Spring 2000
NEW CALIFORNIA LAWS SEEK TO PROTECT MINORS AND EXTEND RIGHTS OF PUBLICITY
California Governor Gray Davis has recently signed several pieces of legislation affecting the entertainment industry. Entertainment employers are now required to pay 15 percent of a minor's personal-services earnings into a trust account. Minors can take control of trust account monies when they turn 18. The Celebrity Image Protection Act increases the right of publicity enforceable by a celebrity's heir from 50 years after death to 70 years after death.
HOW TO THINK LIKE AN INVESTOR
The most recent edition of MovieMaker magazine contains an article I have written titled "How to Attract Capital to Your Movie by Thinking Like an Investor." The piece explains how financiers evaluate projects and decide which ones to back. It includes a checklist I developed for movie investors. The article has been posted on my website: www.marklitwak.com
INTERNET DISTRIBUTION - THE PROMISE AND THE PITFALLS
Here is an excerpt from an article I have written on Internet Distribution of motion pictures. A more extensive version will be appear in the next issue of MovieMaker Magazine. After publication the article will be posted on my website.
With the rapid development of web sites designed to distribute motion pictures directly to consumers, many producers are being asked to grant "Internet" rights to their films. The grant of such rights raises a number of new and interesting issues.
The distribution agreement needs to define "Internet" rights. Is the distributor selling cassettes via the Internet? If so, the right is in the nature of a home video right--the Internet is just being used to market cassettes. But will the grant to an Italian company permit it to sell videocassettes to a buyer who logs onto the Internet from France?
Another "Internet" right is the right to distribute a motion picture via streaming media. Here the distributor is actually transmitting the motion picture over the Internet. This has been called "Netcasting." In the next few years new technologies will enable an increasing number of computer users to watch movies over the Internet with viewing quality comparable to television. Thus, movies can be distributed directly to the end user, bypassing such traditional intermediaries as the broadcast networks, home video retailers, and cable operators.
The economic viability of Internet distribution is unproven at this time. Keep in mind that traditional distributors perform an important marketing function that an Internet distributor may not be able to replace. While Internet distribution is of questionable profitability, there is no doubt that the distribution of your film over the Internet can jeopardize agreements with traditional distributors. If HBO is willing to license your film, how do you think the cable channel will react when you try to reserve the right to simultaneously distribute your movie over the Internet?
For the aforementioned reasons, it is prudent for producers to hold onto their Internet rights until the dust settles. If a distributor insists on obtaining Internet rights, or if you want to be a trailblazer, consider the following:
EXCLUSIVITY: Will the grant of rights be on an exclusive or nonexclusive basis? At this time it is not clear which Internet sites will prosper and which ones will crash and burn. If you grant exclusive rights to a company that goes out of business, your Internet rights may be tied up in bankruptcy proceedings.
TERRITORY: Territory becomes an almost meaningless term when applied to Internet distribution. Anyone with a computer anywhere in the world can log onto the Internet and download data from computer servers wherever they are located. Even if you attempt to restrict distribution, how can you or the distributor prevent distribution outside the territory?
ROYALTIES: No standard has been established as to how to divide revenue from Internet distribution. A popular model for Internet companies is to give information away for free, and generate revenue from the sale of advertising and ancillary services. If your movie is being given away for free, and the Internet distributor retains all revenue from advertising, how do you benefit?
The deals that have been concluded to date are all over the spectrum. Broadcast.com licensed 50 Trimark titles as part of a broader pact in which Broadcast.com acquired a $4 million dollar stake in Trimark. Sightsound.com acquired a limited 30 day pay-per-view Internet window to Artisan Entertainment's Pi in a straight licensing deal. MovieFlix.com offers about 150 features acquired from indie distributors. The company pays a one time license fee. The site is advertiser supported and sells movie memorabilia.
GRANT OF RIGHTS: Do you have the authority to grant Internet rights? Do your contracts to obtain the script, music and stock footage grant you the right to distribute the work over the Internet? Note that many contracts don't explicitly grant "Internet" rights because when the contracts were drafted no one was thinking in terms of the Internet as a distribution media.
If, after reviewing the above issues, you are inclined to license Internet rights, consider the following: many distributors seeking Internet rights have never distributed anything over the Internet. Such companies may be warehousing your rights in the hope that they will become valuable some day. That day may not be soon. Artisan Entertainment's Netcast of Pi attracted an on-line audience of only 100.
