut down the business immediately after the show aired, though, so I never did end up sending them a check.
2% of future net income isn't really a bad deal for most of the kinds of businesses that appear on Shark Tank. None of these companies are VC-investable, and these kinds of royalty-for-placement deals are common in the infomercial industry (which is what a lot of Shark Tank businesses are - informercial products).
I worked for Barbara Corcoran for a year after I was on the show - she's a class act and probably the one Shark that takes her investments seriously.
The 5% equity choice is new, but doesn't surprise me. When I was on the first season it was only the 2% lifetime royalty. It's not actually that bad of a deal because the royalty was taken out of net income - NOT top-line revenue. So, even if Zynga was on Shark Tank they wouldn't have owed ABC a lot of money.
I was called about once a year after the show by the show's lawyers to collect the royalty. I had shut down the business immediately after the show aired, though, so I never did end up sending them a check.
2% of future net income isn't really a bad deal for most of the kinds of businesses that appear on Shark Tank. None of these companies are VC-investable, and these kinds of royalty-for-placement deals are common in the infomercial industry (which is what a lot of Shark Tank businesses are - informercial products).
I worked for Barbara Corcoran for a year after I was on the show - she's a class act and probably the one Shark that takes her investments seriously.
I've answered several questions about my Shark Tank experience on Quora: http://www.quora.com/Nate-Berkopec/answers/Shark-Tank-TV-ser...