Before you decide to purchase the rights to a person’s life story, it is worth considering what you are buying. When you buy the rights to portray someone in film or television, you are buying a bundle of rights. These rights include protection from suits based on defamation, invasion of privacy and the right to publicity. You may also be buying the cooperation of the subject and his family or heirs. Perhaps you want access to diaries and letters that are not otherwise available to you.
If the subject of the life story is deceased, much of the rationale for buying these rights disappears, since defamation and invasion of privacy actions protect personal rights that do not descend to the estate. In other words, people can spread lies and falsehoods about the dead, reveal their innermost secrets, and their heirs cannot sue for defamation or invasion of privacy on behalf of the deceased person. A writer could publish a revisionist history of George Washington, portraying our first President as a child molester and a thief, and his heirs would have no remedy. So when a subject is deceased, a producer has less need for a depiction release. The right of publicity may or may not descend to one’s heirs, depending on state law.
It is also important to consider whether the subject of your film is a private individual or a public official or public figure. Public officials and figures have opened more of their lives to public scrutiny, and consequently more of their lives can be portrayed without invading their privacy. Moreover, public officials and figures must meet a much higher burden of proof in order to establish defamation or invasion of privacy. They must prove that a defamer intentionally spread a falsehood or acted with reckless disregard of the truth.
One should also consider the possibility of fictionalizing a true story. If you change the names of the individuals involved, change the location and make other alterations so that the real-life people are not recognizable to the public, you could avoid the necessity of a depiction release.
Keep in mind, however, that the story’s appeal may be predicated on the fact that it is a true story. In such a case, fictionalization is not a good alternative. Suppose you wanted to do the Jessica McClure story, describing how a Texas community rallied to the rescue of a young girl who fell down a well-hole. Here you would want to bill the movie as The Jessica McClure Story. That is why viewers would tune in.
Terms of the Agreement
In negotiating for life-story rights, there are a number of important issues that need to be resolved. At the outset, the parties must determine the extent of the rights granted. Does the grant include remakes, sequels, television series, merchandising, novelization, live-stage rights and radio rights? Are the rights worldwide? Buyers will usually want as broad a grant as possible. The seller may insist on retaining certain rights.
The buyer must also consider other releases that may be needed. What about the subject’s spouse, children, friends and relatives? Will these people consent to be portrayed? Will the subject ask his friends and relatives to cooperate? Can these secondary characters be fictionalized? If the producer is planning an ensemble piece about a basketball team, it makes no sense to sign up players one by one, hoping to get them all. A smart producer will gather the team in a room and purchase all of the rights or none.
Another issue is whether the rights can be assigned to a studio or production company. If the buyer is a producer, she will often need to assign such rights to a studio or network later as part of a financing/distribution agreement.
The purchase of life-story rights can be structured as either an option/purchase deal or as an outright sale, often with a reversion clause. A reversion clause provides that in the event the rights are not exploited within a certain number of years (i.e., the movie is not made), then all rights would revert to the subject. This provision protects the subject if he has sold rights to his life story to a producer who never uses them, and some time later another producer is interested in making such a film.
The agreement should recite the consideration exchanged. Consideration is a legal term of art. Consideration is that which is given in exchange for a benefit received. It is a necessary element for the existence of a contract. A contract is only binding with consideration. It is what distinguishes a contract from a gift, which may be revocable.
Consideration is usually money, but it can be anything of value. As a general principle, courts do not review the adequacy of consideration. In other words, should you be foolish enough to agree to sell your brand-new car, worth $15,000, for only $5,000, don’t expect a judge to rescue you from the results of your poor judgment. Unless there was some sort of fraud or duress involved, the contract will be enforced, although it may be unfair to one party.
To ensure that a contract is binding, agreements often recite: “For ten dollars and other valuable consideration.” This clause establishes that there has been an exchange of value, even if it is nominal consideration. Make sure the consideration is actually paid. It is wise to pay by check so that you will have the cancelled check as proof of payment.
Mutually exchanged promises can be adequate consideration. For example, a producer’s efforts to develop a project could be deemed adequate consideration for an option. But to be sure their contracts are enforceable; producers may want to pay some money for the option. There are some exceptional circumstances when courts will throw out a contract if the terms of the contract are unconscionable.
There are other ways to compensate a subject of a life story besides a flat fixed fee. You could give the subject points (percentage of net profits), consulting fees and/or bonuses to be paid when the film is exploited in ancillary markets.
An important part of any depiction agreement is the “Warranties and Representations” clause. A warranty is a promise. The buyer will want the seller to promise never to sue for an invasion of his rights of publicity and privacy, or for defamation, even if the buyer takes some creative liberties in telling the story. The warranties must cover all conceivable situations. No one wants to buy a lawsuit.
There will also be a provision that gives the buyer the right to embellish, fictionalize, dramatize and adapt the life story in any way he chooses. This is a frequent sticking point in negotiations. The subject is delighted to be asked to have her story told on the silver screen, but when you present her with a depiction release, she becomes concerned. She asks, “This document says you can change my story any way you like and I can’t sue for defamation. How do I know you won’t portray me as a monster?”
A producer may reply: “Trust me, trust me.” Sometimes that will work. But the subject may respond: “I have no intention of trusting any of you charming Hollywood types. I want script approval. Write your script, and if I like it, I’ll sign the release.”
Can a producer give a subject script approval? No sane producer would. No producer is going to expend a lot of time and money developing a script only to find that the subject has changed her mind or is unreasonably withholding approval.
If the subject refuses to give the producer carte blanche, are any compromises possible? Yes. The subject could have approval over the treatment or selection of the writer. Perhaps the subject will figure that if she approves only a classy writer, her portrayal will be acceptable.
Alternatively, the producer could offer to make the subject a creative or technical consultant to the production. “You’ll be right there by the director’s side,” says the producer, “giving him advice and suggestions to ensure that everything is authentic.” The producer may not mention that the director doesn’t want the subject on the set and is not required to accept her suggestions.
Another possible compromise could limit the subject matter and period portrayed. Perhaps the subject is primarily concerned that an embarrassing incident in her life not be re-enacted in Panavision. The release could say that certain incidents (e.g., a divorce) are not included in the release. Or the release could cover limited periods of the subject’s life (e.g., only those incidents that occurred before 1947).
Finally, the subject might have the right to determine screen notice. She could decide if the film will be billed as a true story or a dramatized account. Alternatively, she could decide whether real names are used for the characters.
Excerpt from Dealmaking in the Film and Television Industry, 3rd Edition, by Mark Litwak.
Monday, December 28, 2009
Monday, November 23, 2009
IFTA Posts Summaries of Arbitration Awards
Many industry disputes involving independent film or international sales are resolved under IFTA (formerly AFMA) arbitration. IFTA now posts summaries of their awards which can be interesting reading. The summaries are available at: http://www.ifta-online.org/IndustryServices/RecentAwards.aspx
The summaries name the parties to the disputes and briefly describe which party prevailed.
According to IFTA, it has administered the resolution of disputes in more than 1700 cases involving more than US$500 million in claims. IFTA Arbitration may be used for a wide variety of domestic and international entertainment disputes, such as those arising out of production agreements, motion picture, television and multimedia licensing agreements, financing agreements, film exhibition agreements, and sales agency agreements, to name a few.
METHOD FEST
The 12th annual The Method Fest independent film festival is currently accepting entries for the 2010 festival, March 25 April 1, in Calabasas, California. Method Fest is dedicated to showcasing breakout acting performances in story and character-driven independent feature and short films. The Method Fest provides a great opportunity to receive Los Angeles reviews and to have films seen by distributors based in Los Angeles. The submission deadlines are:
Early Deadline - December 1, 2009;
Late Entry Deadline February 1, 2010.
You can print / download the entry form for the 12th annual Method Fest on the festival web site, www.methodfest.com. Filmmakers can also submit via www.withoutabox.com.
Over the past 11 years The Method fest has launched over 120 feature films into the marketplace (theatrical releases, DVD/video distribution, TV deals), and has brought to attention actors like Naomi Watts, Jeremy Sisto, Hunter Parrish, Michael Angarano, Jena Malone, Tamara Hope, Hill Harper, Navid Negahban and Eugene Byrd, to name just a few.
Full disclosure: I am an advisor to the festival.
If you have any questions, you can email don@methodfest.com or call (310) 535-9230.
TAX INCENTIVE UPDATE
Hawaii has laid off its film commissioner Donne Dawson and reduced staff in order to economize. Incentives under Acts 215 and 221 (which provide a 100% tax credit for 5 years, dropping to 80% for 2009/2010) sunsets at the end of 2010, but the 15-20% refundable credit remains in place.
Additional info at:
http://latimesblogs.latimes.com/entertainmentnewsbuzz/2009/11/state-budget-cuts-hit-hawaii-film-office.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+newsandbuzz+(News+%26+Buzz)
The new tax incentive guide put out by The Incentives Office is available for free at:
http://fs6.formsite.com/jeff5000/
The regional film commissions (Big Island, Honolulu, Kauai and Maui) are still operational.
THE DIFFERENCE BETWEEN MARKETS & FESTIVALS
Some filmmakers are confused about the difference between a film festival and a film market. Markets are only open to the trade: A member of the public cannot buy a ticket to see a film at a market or participate in it. At markets, films are screened for buyers. Actually, it would be more accurate to call these buyers “licensees” since they usually do not buy films outright but license distribution rights for a term in a territory. One buyer might be a German broadcaster interested in acquiring films to distribute by cable television in Germany. Another buyer might be a Turkish theatre-chain owner who wants to acquire theatrical rights for Turkey. Some buyers want all media rights (theatrical, television, and home video) in a territory, and may sub-license rights to other distributors.
Markets are an opportunity for buyers worldwide to converge at one location to meet with sellers of film rights. In the course of a market, a buyer can talk to many sellers and view multiple films. Deals may be signed during the market or afterwards. The market is also an opportunity for sellers and buyers to socialize, and to meet people with whom they transact business long-distance.
Festivals, on the other hand, are open to the public. Anyone can buy a ticket to a screening, although at the most popular festivals, there may not be enough tickets to go around. Festivals can provide a test of audience appeal. A festival screening may be the first opportunity for the filmmaker to see how moviegoers react to his work. Of course, festival-goers tend to be better-educated, wealthier, and more avid moviegoers than the average moviegoer. Nevertheless, a festival screening does provide some good feedback.
Festivals serve two important functions. First, they expose films to distributors. Acceptance at a top festival will induce many acquisition executives to take a look at your film, either at the festival or by asking to screen it outside the festival. Winning a top festival may make your film highly desirable in the eyes of distributors, and may lead to a furious bidding war.
Second, festivals can be used to generate publicity for a film and draw the public’s attention to it. Thus, once distribution has been secured, the distributor may want the film in a festival to build awareness. If the timing of the festival is near the release date for the film, participation in the festival may further publicize the pic¬ture. On the other hand, if the film is not going to be released for another six months, publicity now may not be helpful, and can be harmful. That is because when the film is released, the prior coverage will have been forgotten by the public, and the news media will consider the film old news. The media may not review the film again or write articles about it.
Except from Risky Business, 2nd Edition by Mark Litwak.
The summaries name the parties to the disputes and briefly describe which party prevailed.
According to IFTA, it has administered the resolution of disputes in more than 1700 cases involving more than US$500 million in claims. IFTA Arbitration may be used for a wide variety of domestic and international entertainment disputes, such as those arising out of production agreements, motion picture, television and multimedia licensing agreements, financing agreements, film exhibition agreements, and sales agency agreements, to name a few.
METHOD FEST
The 12th annual The Method Fest independent film festival is currently accepting entries for the 2010 festival, March 25 April 1, in Calabasas, California. Method Fest is dedicated to showcasing breakout acting performances in story and character-driven independent feature and short films. The Method Fest provides a great opportunity to receive Los Angeles reviews and to have films seen by distributors based in Los Angeles. The submission deadlines are:
Early Deadline - December 1, 2009;
Late Entry Deadline February 1, 2010.
You can print / download the entry form for the 12th annual Method Fest on the festival web site, www.methodfest.com. Filmmakers can also submit via www.withoutabox.com.
Over the past 11 years The Method fest has launched over 120 feature films into the marketplace (theatrical releases, DVD/video distribution, TV deals), and has brought to attention actors like Naomi Watts, Jeremy Sisto, Hunter Parrish, Michael Angarano, Jena Malone, Tamara Hope, Hill Harper, Navid Negahban and Eugene Byrd, to name just a few.
Full disclosure: I am an advisor to the festival.
If you have any questions, you can email don@methodfest.com or call (310) 535-9230.
TAX INCENTIVE UPDATE
Hawaii has laid off its film commissioner Donne Dawson and reduced staff in order to economize. Incentives under Acts 215 and 221 (which provide a 100% tax credit for 5 years, dropping to 80% for 2009/2010) sunsets at the end of 2010, but the 15-20% refundable credit remains in place.
Additional info at:
http://latimesblogs.latimes.com/entertainmentnewsbuzz/2009/11/state-budget-cuts-hit-hawaii-film-office.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+newsandbuzz+(News+%26+Buzz)
The new tax incentive guide put out by The Incentives Office is available for free at:
http://fs6.formsite.com/jeff5000/
The regional film commissions (Big Island, Honolulu, Kauai and Maui) are still operational.
THE DIFFERENCE BETWEEN MARKETS & FESTIVALS
Some filmmakers are confused about the difference between a film festival and a film market. Markets are only open to the trade: A member of the public cannot buy a ticket to see a film at a market or participate in it. At markets, films are screened for buyers. Actually, it would be more accurate to call these buyers “licensees” since they usually do not buy films outright but license distribution rights for a term in a territory. One buyer might be a German broadcaster interested in acquiring films to distribute by cable television in Germany. Another buyer might be a Turkish theatre-chain owner who wants to acquire theatrical rights for Turkey. Some buyers want all media rights (theatrical, television, and home video) in a territory, and may sub-license rights to other distributors.
Markets are an opportunity for buyers worldwide to converge at one location to meet with sellers of film rights. In the course of a market, a buyer can talk to many sellers and view multiple films. Deals may be signed during the market or afterwards. The market is also an opportunity for sellers and buyers to socialize, and to meet people with whom they transact business long-distance.
Festivals, on the other hand, are open to the public. Anyone can buy a ticket to a screening, although at the most popular festivals, there may not be enough tickets to go around. Festivals can provide a test of audience appeal. A festival screening may be the first opportunity for the filmmaker to see how moviegoers react to his work. Of course, festival-goers tend to be better-educated, wealthier, and more avid moviegoers than the average moviegoer. Nevertheless, a festival screening does provide some good feedback.
Festivals serve two important functions. First, they expose films to distributors. Acceptance at a top festival will induce many acquisition executives to take a look at your film, either at the festival or by asking to screen it outside the festival. Winning a top festival may make your film highly desirable in the eyes of distributors, and may lead to a furious bidding war.
Second, festivals can be used to generate publicity for a film and draw the public’s attention to it. Thus, once distribution has been secured, the distributor may want the film in a festival to build awareness. If the timing of the festival is near the release date for the film, participation in the festival may further publicize the pic¬ture. On the other hand, if the film is not going to be released for another six months, publicity now may not be helpful, and can be harmful. That is because when the film is released, the prior coverage will have been forgotten by the public, and the news media will consider the film old news. The media may not review the film again or write articles about it.
Except from Risky Business, 2nd Edition by Mark Litwak.
Tuesday, November 03, 2009
JUST PUBLISHED! 2ND EDITION RISKY BUSINESS
UPDATED AND REVISED
$26.95
CONTENTS
FILMMAKER SELF-DEFENSE CHECKLIST
1. ORGANIZING YOUR COMPANY
Choice of Business Entity
Sole Proprietorship
General Partnership
Limited Partnership
Corporation
Limited Liability Company (LLC)
2. COLLABORATIONS AND CO-PRODUCTIONS
International Co-Productions
Production Incentives
Contract: Co-Production Agreement
Contract: Distributor Sales Agency Agreement
3. FINANCING INDEPENDENT FILMS
Loans
Contract: Promissory Note
Contract: Promissory Note with Guarantee
Borrowing Against Pre-sale Agreements
Investor Financing
Registration and Exemptions
504 Offering
505 Offering
506 Offering
Intrastate Offering Exemption
Accredited Investor Exemption
California Limited Offering Exemption
Anti-Fraud Provisions
Distributor Supplied Financing
Finders
Contract: Finder Agreement
Contract: International Distribution License
Agreement
4. ATTRACTING INVESTORS
Checklist for Film Investors
5. TACTICS AND STRATEGY IN ARRANGING
.DISTRIBUTION
How Much Is My Film Worth?
How Distributors Evaluate a Film
Sources of Revenue
Increasing Your Leverage
Film Festivals
Working the Festival Circuit
Balancing Risks and Rewards
The Acquisition/Distribution Agreement
Investigate the Distributor
6. THE DISTRIBUTION AGREEMENT
Principle Terms of a Distribution Agreement
Territory
Media
Term
Distribution Fee
Distribution and Marketing Expenses
Advances and Guarantees
Consultation Rights
Warranties and Representations
Accounting
Arbitration
Insurance
Termination
Allocation of Package Revenue
Governing Law
Territorial Minimums
Access to Master Materials
Return of Materials
Delivery
Contract: Lab Access Letter
Contract: International Distribution Agreement
(Filmmaker-friendly version)
7. WHEN A DISTRIBUTOR DEFAULTS
Selecting a Distributor
Creative Accounting
Conducting an Audit
How Revenue Is Divided
Creative Accounting Pitfalls
Accounting Terms
Defensive Tactics
A Filmmaker's Bill of Rights
8. LOOKING FORWARD
APPENDIX A - DISTRIBUTION
Delivery Checklist
Certificate of Origin
Statement of Prior Distribution
Statement of Distribution Restrictions and Obligations
Major Deal Points: Acquisition/Distribution Agreement
Copyright Security Agreement
GLOSSARY OF TERMS
INDEX
CONTRACTS AND FORMS*
Co-Production Agreement
Promissory Note
Promissory Note with Guarantee
IFTA International Schedule of Definitions
Finder Agreement
International Distribution License Agreement
Lab Access Letter
IFTA Rider to International Distribution Agreement
International Distribution Agreement
(Filmmaker-friendly version)
COPIES AVAILABLE FOR IMMEDIATE SHIPMENT. GO TO WWW.http://www.marklitwak.com/store/ to order or call (310) 859 9595 and speak to Katrina.
Friday, October 23, 2009
Craigslist Wins Motion for Judgment on the Pleadings
Federal Judge John F. Grady in Illinois has granted Craigslist's motion for a judgment on the pleadings in a suit over the website's "erotic services" internet classified listings.
Thomas Dart, the sheriff of Cook County, Illinois, alleged that Craigslist facilitated prostitution and constituted a public nuisance. The Sheriff claimed that Craigslist knowingly arranges meetings for the purpose of prostitution and directs people to places of prostitution. Dart asked for an injunction prohibiting Craigslist from publishing erotic services listings, and sought to recover the money that his office spent investigating prostitution on the site. The Sheriff claims to have arrested over 200 people through Craigslist since January of 2007.
The court held that Craigslist was shielded from liability by Section 230 of the Communications Decency Act.
.
http://blogs.findlaw.com/courtside/2009/10/craiglist-sure-to-be-pleased-by-judges-ruling-in-erotic-services-lawsuit.html
U.S. to Extradite Polanksi
The United States has formally requested that Switzerland extradite film director Roman Polanski, 76, who fled California in 1977 before sentencing for sexually assaulted a 13-year-old girl.
Swiss authorities said that director Roman Polanski could spend up to two years in prison if he was extradited back to the United States for sentencing in a sexual assault case. Los Angeles County prosecutors have declined to reveal what kind of sentence they would seek if he is returned to Los Angeles.
The extradition process is complex and could delay Polanski’s return if he challenges the request. A Swiss court recently rejected a bid by Polanski for release on bail, saying the risk that he would flee was too great.
Production Incentive Update
According to Entertainment Partners http://www.productionincentives.com/ Iowa has suspended its incentive program and Connecticut recently passed budget bill changes the existing motion picture and digital animation production and infrastructure project expense tax credits, applicable for income years commencing on or after January 1, 2010.
Changes to the motion picture and digital animation tax credits include: (1) a minimum spend of $100,000 for a 10% credit, a minimum spend of $501,000 for a 15% credit, and a minimum spend in excess of $1,000,000 for a 30% credit; (2) a minimum local principal photography requirement of 50% for the film credit; (3) an aggregate project cap on star talent compensation subject to local income tax of $20,000,000 (in addition to the per person cap of $15,000,000); (4) exclusion of costs for the independent certification; (5) exclusion of all costs incurred outside the state, but used within; (6) infomercials have been excluded from eligible formats; and (7) the independent audit must be completed by an approved firm.
The digital media and motion picture infrastructure project credit has also been changed to require a minimum qualifying spend of $3,000,000 to be eligible for a 20% credit.
Thomas Dart, the sheriff of Cook County, Illinois, alleged that Craigslist facilitated prostitution and constituted a public nuisance. The Sheriff claimed that Craigslist knowingly arranges meetings for the purpose of prostitution and directs people to places of prostitution. Dart asked for an injunction prohibiting Craigslist from publishing erotic services listings, and sought to recover the money that his office spent investigating prostitution on the site. The Sheriff claims to have arrested over 200 people through Craigslist since January of 2007.
The court held that Craigslist was shielded from liability by Section 230 of the Communications Decency Act.
.
http://blogs.findlaw.com/courtside/2009/10/craiglist-sure-to-be-pleased-by-judges-ruling-in-erotic-services-lawsuit.html
U.S. to Extradite Polanksi
The United States has formally requested that Switzerland extradite film director Roman Polanski, 76, who fled California in 1977 before sentencing for sexually assaulted a 13-year-old girl.
Swiss authorities said that director Roman Polanski could spend up to two years in prison if he was extradited back to the United States for sentencing in a sexual assault case. Los Angeles County prosecutors have declined to reveal what kind of sentence they would seek if he is returned to Los Angeles.
The extradition process is complex and could delay Polanski’s return if he challenges the request. A Swiss court recently rejected a bid by Polanski for release on bail, saying the risk that he would flee was too great.
Production Incentive Update
According to Entertainment Partners http://www.productionincentives.com/ Iowa has suspended its incentive program and Connecticut recently passed budget bill changes the existing motion picture and digital animation production and infrastructure project expense tax credits, applicable for income years commencing on or after January 1, 2010.
Changes to the motion picture and digital animation tax credits include: (1) a minimum spend of $100,000 for a 10% credit, a minimum spend of $501,000 for a 15% credit, and a minimum spend in excess of $1,000,000 for a 30% credit; (2) a minimum local principal photography requirement of 50% for the film credit; (3) an aggregate project cap on star talent compensation subject to local income tax of $20,000,000 (in addition to the per person cap of $15,000,000); (4) exclusion of costs for the independent certification; (5) exclusion of all costs incurred outside the state, but used within; (6) infomercials have been excluded from eligible formats; and (7) the independent audit must be completed by an approved firm.
The digital media and motion picture infrastructure project credit has also been changed to require a minimum qualifying spend of $3,000,000 to be eligible for a 20% credit.
Friday, September 25, 2009
Risky Business at UCLA February 20, 2010
Mark will present his "Risky Business: Financing & Distributing Independent Films" seminar at at UCLA on February 20. Those who attend this comprehensive one-day seminar will learn how independent films are financed and distributed. Topics include organizing your company, raising financing via pre-sales, debt and limited partnerships, negotiating tactics, principal terms of the acquisition/distribution agreement, cross-collateralization and creative accounting. Particular attention is paid to how producers and filmmakers can protect their interests by watering down warranties, getting added to the E& O policy, using lab access letter to retain possession of the negative, and utilizing termination and arbitration clauses.
The seminar is all day Saturday. Limited Enrollment.
Registration number: V4464B. Attorneys receive 7 hours of MCLE credit.
more info at:
An extensive handout accompanies the course. The handout covers:
SELF DEFENSE CHECKLIST
ORGANIZING YOUR COMPANY
Choice of Business Entity
Sole Proprietorship
General Partnership
Limited Partnership
Corporation
Company Formation Checklist
Limited Liability Company
Comparison of Entities
COLLABORATIONS AND CO-PRODUCTIONS
International Co-Productions
Co-Production Checklist
RAISING MONEY
Loans
Pre-sale Agreements
Contract: IFTA International Schedule of Definitions
Entertainment Finance Companies
Equity Investments
Finders
TACTICS AND STRATEGY IN ARRANGING DISTRIBUTION
How Much is My Film Worth?
How Distributors Evaluate a Film
Sources of Revenue
Increasing Your Leverage
Film Festivals
Working the Festival Circuit
Balancing Risks and Rewards
The Acquisition/Distribution Agreement
Tactics and Strategy
Markets and Festivals
Investigate the Distributor
PRINCIPAL TERMS OF THE DISTRIBUTION AGREEMENT
Territory
Media ¬
Term
Distribution Fee
Distribution and Marketing Expenses
Advances and Guarantees
Consultation Rights
Warranties and Representations
Accounting
Arbitration
Insurance
Termination
Assignment
Allocation of Package Revenue
Security Interest
Governing Law
Territorial Minimums
Retain Your Masters
Return of Materials
Delivery
Contract: Lab Access Letter
Contract: IFTA Rider to International Distribution Agreement
WHEN A DISTRIBUTOR DEFAULTS
Selecting a Distributor
Creative Accounting
Conducting an Audit
How Revenue is divided
Creative Accounting Pitfalls
Accounting Terms
Defensive Tactics
Tax Incentives Revisted
The Los Angeles Times published an article on September 22, 2009 entitled "Filmmaking incentives losing glamour in cash-strapped states. The article stated that while more than 40 states offer tax breaks or rebates for film and television production, some states were re-considering the wisdom of such programs in light of their budget difficulties.
Wisconsin quashed its state's tax program this summer after a report by the state Department of Commerce raised questions about money the state paid for "Public Enemies," the Universal Pictures gangster movie starring Johnny Depp. The governor replaced its program providing a 25% tax credit with no cap -- with a $500,000-a-year grant designed to bolster Wisconsin-based film production companies. That's much less than the $6.1 million the state awarded in tax credits in the last year.
2010 CineVegas Film Festival Cancelled
Organizers are canceling the CineVegas Film Festival in Las Vegas next year because of the economy.
President Robin Greenspun and Artistic Director Trevor Groth announced today that the CineVegas Film Festival will not be held in 2010
Festival President Robin Greenspun issued a Friday statement citing "the current economic climate and the pressures it created."
Greenspun says organizers didn't want to let the economy affect the festival's quality, so they put the event on hold.
Artistic Director Trevor Goth says he hopes to relaunch CineVegas after the economy recovers.
The 11th CineVegas Film Festival was held June 10 - 15, 2009 at the Palms Casino Resort and Brenden Theatres in Las Vegas.
The seminar is all day Saturday. Limited Enrollment.
Registration number: V4464B. Attorneys receive 7 hours of MCLE credit.
more info at:
An extensive handout accompanies the course. The handout covers:
SELF DEFENSE CHECKLIST
ORGANIZING YOUR COMPANY
Choice of Business Entity
Sole Proprietorship
General Partnership
Limited Partnership
Corporation
Company Formation Checklist
Limited Liability Company
Comparison of Entities
COLLABORATIONS AND CO-PRODUCTIONS
International Co-Productions
Co-Production Checklist
RAISING MONEY
Loans
Pre-sale Agreements
Contract: IFTA International Schedule of Definitions
Entertainment Finance Companies
Equity Investments
Finders
TACTICS AND STRATEGY IN ARRANGING DISTRIBUTION
How Much is My Film Worth?
How Distributors Evaluate a Film
Sources of Revenue
Increasing Your Leverage
Film Festivals
Working the Festival Circuit
Balancing Risks and Rewards
The Acquisition/Distribution Agreement
Tactics and Strategy
Markets and Festivals
Investigate the Distributor
PRINCIPAL TERMS OF THE DISTRIBUTION AGREEMENT
Territory
Media ¬
Term
Distribution Fee
Distribution and Marketing Expenses
Advances and Guarantees
Consultation Rights
Warranties and Representations
Accounting
Arbitration
Insurance
Termination
Assignment
Allocation of Package Revenue
Security Interest
Governing Law
Territorial Minimums
Retain Your Masters
Return of Materials
Delivery
Contract: Lab Access Letter
Contract: IFTA Rider to International Distribution Agreement
WHEN A DISTRIBUTOR DEFAULTS
Selecting a Distributor
Creative Accounting
Conducting an Audit
How Revenue is divided
Creative Accounting Pitfalls
Accounting Terms
Defensive Tactics
Tax Incentives Revisted
The Los Angeles Times published an article on September 22, 2009 entitled "Filmmaking incentives losing glamour in cash-strapped states. The article stated that while more than 40 states offer tax breaks or rebates for film and television production, some states were re-considering the wisdom of such programs in light of their budget difficulties.
Wisconsin quashed its state's tax program this summer after a report by the state Department of Commerce raised questions about money the state paid for "Public Enemies," the Universal Pictures gangster movie starring Johnny Depp. The governor replaced its program providing a 25% tax credit with no cap -- with a $500,000-a-year grant designed to bolster Wisconsin-based film production companies. That's much less than the $6.1 million the state awarded in tax credits in the last year.
2010 CineVegas Film Festival Cancelled
Organizers are canceling the CineVegas Film Festival in Las Vegas next year because of the economy.
President Robin Greenspun and Artistic Director Trevor Groth announced today that the CineVegas Film Festival will not be held in 2010
Festival President Robin Greenspun issued a Friday statement citing "the current economic climate and the pressures it created."
Greenspun says organizers didn't want to let the economy affect the festival's quality, so they put the event on hold.
Artistic Director Trevor Goth says he hopes to relaunch CineVegas after the economy recovers.
The 11th CineVegas Film Festival was held June 10 - 15, 2009 at the Palms Casino Resort and Brenden Theatres in Las Vegas.
Tuesday, July 07, 2009
INTERNET RADIO DEAL CONCLUDED WITH MUSIC LABELS
After several years of debate, webcasting radio stations have at last reached a deal with copyright holders regarding royalty rates. The non-profit SoundExchange a performance rights organization designated by the U.S. Copyright Office to collect royalties from digital playback of music announced a deal with Internet radio services on new royalty terms. Online radio has become increasingly popular because it has the ability to target music to niche audiences.
Before 1995, Sound Recording Copyright Owners in the United States did not have a performance right. The Digital Performance in Sound Recordings Act of 1995 and the Digital Millennium Copyright Act of 1998 altered that by granting a performance right in sound recordings. Consequently, the law now requires that users of music pay the copyright owner of the sound recording for the public performance of that music via certain digital transmissions.
A controversy arose in 2007, when the Copyright Royalty Board (CRB) issued royalty rates for Internet radio that many stations complained would put them out of business. The fees were going to increase next year to 0.19 cents a song each time they streamed a song.
Both sides negotiated for several years, eventually agreeing to legislation that let Internet radio and copyright holders work out a deal on their own. If they reached an agreement, the CRB's rates would be vacated. The Webcasters Settlement Act of 2008, and a second bill, the Webcasters Settlement Act of 2009, extended that deadline for another month after President Obama signed it on July 2.
The agreement treats sites according to their size and business model. Under the deal Internet radio stations are divided into three categories: large pureplay webcasters; small pureplay webcasters (i.e. those that earn $1.25 million or less in total revenues and have a cap on the amount of music streamed); and pureplay webcasters that provide bundled, syndicated, or subscription services.
Large pureplay stations will pay a pay-per-performance rate or 25 percent of their revenue, whichever is greater. They are required to report to SoundExchange on the music they stream to listeners. These rates are in place until 2015. Small stations will pay either a percentage of their revenue or a percentage of their expenses. They have the option of less rigorous reporting requirements if they pay a proxy fee. These rates are in place until 2014. Pureplay webcasters pay an annual fee of $25,000.
SoundExchange represents more than 3,500 record labels and 31,000 artists and whose members include both signed and unsigned recording artists as well as independent and major label record companies. The agreement applies exclusively to "pureplay" webcasters -- those that simply play music, frequently supported by advertisements. Those sites usually have minimal revenues. Websites that stream music and sell other products won't find the terms as tempting because they must pay a percentage of all their revenue.
Before 1995, Sound Recording Copyright Owners in the United States did not have a performance right. The Digital Performance in Sound Recordings Act of 1995 and the Digital Millennium Copyright Act of 1998 altered that by granting a performance right in sound recordings. Consequently, the law now requires that users of music pay the copyright owner of the sound recording for the public performance of that music via certain digital transmissions.
A controversy arose in 2007, when the Copyright Royalty Board (CRB) issued royalty rates for Internet radio that many stations complained would put them out of business. The fees were going to increase next year to 0.19 cents a song each time they streamed a song.
Both sides negotiated for several years, eventually agreeing to legislation that let Internet radio and copyright holders work out a deal on their own. If they reached an agreement, the CRB's rates would be vacated. The Webcasters Settlement Act of 2008, and a second bill, the Webcasters Settlement Act of 2009, extended that deadline for another month after President Obama signed it on July 2.
The agreement treats sites according to their size and business model. Under the deal Internet radio stations are divided into three categories: large pureplay webcasters; small pureplay webcasters (i.e. those that earn $1.25 million or less in total revenues and have a cap on the amount of music streamed); and pureplay webcasters that provide bundled, syndicated, or subscription services.
Large pureplay stations will pay a pay-per-performance rate or 25 percent of their revenue, whichever is greater. They are required to report to SoundExchange on the music they stream to listeners. These rates are in place until 2015. Small stations will pay either a percentage of their revenue or a percentage of their expenses. They have the option of less rigorous reporting requirements if they pay a proxy fee. These rates are in place until 2014. Pureplay webcasters pay an annual fee of $25,000.
SoundExchange represents more than 3,500 record labels and 31,000 artists and whose members include both signed and unsigned recording artists as well as independent and major label record companies. The agreement applies exclusively to "pureplay" webcasters -- those that simply play music, frequently supported by advertisements. Those sites usually have minimal revenues. Websites that stream music and sell other products won't find the terms as tempting because they must pay a percentage of all their revenue.
Thursday, June 25, 2009
J. D. SALINGER SUES TO PREVENT PUBLICATION OF BOOK
Lawyers for acclaimed author J. D. Salinger, who wrote “The Catcher in the Rye,” have filed suit to enjoin circulation of Fredrik Colting’s new novel, “60 Years Later: Coming Through the Rye,” claiming that it infringes Salinger’s copyright.
Defendant Colting’s novel has already been released in Europe and was scheduled for a September release in the U.S. Colting claims his novel is legally protected commentary and a parody of "The Catcher in the Rye." Colting, writing under the pen name John David (J.D.) California, introduces “Mr. C.” in his book as the 76-year-old Holden Caulfield who escapes from a nursing home and pontificates on his experiences while meandering New York City. The novel, which is Colting’s first novel to be published, also features a character named "J.D. Salinger."
Salinger’s lawyers contend that the right to create a sequel to “The Catcher in the Rye” or to use the character “Holden Caulfield” belongs only to Salinger, who has never permitted his work to be filmed, staged or otherwise adapted. The suit further argues that sales of Colting’s unauthorized book would siphon off profits due Salinger. Catcher has been a highly successful book that has been translated into dozens of languages and has sold more than 35 million copies worldwide
Colting’s lawyers contend that 60 Years is a commentary on Catcher, Salinger and the Holden character. They contend that the work shows the battle between Salinger and a 76 year-old “Mr. C” as Salinger struggles to kill off his famous character. They further argue that Colting has only taken as much of Catcher as needed to make his points, and there is no literal copying of any expression in Catcher other than a few catch-phrases such as “phony” and “goddam.” Only three of the 80 or so characters in Catcher appear in 60 Years, and they are considerably older than their younger counterparts in Catcher. In Catcher, Holden is 16 years old.
While characters can be protected under copyright, most decisions involve protection of characters from cartoons, films and other visual medium, rather than literary characters described only in words.
Colting’s lawyers further argue that many elements of “The Catcher in the Rye” are generic to numerous works of fiction and are hence not protectable, and that, even if protectable, their manifestations in the two books are insufficiently similar. Salinger’s lawyers, on the other hand, enumerate specific parallels between what they contend are idiosyncratic elements of “The Catcher in the Rye,” and elements of Colting’s book.
Even if the court finds Colting’s work to be substantially similar to protectable aspects of Salinger’s work, Colting may prevail on a fair use defense. Courts have tended to consider parodies that do not detract commercially from the copied work to be fair uses of the work. In filed declarations, Colting and academicians describe Colting’s novel as a parody exploring the unresolved relationship between Salinger, who emerges as a character in the book, and his autobiographical creation, Holden Caulfield.
Salinger’s lawyers, alternatively, characterize Colting’s book as merely an imitative knock-off, or sequel to the original. They contend the work is not a parody and it has no claim to fair use because it does not poke fun, ridicule, comment upon, criticize, or otherwise transform “The Catcher in the Rye.”
J.D. SALINGER v. John DOE, writing under the name John David California; Windupbird Publishing Ltd.; Nicotext A.B.; and ABP, Inc. d/b/a SCB Distributors Inc., No. 09 Civ. 5095 DAB (June 1, 2009).Complaint available at Westlaw, 2009 WL 1615819 (S.D.N.Y).
FORMER BEAUTY QUEEN SUES ICM FOR SEXUAL ASSAULT
A former Canadian beauty queen has filed a class-action lawsuit accusing ICM of a conspiracy to sexually assault and exploit young actresses. ICM denied any wrongdoing.
Claire Robinson, a past Miss British Columbia (2004), claims ICM agent Jack Gilardi and his friend John Rockwell ran a scam in which they “hip-pocketed” actresses in attempt to take sexual advantage of them. A “Hip-pocket” client is one that is represented on the side by an agent while not officially being represented by the agency at large. At many mid and large-sized agencies, the partners have to approve acceptance for all new clients of the firm.
The complaint alleges that Robinson, 23, met Rockwell in March 2007 when she moved from Vancouver, Canada, to Los Angeles, California to become an actress.
Robinson claims that Gilardi and his assistants sent her on several “mock auditions.” During one such audition a producer allegedly asked her to perform bedroom scenes and a lewd act. On another audition Robinson met a producer who held Robinson's hand, touched her body and attempted to plan a vacation with her, according to the lawsuit.
Robinson further alleges that Rockwell made sexual advances during a trip to the Cannes Film Festival under the ruse that the trip would help her career. Robinson claims that Rockwell became “increasingly aggressive and controlling” when she rejected his advances. One year after the trip to Cannes, Rockwell forced himself into Robinson's apartment and raped her, according to the suit.
Robinson filed a class-action because she believes other women have been “ensnared” in the ICM scheme in the past. Robinson seeks $10 million in punitive damages or ten percent of ICM's annual gross earnings.
The lawsuit alleges fraud, negligent supervision and sexual battery. It also seeks to designate the hip-pocketing scheme as an ongoing criminal enterprise under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c).
Robinson v. International Creative Management Inc. et al., No. BC414002, complaint filed (Cal. Super. Ct., L.A. County May 19, 2009). 21 No. 5 ANENTILR 2. 2009 WL 1468113
Defendant Colting’s novel has already been released in Europe and was scheduled for a September release in the U.S. Colting claims his novel is legally protected commentary and a parody of "The Catcher in the Rye." Colting, writing under the pen name John David (J.D.) California, introduces “Mr. C.” in his book as the 76-year-old Holden Caulfield who escapes from a nursing home and pontificates on his experiences while meandering New York City. The novel, which is Colting’s first novel to be published, also features a character named "J.D. Salinger."
Salinger’s lawyers contend that the right to create a sequel to “The Catcher in the Rye” or to use the character “Holden Caulfield” belongs only to Salinger, who has never permitted his work to be filmed, staged or otherwise adapted. The suit further argues that sales of Colting’s unauthorized book would siphon off profits due Salinger. Catcher has been a highly successful book that has been translated into dozens of languages and has sold more than 35 million copies worldwide
Colting’s lawyers contend that 60 Years is a commentary on Catcher, Salinger and the Holden character. They contend that the work shows the battle between Salinger and a 76 year-old “Mr. C” as Salinger struggles to kill off his famous character. They further argue that Colting has only taken as much of Catcher as needed to make his points, and there is no literal copying of any expression in Catcher other than a few catch-phrases such as “phony” and “goddam.” Only three of the 80 or so characters in Catcher appear in 60 Years, and they are considerably older than their younger counterparts in Catcher. In Catcher, Holden is 16 years old.
While characters can be protected under copyright, most decisions involve protection of characters from cartoons, films and other visual medium, rather than literary characters described only in words.
Colting’s lawyers further argue that many elements of “The Catcher in the Rye” are generic to numerous works of fiction and are hence not protectable, and that, even if protectable, their manifestations in the two books are insufficiently similar. Salinger’s lawyers, on the other hand, enumerate specific parallels between what they contend are idiosyncratic elements of “The Catcher in the Rye,” and elements of Colting’s book.
Even if the court finds Colting’s work to be substantially similar to protectable aspects of Salinger’s work, Colting may prevail on a fair use defense. Courts have tended to consider parodies that do not detract commercially from the copied work to be fair uses of the work. In filed declarations, Colting and academicians describe Colting’s novel as a parody exploring the unresolved relationship between Salinger, who emerges as a character in the book, and his autobiographical creation, Holden Caulfield.
Salinger’s lawyers, alternatively, characterize Colting’s book as merely an imitative knock-off, or sequel to the original. They contend the work is not a parody and it has no claim to fair use because it does not poke fun, ridicule, comment upon, criticize, or otherwise transform “The Catcher in the Rye.”
J.D. SALINGER v. John DOE, writing under the name John David California; Windupbird Publishing Ltd.; Nicotext A.B.; and ABP, Inc. d/b/a SCB Distributors Inc., No. 09 Civ. 5095 DAB (June 1, 2009).Complaint available at Westlaw, 2009 WL 1615819 (S.D.N.Y).
FORMER BEAUTY QUEEN SUES ICM FOR SEXUAL ASSAULT
A former Canadian beauty queen has filed a class-action lawsuit accusing ICM of a conspiracy to sexually assault and exploit young actresses. ICM denied any wrongdoing.
Claire Robinson, a past Miss British Columbia (2004), claims ICM agent Jack Gilardi and his friend John Rockwell ran a scam in which they “hip-pocketed” actresses in attempt to take sexual advantage of them. A “Hip-pocket” client is one that is represented on the side by an agent while not officially being represented by the agency at large. At many mid and large-sized agencies, the partners have to approve acceptance for all new clients of the firm.
The complaint alleges that Robinson, 23, met Rockwell in March 2007 when she moved from Vancouver, Canada, to Los Angeles, California to become an actress.
Robinson claims that Gilardi and his assistants sent her on several “mock auditions.” During one such audition a producer allegedly asked her to perform bedroom scenes and a lewd act. On another audition Robinson met a producer who held Robinson's hand, touched her body and attempted to plan a vacation with her, according to the lawsuit.
Robinson further alleges that Rockwell made sexual advances during a trip to the Cannes Film Festival under the ruse that the trip would help her career. Robinson claims that Rockwell became “increasingly aggressive and controlling” when she rejected his advances. One year after the trip to Cannes, Rockwell forced himself into Robinson's apartment and raped her, according to the suit.
Robinson filed a class-action because she believes other women have been “ensnared” in the ICM scheme in the past. Robinson seeks $10 million in punitive damages or ten percent of ICM's annual gross earnings.
The lawsuit alleges fraud, negligent supervision and sexual battery. It also seeks to designate the hip-pocketing scheme as an ongoing criminal enterprise under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c).
Robinson v. International Creative Management Inc. et al., No. BC414002, complaint filed (Cal. Super. Ct., L.A. County May 19, 2009). 21 No. 5 ANENTILR 2. 2009 WL 1468113
Sunday, June 14, 2009
REAL DEALS
The following article written by Mark Litwak was published on June 2, 2009 in the L.A. Daily Journal, the primary legal newspaper for the Los Angeles legal community.
Film investments have a bad reputation, and deservedly so. There are instances where financiers have been cheated and lost their entire investment. Consequently, some investors simply refuse to consider film-related investments. This is unfortunate because an intelligent investment in a motion picture can earn substantial returns. While film investments are risky, the potential return from a hit can be enormous. No only can the film earn revenue from box office receipts, but there are many ancillary sources of income. These sources include revenue from television, home video, merchandising, music publishing, soundtrack albums, sequels and remakes.
There are ways to reduce the risk of film investments. Here is a checklist to guide investors.
Thoroughly investigate the reputation and track record of any producer or distributor you contemplate doing business with. No contract can adequately protect you against a scoundrel. Speak to filmmakers and investors who have done business with a candidate. Check court records to see if the company has been sued.
Federal and State security laws are designed to protect investors. Offerings to the public generally require prior registration with the SEC or a state agency. Usually private placements are limited to persons with whom the offeror has a pre-existing relationship. Even if registration is not required, the anti-fraud provisions of the security laws require that the offeror make full disclosure of all facts that a reasonably prudent investor would need to know in deciding whether to invest. The information disclosed should include a detailed recitation of all the risks involved in developing, producing and marketing a movie. Avoid any offering that appears to violate this requirement by making less than full and truthful disclosure. Carefully read the prospectus, and consult your own financial and legal advisors before making a decision to invest.
Do not back a filmmaker or production team that does not possess the proven skill needed to make a professional-looking movie. Avoid first-time filmmakers. You are safer backing filmmakers whose have completed at least one short or a feature-length work. Partner with people of integrity who bring the skills, expertise and resources to the endeavor that you lack. For instance, if you don't have the knowledge necessary to evaluate a script, bring aboard someone who has that expertise, or hire a script doctor.
There is a very limited market, and modest potential revenue, to be earned from short films, documentaries, black and white films, and foreign language pictures. Distributors and exhibitors are prejudiced against motion pictures shot on videotape. They prefer films shot on 35-millimeter stock, although quality films shot on 16-millimeter or Super 16-millimeter stock can obtain distribution. The top festivals do not exhibit motion pictures on videotape.
Certain themes, topics and genres can be difficult to sell. Religiously-themed pictures can easily offend audiences. Cerebral comedies can be difficult to export because their humor may not translate well. Films with a great deal of violence may be shunned by European television which is a prime market for independents. Films with explicit sex may not pass censorship boards in certain countries.
Independent films without name actors are difficult to sell. Of course, name recognition varies around the world. The star of an American television series may be a big name in the United State but unknown abroad. On the other hand, some actors have large following aboard, yet are relatively unknown in the United States. There are several publications that can be consulted to determine the commercial appeal of actors. The Ulmer Guide surveys financiers, sales agents and other industry insiders. Also, the Hollywood Reporter publishes its "Star Power" guide.
The director of the film is the key person who will determine whether the final product is marketable. If a filmmaker shows no concern about making a movie with audience appeal, you can expect a film whose exhibition will be limited to the family and friends of the filmmaker. This is not to say that the only films you should invest in are low-brow fare like "Dumb and Dumber." A well-made "art" film like "Elizabeth," can win awards and make a handsome return on investment. Filmmakers should give some thought beforehand as to the nature of the film's intended audience. I once watched a wonderful "Lassie" type film spiced with four-letter words uttered by one character. I explained to the filmmaker that his film would never sell in the family market because of the vulgar language, and it was too soft a story to appeal to teens and adults.
It is best to invest in an endeavor where everyone shares the same risks and rewards. A filmmaker who takes a large fee from the production budget may financially prosper from a picture that returns nothing to the investors. It is better to back a filmmaker willing to work for a modest wage and share in the success of the endeavor through deferments or profit participation. An investor can take some comfort investing in a motion picture on the same terms as a producer or distributor where all parties recoup at the same time. Beware of investing in a project where other parties benefit when you lose.
Usually, investors are entitled to recoup all of their investment from first revenues before payment of deferments or profits. Many times investors are allowed to recoup 110 percent or more of their investment in order to compensate them for loss of interest and inflation. Profits are declared after payment of debts, investor recoupment and payment of deferments. Profits are generally split 50/50 between the producer(s) and the investors. Thus, investors who provide 100 percent of the financing are entitled to 50 percent of the profits. From the producer's half of net profits are paid any third-party profit participants (e.g. the writer, director and stars).
Don't ever accept oral assurances from a producer or distributor. If they promise to spend $50,000 on advertising, get it in writing. If there is not enough time to draft a long-form contract, ask for a letter reiterating the promises. Retain copies of all correspondence, contracts and any promotional literature. If a filmmaker makes fraudulent statements in order to induce you to invest, you will have a much stronger case if his statements are in writing.
Avoid filmmakers who make handshake deals. Such individuals may neglect to obtain the necessary contracts needed to fully secure ownership to their motion picture. In order to have a complete chain of title to a film, one needs to secure written contracts with many parties including actors, writers and music rights owners. Filmmakers who fail to pay attention to such legal niceties lack the professionalism needed to succeed.
Film investments have a bad reputation, and deservedly so. There are instances where financiers have been cheated and lost their entire investment. Consequently, some investors simply refuse to consider film-related investments. This is unfortunate because an intelligent investment in a motion picture can earn substantial returns. While film investments are risky, the potential return from a hit can be enormous. No only can the film earn revenue from box office receipts, but there are many ancillary sources of income. These sources include revenue from television, home video, merchandising, music publishing, soundtrack albums, sequels and remakes.
There are ways to reduce the risk of film investments. Here is a checklist to guide investors.
Thoroughly investigate the reputation and track record of any producer or distributor you contemplate doing business with. No contract can adequately protect you against a scoundrel. Speak to filmmakers and investors who have done business with a candidate. Check court records to see if the company has been sued.
Federal and State security laws are designed to protect investors. Offerings to the public generally require prior registration with the SEC or a state agency. Usually private placements are limited to persons with whom the offeror has a pre-existing relationship. Even if registration is not required, the anti-fraud provisions of the security laws require that the offeror make full disclosure of all facts that a reasonably prudent investor would need to know in deciding whether to invest. The information disclosed should include a detailed recitation of all the risks involved in developing, producing and marketing a movie. Avoid any offering that appears to violate this requirement by making less than full and truthful disclosure. Carefully read the prospectus, and consult your own financial and legal advisors before making a decision to invest.
Do not back a filmmaker or production team that does not possess the proven skill needed to make a professional-looking movie. Avoid first-time filmmakers. You are safer backing filmmakers whose have completed at least one short or a feature-length work. Partner with people of integrity who bring the skills, expertise and resources to the endeavor that you lack. For instance, if you don't have the knowledge necessary to evaluate a script, bring aboard someone who has that expertise, or hire a script doctor.
There is a very limited market, and modest potential revenue, to be earned from short films, documentaries, black and white films, and foreign language pictures. Distributors and exhibitors are prejudiced against motion pictures shot on videotape. They prefer films shot on 35-millimeter stock, although quality films shot on 16-millimeter or Super 16-millimeter stock can obtain distribution. The top festivals do not exhibit motion pictures on videotape.
Certain themes, topics and genres can be difficult to sell. Religiously-themed pictures can easily offend audiences. Cerebral comedies can be difficult to export because their humor may not translate well. Films with a great deal of violence may be shunned by European television which is a prime market for independents. Films with explicit sex may not pass censorship boards in certain countries.
Independent films without name actors are difficult to sell. Of course, name recognition varies around the world. The star of an American television series may be a big name in the United State but unknown abroad. On the other hand, some actors have large following aboard, yet are relatively unknown in the United States. There are several publications that can be consulted to determine the commercial appeal of actors. The Ulmer Guide surveys financiers, sales agents and other industry insiders. Also, the Hollywood Reporter publishes its "Star Power" guide.
The director of the film is the key person who will determine whether the final product is marketable. If a filmmaker shows no concern about making a movie with audience appeal, you can expect a film whose exhibition will be limited to the family and friends of the filmmaker. This is not to say that the only films you should invest in are low-brow fare like "Dumb and Dumber." A well-made "art" film like "Elizabeth," can win awards and make a handsome return on investment. Filmmakers should give some thought beforehand as to the nature of the film's intended audience. I once watched a wonderful "Lassie" type film spiced with four-letter words uttered by one character. I explained to the filmmaker that his film would never sell in the family market because of the vulgar language, and it was too soft a story to appeal to teens and adults.
It is best to invest in an endeavor where everyone shares the same risks and rewards. A filmmaker who takes a large fee from the production budget may financially prosper from a picture that returns nothing to the investors. It is better to back a filmmaker willing to work for a modest wage and share in the success of the endeavor through deferments or profit participation. An investor can take some comfort investing in a motion picture on the same terms as a producer or distributor where all parties recoup at the same time. Beware of investing in a project where other parties benefit when you lose.
Usually, investors are entitled to recoup all of their investment from first revenues before payment of deferments or profits. Many times investors are allowed to recoup 110 percent or more of their investment in order to compensate them for loss of interest and inflation. Profits are declared after payment of debts, investor recoupment and payment of deferments. Profits are generally split 50/50 between the producer(s) and the investors. Thus, investors who provide 100 percent of the financing are entitled to 50 percent of the profits. From the producer's half of net profits are paid any third-party profit participants (e.g. the writer, director and stars).
Don't ever accept oral assurances from a producer or distributor. If they promise to spend $50,000 on advertising, get it in writing. If there is not enough time to draft a long-form contract, ask for a letter reiterating the promises. Retain copies of all correspondence, contracts and any promotional literature. If a filmmaker makes fraudulent statements in order to induce you to invest, you will have a much stronger case if his statements are in writing.
Avoid filmmakers who make handshake deals. Such individuals may neglect to obtain the necessary contracts needed to fully secure ownership to their motion picture. In order to have a complete chain of title to a film, one needs to secure written contracts with many parties including actors, writers and music rights owners. Filmmakers who fail to pay attention to such legal niceties lack the professionalism needed to succeed.
Tuesday, April 21, 2009
Creative Studio Heads Can Be Both Risky and Rewarding
| The following article written by Mark Litwak was recently published in the L.A. Daily Journal, the primary legal newspaper for the Los Angeles legal community.
| |||
|
| |||
| Hollywood suffers from many of the same problems that plague other American industries. Professional managers have taken the reins of control. They are better-educated than their predecessors but often lack their entrepreneurial zeal and willingness to take risks.
Entrepreneurs who start businesses often don't have the desire or management skills to run a large organization. Inventors, like Steve Wozniak, may find it more satisfying to tinker in their garages and invent new products than attend board of directors' meetings and manage a large bureaucracy. While these entrepreneurs may function well as lone operators or in small groups, when called upon to supervise large enterprises, their shortcomings can prevent the organization from prospering. So the entrepreneurs stand aside - or are shoved aside -and the managers take over.
But the movie and television industry is different from other industries. The commodity being sold is creativity. Movies don't lend themselves to assembly-line manufacturing. It's not like making soap, where once you devise the right formula you can churn out the same product time and again. A consumer who finds a brand of soap he/she likes may stick with it for a long time. He/she doesn't want the tenth bar to be any different from the first. He/she doesn't expect the product to entertain him/her or provide a new experience.
But people don't find one movie they like and watch it repeatedly. Moviegoers always want something different. They want to be taken where they haven't been before. They want fresh situations, plots, and characters - not a rehash of last week's hit.
Consequently, the movies that do best are often those that are distinctly original. Star Wars was a breakthrough film because of its wonderful special effects, unusual setting, and fresh characters. Moviegoers had never seen anything like it before.
Unfortunately, the atmosphere prevalent at many major studios today is not conducive to creative filmmaking because executives are so risk-adverse. United Artists and Universal rejected Star Wars before Alan Ladd Jr. at 20th Century Fox decided to back it. Often filmmakers can't find a single executive willing to gamble on anything that is offbeat or unusual. It took director Oliver Stone ten years to produce Platoon, and then he succeeded only because an independent company provided the financing.
Many intelligent, provocative, and innovative movies - like Crouching Tiger, Hidden Dragon; The Crying Game; Roger & Me; Sex, Lies, and Videotape; Hollywood Shuffle; Kiss of the Spider Woman; and Blood Simple - have been made with independent financing. Some of these independently made pictures are enormously profitable, such as The Full Monty and My Big Fat Greek Wedding, and many have received Academy Award nominations for Best Picture. Such critically acclaimed films as Juno, Crash, March of the Penguins, and Little Miss Sunshine were made outside Hollywood. The public is generally unaware of how many of the best movies are only distributed by a major studio.
Due to the risk-adverse climate in Hollywood, a common failing of studio movies today is that they are derivative of other movies. Flashdance spawns Footloose; Animal House is reworked into Meatballs and Police Academy. Any movie that is the least bit profitable is the basis for one or more sequels. The studios try to squeeze as much as possible from every successful property they own.
Coping With Risk
Because of their aversion to risk, the studios have largely withdrawn from producing films in-house. While many maintain production lots, which are rented to anyone needing a soundstage, the studios essentially function as specialized banks, lending money to produce worthy projects and then distributing the finished product.
Like banks, they evaluate proposals submitted to them but rarely initiate projects. After borrowing money from large banks or obtaining investment funds, the studios decide which producers to back. The producer and director make the movie, with oversight by the studio concerned about protecting its investment. Once the picture is complete, the studio markets it, creating an advertising campaign and duplicating and distributing prints. Finally, the studio uses its clout to collect receipts from exhibitors.
There are some exceptions to this modus operandi. At some independent production entities like Castle Rock Entertainment and Imagine Entertainment, the executives who run the company are more involved in creating product.
But most studios are run by dealmakers, not filmmakers. Many executives rise to the top based on their relationships with big-name talent and their dealmaking prowess, not because of their understanding of what makes a good script or their film-making ability.
Other problems have arisen because the studios have relinquished much of their creative authority. Increasingly, executives make decisions based on market research, demographic trends, and minimizing financial risks. It has become much more of a lawyer-agent game, with less showmanship, according to producer Martin Ransohoff (Jagged Edge): "Picture-making itself had a better shot under the old moguls. They were basically movie guys. Not conglomerate or bank-endorsed people."
The old studio staff producers have been replaced by creative-affairs executives. "They function as staff producers but without the public shame and responsibility that comes from having your name on the picture," says industry analyst A.D. Murphy. "They exercise authority but remain anonymous. And when you have a lot of faceless people who are not out there naked next to their films, you have a lot of copping-out and log-rolling." Large talent agencies such as CAA and William Morris exercise considerable influence in developing and packaging projects. Agents conceive ideas for movies, discover new talent, and decide which writers, directors, and stars shall work together in the packages they create. In the old days, the studios performed these creative tasks.
Managing a Creative Enterprise In many ways the atmosphere for creative moviemaking was better during the era of the moguls. More than 50 million Americans went to the theater every week in the days before television. Admissions reached an all-time high of four billion in 1946. Because films cost less and there was no competition from television, videogames, and the like, even mediocre films stood a better chance of making a profit. Since the moguls owned the studios they ran, they were more secure in their positions and could afford to take more risks - if a picture flopped, it might hurt their pocketbook but they wouldn't lose their job.
Some studios have belatedly realized the importance of creativity in moviemaking. Burned by expensive star-studded flops based on agency packages, these studios have hired executives who can play a more creative role in filmmaking.
In 1984, after Rhinestone (starring Sylvester Stallone and Dolly Parton) bombed, 20th Century Fox fired Alan Hirschfield and Joe Wizan and hired Barry Diller. Diller was head of the much-vaunted Paramount team (Diller/Eisner/Katzenberg/Mancuso) that insisted on developing projects itself rather than accepting agency packages. Disney also lured two other members of that Paramount team, Michael Eisner and Jeff Katzenberg, to replace the more business-oriented Ron Miller.
In each of these instances, studios replaced executives with backgrounds in finance and dealmaking with people known for their creative abilities. But creativity can be risky. In 1994, Steven Spielberg, Jeffrey Katzenberg, and David Geffen launched Dreamworks SKG to create an artist-friendly studio. However, by 2006, after flirting with bankruptcy twice, the company was sold to Viacom, losing its independence. Likewise, independent New Line Cinema, founded in 1967, was acquired by Turner Broadcasting System in 1994, which in 1996 merged with Time Warner. The company lost its autonomy in 2008 when Time Warner absorbed it.
Daily Journal |
Tuesday, January 13, 2009
California Officials Pursuing Noncompliant LLC's
Under a new state program, the state tax board has begun sending out the first of many monthly mailings to approximately 23,332 limited liability companies whose records are eligible for suspension. California officials are suspending LLCs due to the lack of filed state tax returns and other necessary information filings and overdue annual tax fees.
According to the Franchise Tax Board and the California state tax agency, if a company is suspended, that company will lose the rights to its name, it will be unable to sue or be represented in court, its contracts will be unenforceable and it will not be able to do business in California.
Next year, the secretary of state is expected to begin proceedings of its own to suspend LLCs for lack of filing an information statement every two years. Those LLCs who have not filed these forms, could be subject to a $250 penalty.
Before a suspension is imposed, the tax board is allowing any targeted LLCs 60 days to resolve any issues or explain why a notice was sent in error. To avoid suspension, LLCs must file missing income tax returns and pay any outstanding fees, taxes, penalties and accrued interest charges. If an LLC is cancelled, it is still responsible for missing income returns and unpaid fees, taxes and interest.
The tax board anticipates its new suspension program will reduce tax gaps and bring about LLC compliance. An estimated $64.7 million is owed by these non-compliant LLCs in back taxes, fees, penalties and interest. In addition, California officials will continue to bridge these gaps by increasing 2009 fees and penalties and forcing LLCs to file income tax returns sooner. At least one decision by the Board of Equalization has indicated that a shareholder can be liable for corporate taxes if certain conditions are met, and similar liability could apply to an LLC member who walks away. So it is best to close down an LLC that is no longer being used to ensure that you do not become liable for taxes, fees and penalties.
For more information on LLCs and the tax board's suspension program, please visit the tax board website at www.ftb.ca.gov.
Risky Business Seminar in New York April 25, 2009
Volunteer Lawyers for the Arts is sponsoring a one day seminar with Mark Litwak on Saturday, April 25, 2009 in Manhattan.
This comprehensive seminar explores how independent films are financed and distributed. Topics include financing via pre sales, debt and limited partnerships, negotiating tactics, typical contract terms, cross collaterization and creative accounting. Particular attention is paid to how producers and filmmakers can protect themselves by watering down warranties, getting added to the E & O policy, adding performance, termination and arbitration provisions, using lab access letter to retain possession of the negative, and a schedule a minimums.
Other topics include criteria for selecting a distributor; what is negotiable and what is not; compliance with state and federal laws when seeking investors; retaining an attorney or producer's rep; confirming arbitration awards in Superior Court; and enforcing judgments. The seminar includes a handout with a distribution contract, articles, a self defense checklist and other materials.
Since 1969, Volunteer Lawyers for the Arts has been the leading provider of pro bono legal services, mediation services, educational programs and publications, and advocacy to the arts community in New York. The first arts-related legal aid organization, VLA is the model for similar organizations around the world. For more information about Volunteer Lawyers for the Arts, please go to: www.vlany.org.
NETFLIX WILL AWARD $350,000 TO FILMMAKER
NETFLIX, in association with Film Independent, has announced its Find Your Voice film competition contest. The contest is open only to the first two thousand individuals who are legal residents of the fifty (50) United States (including D.C.), at least eighteen (18) years old at the time of entry and who have never created and publicly screened a full length narrative feature film of seventy (70) minutes or more. The prize of cash and services is worth approximately $350,000.
To apply, one must submit an application and a feature length script (80-120 pages). Applicants can also submit optional materials: a list of cast and crew, a budget top-sheet and a DVD with sample footage or a link that provides online access to such footage. The award is for a narrative film, not a documentary.
Additional information at netflix The deadline to submit an application is February 9, 2009.
According to the Franchise Tax Board and the California state tax agency, if a company is suspended, that company will lose the rights to its name, it will be unable to sue or be represented in court, its contracts will be unenforceable and it will not be able to do business in California.
Next year, the secretary of state is expected to begin proceedings of its own to suspend LLCs for lack of filing an information statement every two years. Those LLCs who have not filed these forms, could be subject to a $250 penalty.
Before a suspension is imposed, the tax board is allowing any targeted LLCs 60 days to resolve any issues or explain why a notice was sent in error. To avoid suspension, LLCs must file missing income tax returns and pay any outstanding fees, taxes, penalties and accrued interest charges. If an LLC is cancelled, it is still responsible for missing income returns and unpaid fees, taxes and interest.
The tax board anticipates its new suspension program will reduce tax gaps and bring about LLC compliance. An estimated $64.7 million is owed by these non-compliant LLCs in back taxes, fees, penalties and interest. In addition, California officials will continue to bridge these gaps by increasing 2009 fees and penalties and forcing LLCs to file income tax returns sooner. At least one decision by the Board of Equalization has indicated that a shareholder can be liable for corporate taxes if certain conditions are met, and similar liability could apply to an LLC member who walks away. So it is best to close down an LLC that is no longer being used to ensure that you do not become liable for taxes, fees and penalties.
For more information on LLCs and the tax board's suspension program, please visit the tax board website at www.ftb.ca.gov.
Risky Business Seminar in New York April 25, 2009
Volunteer Lawyers for the Arts is sponsoring a one day seminar with Mark Litwak on Saturday, April 25, 2009 in Manhattan.
This comprehensive seminar explores how independent films are financed and distributed. Topics include financing via pre sales, debt and limited partnerships, negotiating tactics, typical contract terms, cross collaterization and creative accounting. Particular attention is paid to how producers and filmmakers can protect themselves by watering down warranties, getting added to the E & O policy, adding performance, termination and arbitration provisions, using lab access letter to retain possession of the negative, and a schedule a minimums.
Other topics include criteria for selecting a distributor; what is negotiable and what is not; compliance with state and federal laws when seeking investors; retaining an attorney or producer's rep; confirming arbitration awards in Superior Court; and enforcing judgments. The seminar includes a handout with a distribution contract, articles, a self defense checklist and other materials.
Since 1969, Volunteer Lawyers for the Arts has been the leading provider of pro bono legal services, mediation services, educational programs and publications, and advocacy to the arts community in New York. The first arts-related legal aid organization, VLA is the model for similar organizations around the world. For more information about Volunteer Lawyers for the Arts, please go to: www.vlany.org.
NETFLIX WILL AWARD $350,000 TO FILMMAKER
NETFLIX, in association with Film Independent, has announced its Find Your Voice film competition contest. The contest is open only to the first two thousand individuals who are legal residents of the fifty (50) United States (including D.C.), at least eighteen (18) years old at the time of entry and who have never created and publicly screened a full length narrative feature film of seventy (70) minutes or more. The prize of cash and services is worth approximately $350,000.
To apply, one must submit an application and a feature length script (80-120 pages). Applicants can also submit optional materials: a list of cast and crew, a budget top-sheet and a DVD with sample footage or a link that provides online access to such footage. The award is for a narrative film, not a documentary.
Additional information at netflix The deadline to submit an application is February 9, 2009.
Subscribe to:
Posts (Atom)