1pagepaper:Singlespaced(preferred),normalmargins,thoughtful/nonobvious

INTRODUCTION
Mostfilmslosemoneycertainlyatthetheatricalreleasepoint,butovertime,filmscanmake
money
o Ingeneraltheonlymoviesthathavelargereturnsarethosethataremadeforalotorvery
littlemoneyDavidOSelznick(producerofGoneWiththeWind)
o 600750filmsfortheatricalrelease,butsomewherebetween200250getreleased
Whathappenstotherest?$1binatTarget,lowcostPPV
o Thereisavastoversupplyofproduction(supplyisgreaterthandemand)
o Therearemanymoreproducersthandistributors;distributorshavethepower
o Whycantallfilmsgetdistributed?limitedmethodsofdistribution
Aretheremoreproducersormoredistributors?Producers
o Traditionalrateofreturnis5%(capitalizationrate=rateofreturnoninvestedcapital)
o Whycontinuetoinvestinfilm?
Individualpeople(investors)theresasexappealtoit,itscool
Distributorsmakemoneyondistributionproceeds
Inproduction,thetalent,behindthescenespeople,etcmakemoney,
butmoneyonthefilmisnotmadeuntildistribution
Thepotentialenergyofamoviethatgetsunlockswhennewmediacomesout
orwhennewpeoplewanttobuythecompanythecataloguealsogetssold
Inotherwordsifyouhaveahitthatcomesout(thinkStarWars)thatmovie
mademoneyintheater,VHS,laserdisc,DVD,Bluray,etcetc
TheywanttoholdontotherightsandsellthelibraryInthepast10years
Universalslibraryhasbeenboughtandsold4times,eachtimeformoremoney

Whatisentertainmentlaw?
o Document2,page7forthelistofwhoentertainmentlawyersare
Forthetypesofthingsthesepeopledolookattheproductionchecklists
o Entertainmentlawisessentiallyanytypeoflawinvolvingclientsintheentertainment
industry
Youalwayswanttobethinkingaboutwhatunderliesthenegotiationstanceoftheparties
Whatschangingnowinentertainment?
o Methodsofdelivery/distrubution
o OTToverthetopdeliverymethodsthatbringyourecordedentertainmentbutnot
bystandardcableoranalogordigitalbroadcast;providesdatatoyourTVthatdoesnt
comefromacable
Roku,NeoTV,GoogleTV,Netflix
Ginsburgthinksthisrepresentsabigchangeandthemovingawayfromcableto
OTT
OTTalsomeansoffthetop5%distributioncharge
o ChangehehighlightedfromlastyearWeinsteinCompanyusedtoonlyshowtheir
moviesonShowtime;After2016whentheirdealexpires,theywillmovetoNetflix
o Dayanddatereleasemoviesreleasedessentiallysimultaneouslytotheatricalmarkets
andtopayperview
Inthebeginningpeoplethoughtthiswouldbeadeathknellformovies,butit
turnsoutthatmoviesaremakingmoneyusingthismethod

TVmodeofdistributionhaschanged,andtheseasonshavechanged
Secondbitesshowingthesameshowover,makingnewshowsthatfollow
thesameformula(realhousewivesofX)
SchuylerMooresPhilosophy3Questions
1.Whohascontrol?
o Theactual,factualcontroloverdecisionmaking/result
2.Whohaspower?
o Powerisasubsetofcontrol
o Powerisrelativerelativemeasureofpower=leveragetheabilitytouse
somethingtheothersidewantsandleverit
3.Whereisthemoney?
MooresPhilosophyRephrased:
MoneyInmoneyflowingintoatransactionoroneoftheparties
o Whocontributesorpays?
o Whattriggersthecontribution?
o Whendotheypay?
o Howmuchispaid?
o Howareunforeseenlossesoroverageexpenseshandled?
o Whatisthelegalmechanismforenforcingthecontribution?
MoneyOutvisitedinthecorporateorownershipcontextinvolvestheorderandpriority
ofdistribution(isinterestpaid,howarecontingentfeespaid,etc)
o Whatistheorderandpriorityfordistributionsofmoney?
o Howarecontingentrevenuesaccountedforanddivided?
o Arerevenuesourcesanddefinitionsthesameforallpayees?
i.e.,bigstarsgetpaidmoreb/ctheyhavemoreleverage
Control
o Whohasit?
o Isitjoint?
o Isitallocatedbtwn,say,creativeandfinancial?
o Whohasactivecontrol/vetopowervs.whoismerelytherefortheride?
o Cancontrolrightsbetransferredorassigned?
RobinHoodArticleEntertainmentLawIssues
Issuesinthearticle
o Conflictsbetweendirectorandstar
o Howmuchmoneywasspenttoacquireanddevelopanawfulscript$6.7millionin
scriptwritingcosts
o Main:Whatsgoingonwiththebudgetingforthewriting?
Originalspecscriptboughtrightswiththeoptionofgoingforward$1miltoacquirethe
rights,andanother$500Kifmoviegotmade(contingentbonus)$1.5miltotal
o Buyerhastitle;titletransferredimmediately
Youcouldlookatthemoneyanotherway:
o $1milastheoptionpayment(theyhavetheoptiontousescriptforsomeperiodof
time,andtimeisoftheessence)
o $500Kastheexercisepaymenttoexercise,havetogivewrittennotice
o Sellerstillhastitleuntilexercisepaymentismade
o

Eachofthesepaymentsinvolves1.5mil,butthedifferenceiswhenthemoneychangeshands;
whendoestitlepass
BUTthebudgetsays$750K(story&otherrights)why?
o Draftchangesscriptstructure
o Polishchangesonlydialogue
o Ginsburgthinkstheysplitit$750Kand$250K(i.e.,750Kfortheoriginaldraftthat
theyalreadywroteand250Kforarewriteand2polishes)
Splittingitthiswaykeepsthewritersontheproject
Byshifting250K,theyhaveestablishedtheirpriceinHollywoodfordoing
rewritestheirquote(thesewereunknownwriters)
Thus,eventhoughthesellersgetpaidlater,theyprobablypreferthis
methodratherthanjustgetting$1milflat

Basics&Terminology:
Distributoratruedistributoristhefinancingpartywhoiscapableoftakingfilmsandputting
theminthechainofdistributionTakefilmsandmakethemavailabletotheaters,homevideo,
paytelevision,streaming,etc
o Copyrightsalamithebundleofrightsinanycopyrightissue;calledasalamibecauseit
canbeinfinitelysliced
o Noteverydistributorgetsalloftherightsofthesalami(allofthebundleofrights)
o Distributorsholdthepowerinthedistributor/producerrelationship,becausetheymake
themoney
o Distributors/studiosmakemoneyondistribution,notproduction
StudioPeopleusethewordstudiolooselytomeandistributorbutstudiosalsoactas
producers;sobecarefulwiththisdistinction;whenstudiosproducefilms,theyalsodistributeand
thatswherethedifferenceis.Studiosproduceanddistribute
o Studios:produced,distributed,exhibited(historically;studiosdon'treallyexhibit
today)
o Studiosaredifficulttocreatenow
o Professorwillusestudioanddistributorinterchangeablyb/ctheyareessentiallythe
samenow(Unlessthere'sadistinction)
o Everystudiohas"betthefarm"onamovie(e.g.20thCenturyFox&Cleopatra,Avatar,
Titanic,LOTR)
o Studioshavethecapitaltotakethesekindsofrisks
o Studiosmakemoneyondistributionproductionismoneyout,asisdevelopment
2waystolookatafilm
o Playabilitywhetheranaudiencelikesamoviewhentheywatchit
o Marketabilityifandhowyoucansellafilm
Thetrickforastudioistofigureouthowtomarketafilm
Afilmcanbeplayablebutnotmarketable
TerminalgrossEndlineofthemovieseconomiclife
o Low/poor,base,andhighmodel
o Lowestimateworstcase
o Highestimatebestcase
o Basewhattheythinkthemoviewillmakemorelikelythannot
o Producersdontwanttopredicttoohighortoolowbecauseofcredibility
o Triggerispulledtomakethemovieifthebaseishighenough

OrderofOperationsforaMovie:
AcquisitionofRightsWhatsortofrights?:
o Underlyingrightsprimaryliteraryrightsthatfilmwillbebasedon
o Specscriptspeculativescript;ideaholderwritesitspeculatively;somethingawriter
composeswithoutbeingfirsthiredtowriteit
o Article
o Book
o Event(i.e.frompercipientwitness)
o Biography
o Song
o Workforhire
Enterintoawritersagreement,getaquote:createanoriginalagreement
o Exercisewithintheoptionperiodwithpayment
Wheredoyougetthemoneytogothroughwithyouroriginalidea/specscript?
o TheperfectresultformostproducersPFD(voluntary,bilateralcontract)
PProducer
FFinancing
DDistribution
APFDiswhenthestudiosays,wewillcompletelyfundthemovie
Gotothestudio,pitchascript,etcandtheyagreetohandleallthework
Essentiallymakestheproducerintoanemployeeofthestudio
Studioisputtingupallthemoneyandownsalltherights
o Loanfinancing
o Privateinvestor
o Taxincentivesprovideasortofhiddensubsidythatlowersthenetcostoftheproject
o PromotionalfinancingAdidaspaysyousomemoney
o Foreignbuyers/distributors(ifthetopictravelsacrosscultures)
o Internalforbearanceproducercanforgoherproducerfeeandspendthefeeonthe
movie
o Oneofthesourcesforfinancingispresalessellingrightsusuallyinforeignterritories
sellingNOTjusttheatricalrights(b/cthisisnotenoughforforeignterritorytorecoup
itslosses;foreignterritoriescanalsobesoldinclusters)
US3540%percentageofbudgetsubmittedtoprebuyingvenue
Japan10%percentageofbudget
UK10%percentageofbudget
Germany10%percentageofbudget
Total=~65%
o Youcanplayafinancialtrickbyartificiallyincreasingthebudgetsogapgetsfilledb/c
65%ofanincreasedbudgetisalittlemorethan65%ofanonincreasedbudget
i.e.,youthinkthebudgetisonlygoingtobe$10milbutyousubmitabudgetof
$12mildoingthisinc.theputativecosttothirdparties65%of12milisa
biggernumberthan65%of10mil
Byartificiallypuffingthebudgetwithjunk,youfillinthegap
BUTinsurancerateisoftenbasedonbudgetincreasesothercosts
o PreSalessellingrightsinafilm,usuallyinaforeignterritory
Asortofspeciesofnegativepickup

PresalesoccursBEFOREfilmhasbeenmade
Youdontjustselltheatricalrightsyoualsosellothercollateralrights,
i.e.,digital,homevideo,freetv,paytv(thisisb/cmostmoviesdont
makemoneyintheatres)
Presalesarenotpaidatthedeal,theyarepaidupondelivery(i.e.
finishedmovie);uponagreementthepartyjustsignsanagreement
sayingtheywillpay,maypaysomepercentagedown
Makesuretonotethetimevalueofmoneyissuesdiscounttopresent
value
NegativepickupoccurswhenprojectisFINISHEDandcanbeviewed
Gapthedifferencebetweenwhatyouhaveincashbeforeproductionstarts(whatyoupresold)
andwhatyouneed
o Thegapiswhereothersourcesoffundingcomeinborrowingmoney,gettingan
investor(borrowingmoneyinvolvesadebtyoupaybackandinvestorgetspayments
later),etc
o Sometimestherearecoststoclosethegapsometimesthesecostsarentworthit
o Usuallyyouhavetofrontthemoneyforthegap:loans,investors,softmoney(tax
rebates,deductions,credits,etc),internalforbearance(withholdyourownproducersfee
upfront)
o Ifyousellalltherightstothemovie,thegapistheupsideforyourownprofit
o Cantrytosell(license,giverights)thegaplaterafterinitialsuccess(withmarkup),
butrisky
Countriesmaymakeanarmslengthassessmentbasedonterritorialmarket
valuation
Foreignterritoriescanbesoldasclustersandtypicallypurchaseallrightsforthe
territory(miniPFDs)
Easieraccesstolocaldistributors
Otherrightscancrosscollateralizeforpoorboxofficeperformance,orif
themoviedoesnothaveatheatricalrelease
Theotherwaytomakethemovieisindependentfromthestudiosystemandseeifyoucangeta
distributortopickitup
TVProductionisquitedifferentfromthisindependentfilmproductionmodel
Untilabout1985,mostofTVwasfinancedonthelicenseofferedbytheAmerican
broadcasterABC,CBS,orNBCandtherestoftheworldwastheupside
o So,producerwouldsellshowtonetwork;networklicensefeewouldcoverthe
budget,andtherestoftheworldwouldbetheupside
o Thisworkedreallywellitwassuperlucrative!!!
o ThisishowAaronSpellingboughthisridiculouslylargemansion
Now,themodelisdifferentduetotaxpolicy
o Usedtobethecasethatnetworkswereprohibitedfromwhollyowningthe
programmingfearedmonopoliestheserulesendedin1997/1998!!
o Nownetworksmakewhollyorpartlycoownedshowswiththeproducer
o Wewentfroma3channeluniversetoa300channeluniverse
Now,thefinancingofTVlooksmorelikeaPFDthananindependentfinancemodel
o Networkspayforit
o Sometimesjointlygetworldwideincentivebenefits
o Producersgetfeeandashareofbackend

Themorepowerfultheproducer,themorelikelyhecanputupadeficit(the
differencebtwnwhatthenetworkisputtingupandwhattheprojectcosts)and
givehimselfalargerupsideorgetlargerfrontendsandbackends

CONTRACTS
Verbalcontractacontractexpressedinwords(asopposedtoanimpliedcontracts
o Oralthepartiessaywhattheirdealis
o Writtenthepartieswritedownwhattheirdealis
Ginsburgsfirstdealwaswrittenonanapkin,somewhatspecificterms,andthenapkinwas
signedbybothparties;isthisacontract?Thecourthastodecide(legalquestion)
o Isthereenoughinthewrittenagreementthatobjectivelysetsforthwhattheirrights,
regulations,andremediesare
Knowwhatthedefaultrulesare
o Supposeyouknowwhatthedefaultruleis,anditfavorsyou.Isitbetteradvicenotto
mentionit(assumeitsoperativeandyoullendupwiththeruleanyway),ortosetit
forthinwriting?
Youwantitinwritingbecauseonepersonsperceptionofcustompracticecould
bedifferentfromwhatareasonablejurywouldaccept;thepreferredversionisto
setfortheverythingwithclarity
Whataresomefactorsthataffecttheenforceabilityoftheemploymentagreement?
o Whetherthepartieshavehadanagreementinthepast;customandpractice;labor
laws/unions;civilcode;commonlaw
Ginsburgscustompracticesbehonest,honorwhatyousay,dontrenegotiateoldpoints,dont
bypassthechainofcommand(i.e.ifyoureseniortothepersonyourenegotiatingagainst,dont
treatthempoorlyandgoovertheirheadtoaseniorperson),zealouslyrepresentyourclient
(moderncollaborativeapproach)pointoutifsomeonemissedamaterialtermormadeadumb
move(termsofservices,perks,credit)*
o *Ginsburgsaidifhewouldhaveconcededthetermtheotherpersonforgottoaskfor,he
willgiveittothemlaterbecauseitcreatesgoodlongtermrelationships
Materialtermsinemploymentcontracts(ingeneral)
o Parties,services,compensation,termofservices(time),perks,credit
*THEMOSTIMPORTANTWORDINAPERSONALSERVICECONTRACT:exclusive
allowsyougetanegativeinjunctionincasetheartisttriestogoworkfora3rdparty
Hierarchy/CategoriesofWrittenContracts
o LetterofIntent(LOI)anagreementtoagreethisisNOTabindingcontractall
thatishereisintent
Sometimestheseareusefulthoughasastartingpointorsometimestheywillset
conditions
Notw/ouse,butnotbinding
WhatifyouhaveaLOIthatssignedbybothparties.Isitacontract?
Nointentisjustintentitisnotapresentagmtexecutedbytheparties
Yesitstatesthematerialtermsanditssigned
Answer:itdependsonhowadvancedpartieswereinwhattheyintendedtodo
Generally,though,aLOI,inandofitself,isnotacontract
HypoLOI,lateranoralassent,butcontractsentandnotsignedthisiswhere
promissoryestoppelmaycomeintoplay(sendadetrimentalrelianceletter);
however,thismightnotwork

RelianceLetter
Sentoutwhenpartieshavebeenexchangingdraftsanditsgettingclose,but
onesidejustwontsign
Purporttoestablishdetrimentalreliance
RLscreateamemorializationthatthepartysendingtheletterreliedonthe
assertionsoftheotherside
Promissoryestoppeldetrimentalreliance
o BigissueisconsiderationIamgivingupsomethingfor
something,andifIproceedinrelianceonthis,thenacourtmay
findacontracthere
Wouldntworkinacopyrightgrantsituationoranegativeinjunctionsituation
OnlyworksinsituationswherethereisnoStatuteofFraudsrequirement
o DealMemo
Setforththebasictermsbutnotinnarrativetext
Ashort(canbequiteshort)listofessentialsofthecontracttheyhaveagreed
to;alittleshorterthanatrueshortformcontract
Thisisamemorializationofwhattheyagreedto
Thisiswhatthebusinessaffairsdeptcomesupwithsendittothelegaldept
Agencieswanttohaveintheirfilesthattheymadesuchadealthentheycan
calculatewhattheir10%cutis
Whatifthisissigned(assumeallthecrucialtermsaresetforth)?
Agenciestrynottoputthewordexclusivein,butitusuallygetsputin
bythestudio;assumeitishereforthishypo
ItDependsontheWording:
o Theremightbeprotectivelanguagethatthepartiesdonotintend
thistobebindinguntilamoreformalagmtissignedinthefuture
o SometimesitsaysthiscontractISbindingnowuntilamore
formallongtermcontractisformed,ifitiseverformed
o However,inmostcases,absentlanguagetothecontrary,andif
itssignedbybothparties,itISbinding
o AShortFormAgmt
Differsfromadealmemointhatthisagmthasmorenarrativelanguage
Hassameweightasdealmemountilsigned
Includesi.e.,forcemajeure,languageaboutwhetherornotitisbinding,etc.
Providesverypowerfulremediesifthewordexclusiveincluded
AnotherKindofShortFormContract
Forpurposesofrecordinginthecopyrightoffice,often,attachedtothe
fullcontractgrantingrights,isattachedashortformagmtservesas
confirmationofthemoreformalgrantofcopyrightthisisasigned
writingforpurposesofcopyrightgrantreferencesanexternal
document(thelongform),butsaysthatcopyrightrightshavebeen
grantedsubjecttothelong,attacheddocumentthepointofthisisso
thatifthiscasegoestocourt,onlytheshortformwillbecomepublic
record(i.e.,ifawriterdoesntwantpublictoknowhowmuchshegot
paidforgrantingtherightstoherbook)
o CertificateofAuthorship(onlyforwriters)
o

Reporttheexistenceofadealifnotallitsterms
Ifyoucantgetthelongformagmtdone,yougetthewritertosignthis
certificate,sayingthatasbtwnemployerandwriter,allresultsandproceedsof
thewritings,shallbeaworkforhireforthebenefitoftheemployer,andshallbe
theexclusivepropertyoftheemployer
Certificateisnotactuallytheagreement,it'sjustasignedrecognitionofan
agreementUnlessthereisaconditioni.e.,thatthewritershallbefullyand
dulypaid
Whatifthewriterdidntgetpaidandnowwantsaninjunctiononthefilm?
PutintothecertificatethattheSOLEremedywillbedamages(unpaid
sums+interest)thissolvestheproblemofthewriterpotentially
askingforaninjunctionagainstthemovie
o LongFormAgmt/FormalAgmt
Exceptforcertainstudios,youjustdontseetheseanymore,b/ctheyjustdont
getsigned;mostplacesliketomakeKsshorterbutbinding
Thesearestillusedfornetprofitdefinitionsandcontingentprofitdefinitions
o 2030pagesoflegalsizedpaper
o Stuffgetsbuiltinfromeverylongformcontractevertheyaccountfor
everything
o i.e.,theforcemajeureclausesomethingnotwithinthecontrolofthe
partiesthatmakestheperformingofthecontractimpossible
ForceMajeureanactofgod/naturesomeforcebeyondthecontroloftheparties
3EXAMPLESofForceMajeure:(Readerp71)
CommonlyincludereferencestoactsofGod
Doweneedallthesespecifics?
Wecouldjustsummarizethese
Bettertohavesomethingshort,concise,andbindingSEE
EX1)oftheforcemajeureclauses
o Including,withoutlimitationclauseclauseincludedtocombattheclaimthat
becausesomethingwasnotlistedintheclausethenitdoesn'tapply
o Longformcontractsendupwiththeriskofexcludingsomethingbyincludingtoo
much
o BigRiskdiff.partsofthecontractaredraftedatseparatetimesandarenot
harmonizedthus,thereisalwaystheriskofcontradiction

btwndiff.clauses
(thiswasGinsburgsanswer)
Toavoidthisrisk,studiostrytoputinclausessayingwhichpartgovernsif
thereisaconflict
Nonetheless,conflictsoccur
o Bettertohaveashort,concise,binding,andsignedagreement!beingshortis
better
o 2contractsthatmustbesignedarepersonalserviceagreementsandcopyrightgrants
Mustcontainthewordexclusive
Whydowewanttheseagreementssigned?
o 1.Therehastobeasignedwrittenagmttograntexclusivecopyrighttosomeone
o 2.Therealsohastobeasignedwrittenagmttogetapersonalservicecontract
enforcedagainstaperson
Whatdoesanegativeinjunctiongiveyou?

Ifyoucantforcesomeonetowork,youcanforcesomeonenotto
workforsomeoneelse
EachpieceofrealestateisuniqueGeorgeClooneyisunique
thereisnoadequateremedyforreplacinghimbuthecantbe
forcedtowork
Sosayayoungactorgetsarole,butthenthenextdaySteven
Spielbergoffershimarole,andtheartistbreaches.Whatreally
happens?
TheygettoldtheycantdotheSpielbergfilm
Smartpartiestrytorearrangethetiming,sotheactorcando
both
Thisisanex.ofrights/remedies/practicalsolutions:
o RemedyisaNegativeInjunction
o Rightsfirstpartyhasabindingcontract
o PracticalSolutiontrytorearrangeschedulesto
accommodatebothproductions
Whatonewordhastobeina1)personalservicecontractor2)agrantofcopyright?
o Exclusive:defaultinsilenceisconstruedasnonexclusive
Ifservicesarenonexclusive,thenpartycanworkformultiplepplatone
time
IfNOTexclusive,thenyouCANNOTgetthenegativeinjunction
Ifcopyrightisnotexclusive,thenmultiplecanbegrantedthecopyright
tothesamething
Personalservicecontracts
Subsetoftheworldofemploymentagreements
Whataretheessentials?
TalentContracts
Whodrafts?Doesitmatter?
o Yes,itmatters
o Itisbettertodraftfirstsettheframeworkofthecontractandestablishcontrol
o Counter:
Languagetendstobeconstruedagainstthedraftingparty,soitsbetterto
commentratherthantodraft
o Ginsburg:Generally,itsbettertostrikefirstsettheplayingfield
thensomeoneelsehastospotwhatsthereandwhatisntthere
Itsalwayshardertospotwhatisntthere
Byinitiatingcontrolofthedocuments,thepowerisestablishedonyourside
Soifothersidedoesntaskforachange,whatyouwritestays

Constraintsonfreebargaining
Immigrationlimitations:transportingtalentinoroutoflocation
Unionagreements:cannotgobelowminimumscalecompensation
Jurisdictionclause:GlobalRule1:SAGAFTRAsJXistheentireglobe

PayOrPlayClauses
TheseprovidethatemployercanpayandusetheservicesofthetalentORpayandnot
usetheservicesofthetalenteitherway,employerhastopay

o I.e.thereisanobligationtopayBUTNOTtousetheemployeesservices
o Actorsperspective:
Actorthinkshewasgettingacredit
Actoralsothinkshewasgettingtheopportunitytoworkwithaspecificactorordirector
o Noobligationtomitigate(totrytogetanotherjobbecauseno2jobsare
exactlyalike(likerealestate)ifanotheropportunitycomesupfortheartist,
doesntmatter,artisthasnoobligationtolookforworkortakework.Also
allowstalenttoseekoutalternativeemploymentwithoutaffectingtheir
damages
Now,thishasspreadtoexecutivesofcompanies
2meanings
Adjtheartistis/waspayorplay(describestheartist)
Verbpayorplaytheartist
Artistsgetpaidwhetherornotthemoviegetsmadeitdoesnt
matterifthemoviegetsmade,doesn'tmatteriftheyreinit,etc
Incentivizestheproducerandtheartist
Whataboutcontingentcompensation?Theartistdoesnt
get%ofprofits,sales,credits,perks(exceptpaymentfor
entourage),etcthattheywouldhavenormallygotten
o Importanttodesignatewhoholdsobligationtopayensurepartyis
financiallyreliableandcanlaterbeheldliable;otherwiseSAGwillaskfor
advancedpayment
Notincludingthisinacontractmaybeconsideredmalpractice
Finalapprovedbondedbudgetclausemakesthecontractillusorybecauseifamovieisnt
made,theartistdoesn'tgetpaid(socantmakeapayorplaycontingentonfinalapproved
budget)
Incertainothercases,thereisanotherkindofagmt:PayAndPlaytheemployermust
payANDmustusetheservicesofthetalent
Comesupinacoupleofenvironments:
i.e.,Somewritersmightrequirethattheyarenotonlypaidtodowriting,but
thattheyalsoactuallydothewriting
i.e.,Powerfuldirectorshavethesekindofcontractsthisdirectorhasthe
absoluterighttodirectthismovie
o Ifdirectorwrotethescreenplay,alotoftimeshewillsay,Iwill
onlyletyouoptionthisifIcandirect
Howcanyoucounterapayandplaydealforadirector,sayforan8weekshoot?
Directorisallowedtoshootthefirst12weeksofprinciplephotography,butif
employerconcludesthisfilmisnotbeingexecutedwell,thenemployercanchange
thedirectorafter12weeks
Artistsoftengetpaidthroughloanoutcorporations(atypeofcorporation,usuallyowned
andcontrolledbytheartist,whichprovideshis/herservices)asopposedtoastandardwork
forhire/directemploymentrelationship
Howdoesitwork?
Loanoutcorporationscandeductallprofessionalexpenses(keyistheyhavetobefor
businessusesoifyouuseacar,allocatetheportionofthecarusedforbusiness)
Moneygetspaidtothecorporation,allexpenses/goodiesgetdeductedoffthetop

Ex:1milflowsin,150kpaidoutasgoodies(car,ticketstofestivals,plane
tickets,etc)nominalgrossisonly850kratherthan1mil
o Someofthis850kgoestothemedicalplan,pensionplan,etcand
getsdeductible
Whateverisrestispaidoutashumansalaryto0outthecorporationsothat
thecorporationdoesnthavetopaytax
Thissavedthehumanabout75kintaxes(ifyouassumethemarginaltaxrate
isabout50%)sincetheypaidout150kasexpenses
Laughtonv.CommissionerPaymentstoactorsloanoutcorp.areNOTtaxabletothe
actor(ifalltheformalitiesofacorporationareobserved)
Establishedrulethatcorporationsotherwiseconductingthemselvesasacorporation
arealegitimatewaytohireahumanowner
Thereareatleast2kindsofcorporations:
o CCorporations
o SCorporations
Limitedliabilityasacorpincomenottaxedtocorp
ForeignServicesHYPO
LetssayurclientisworkinginHungary
Iftheyarethereformorethan180days,Hungarymaytake1520%asa
withholdingtaxjustoffthetopofallincomeearnedthere
Thatmoneycanthenbeclaimedb/citpassesrightthroughtothetaxpayer
asaforeigntaxcreditonadomesticreturninotherwords,theygeta20K
taxcreditontheirtaxesintheUS,onahumanlevel
WhatwouldbetheproblemifitwereaCCorp?
SupposetheCCorpwerepaid100KandHungaryextracteda20K
withholdingtax
WhatstheproblembasedthestructureofaCCorp?
o Attheendoftheyear,thereiszeromoneyintheCCorp
o So,atendoftheyear,theCCorphasa20Kforeigntaxcreditfor
ZEROtax
o So,itsauselessforeigntaxcredit
ThisiswhyyoumightwanttouseanSCorpforoverseasservices(individual
shareholdersaretaxedasopposedtothecorporationasanentitypayingfederal
incometax)
o ThesearedescribedintheIRSInternalRevenueCode
o Employer(contractingparty)paysmoneytoCCorporation(i.e..,TomCruise,
Inc.)
o WhenmoneycomestorestinCCorp.,thisCCorp.hastoreportincome,
deductions,andanynetincome
Corp.canown,buy,anddeductthingsonabasisdiff.thanahuman
Notlimitedtothecapshumansarelimitedto
TheCCorp.spendsalotofthemoneythatflowsintoitbuys
legitimatebusinessexpensesthingsthattheartistneedstodohis
work,i.e.,lessons,audiovisualequipment
Corps.routinelybuycars,payfortravel,payforinsurancethesethings
arealothardertodeductatthepersonallevel(subjecttoanintervening

o
o
o

minimumlevelofexpenses,whichifyoudontreach,youdontgetto
deduct)
So,ifadjustedgrossincomewas30K,untilyouhit30Kin
expenses,youcantdeductthesethingsatall,BUTifura
corporation,youcandeductthesethings
Usingthisdevicesavesyoumoney
Ifyoucantdeduct,thenyouhavetopaytaxesonit
Ifyoudeduct,thenyoudontpaytaxes,soyousavemoney
Deductiongoesagainstincome
o
Ifyouhavea$1deduction,itreducesyourincomeby$1,butit
maynothavemucheffectonyourtaxes
Creditgoesagainsttaxthisisjuicier
o
Ifyouhavea$1credit,itreducesyourtaxby$1
Afteryoucantmakeanymoredeductions,whatsleftiswhatyoupaytheartist
HYPO
Gross=200K
Deductions=75K
OnDec.30,CCorp.decideshowmuchofthe125Kshouldbe
putintoaretirementorinvestmentaccount(thisamountalso
getsdeducted)
Then,thefinalleftovermoneyisthesalarytotheartistgets
paidout
ThisiswhatsembeddedintheLaughtoncase
CCorps.flourishencounteredallthetime
IfurusingaCCorp.andyoubreach,whogetssued?Doyouhavetoexhaust
yourremediesagainstthecorporationbeforeyoucansuetheindividual?
CCorp.paysoutanythinglefttothehuman
Studiowouldsuethecorp.theyhire
Themoneyinthehumanshandsisuntouchable
GoalistozeroouttheCCorp.bytheendoftheyearifthereisno
moremoneyinit,thenyoudontpaytaxes(otherwise,youwouldbe
payingcorporateandpersonaltaxes)
CCorps.areessentiallyeconomicshells,andtheyaremeanttobe,so
suingthemispointless
So,youwanttheactortoexecuteaninducementletter
basically,itletsthestudiosuetheactordirectly(employerdoes
notneedtofirstexhaustremediesagainsttheccorp.)
Insomejurisdictions,someverysophisticatedtaxplannershaveartistsservices
setupwhereartistalsohasanSCorp.
InSCorps,themoneyflowsrightthrough

o
Yougetthebenefitsofacorporationandthetaxbenefitsof
havingacorporation
o
OnemajorbenefitofusinganSCorpisthatifyouhaveforeign
taxcreditforshootingamovieinaforeigncountrypaytaxesfor
shootinginaforeigncountry,writeoffadeductionwhenyoucomeback
totheUSforyourUStaxesifyouuseanSCorp
Oneproblemwiththisloanoutcorpsystemisthatifthehuman/artistthatisgettingpaidbythe
corporationcouldbreachthecontractbetweenthecorpandtheproducer;ifthereisacorporate
shield,wontthehuman/artistbeabletobreachatwillwithoutconsequence?
o Thesolutiontothisistoinsistthatthehuman/artist(whoseservicesarebeinglent)signs
somethingthatiscalledaninducementletterthislettersays,producerisallowedto
sueartist(asiftheywereinprivity)ratherthanhavetosuethecorporation
o Theletterconfessesjurisdictionandallowstheproducertosuetheartist
o ThesecorporationsarecalledCcorporations
TherearealsoScorporations,whicharecorporationsforlimitedliabilitypurposes,butfor
taxationpurposesthemoneypassesstraightthroughthecompanytotheemployee
Anotherthinghepointedoutwhenyougetpaidforajob,therearedeductionsfromyoursalary
fortaxes;employertypicallypayshalfandemployeepayshalf
o Inthecaseofaloanoutcorp,technicallytheloanoutcorpissupposedtopay
o Toavoidthissituation,artistswilltypicallyasktheproducertopaythedeductionsasif
theyweredirectlyemployingtheartist(andthuswouldhavehadtopayanyway)
o Thecounterargumentfromtheproducersendisthattheartistdidn'thaveto
createaloanoutcorp
Workperiod
o Preproductioncoverstheperiodbeforeprincipalphotography
Rehearsals,makeuptests,wardrobefittings,etcetc
Usuallyallofthisstuffisincludedinthecompensation
Butifyouarepayingtheartisttheabsoluteminimumdailyscale,youhaveto
compensateadditionallyforthis
o Productionthestartofprincipalphotographythemainnarrativeactionofthemovie
(nowadaysincludesthingslikeonsetmakingofinterviewsforDVDs)
Principalphotographythephotographyinvolvingthemainstars
o Postproductionafterprincipalphotography
Loopingdialoguereplacement
ADRautomateddialoguereplacement
Reshoots,additionalscenes,etc
Butthispartlydependsonthecontract,levelofcompensation
o Howmuchtimeisbeingbought?
Typicallydonotstateaspecificstopdate
o Exampleofpaymentartistpaid$600kfor4weeks+2freeweeks
Theartistgetspaid600kwhethertheywork4,5,or6weeks
Artistisgettingpaid150kperweek(sinceweeks5and6arefree
weeks)
Thereasontheydothis2freeweekstructureisbecauseiftheygoanextra
week(7weekstotal)thedivisoris4weeksinsteadofsix,sotheartistwouldget
150kfortheadditionalweekinsteadof100k

Buthowdoyoudealwithaproblemwhereyoupaytheartistforsometimebutyoure
notdoneandtheartisthasothercommitments
Artistincludesacontractclauseforsubjecttoartistavailability
Iftheartistisnotavailable,producersforeachprojecttrytoworkwitheach
othertoadjustshootingdates;ifitreallycantbeworkedout,thenyoujusthave
toreassemblethecrewlaterfortheextrashots(veryexpensive)
Couldalsogotowheretheyreshootingandshootthere(butalso
expensiveandcouldraiseotherissues)
Dropandstartcantdropsomeoneandthenstartagainthenewstartisanewcontract
o I.e.youcantsignsomeone,letthemgo,andthenbringthembackunderthesameK;
alsocantusesomeoneforsometime,releasethemofduties,andbringbackwithout
makinganewK
DeHavilandcasetheproducerswantedtocounther7yearsofemploymentas7yearsof
actualworking,butthecourtsaid7yearsofemploymentmeans7yearsfrominceptionofthe
contract/commencementofservice
o Obviouslyfairbecauseyoucantsignsomeonefor7yearsanddragthatoutover20
years
o ThisisstillgoodlawinCAforentertainmentKsthelongestKis7years
Legislatureintendedtopreventanticompetitivebehaviorandallowworkersto
freelychangeemployers.Churnavailabilityofpersonalservicesasamatterof
publicpolicy.
o Expressiouniusestexclusionalterius:expressionoftheoneindicatesexclusionofthe
other.Canonofstatutoryinterpretation.
Legislaturedidnotintendactualserviceifitdidnotincludesuchastipulation
o Aproducermighthaveanartistsignacontractwhentheyretesting,evenbeforetheyve
appearedonfilm,sothattheycansecuretheservicesfor7years
o HealsotalkedaboutcontractingforsequelsinmoviesandseriesinTV
Artistcompensation
Considertheloanoutcorpinfofromabove
Mostobviouswaytopayartististhroughcash
Resultofanarmslengthcontractbtwnartist/loanoutco.andemployer
Usuallybasedononeoftwoestablishedfloors:
o 1)UnionScale(+10%ifrepresentedbyagentaccordingtocustom)
o 2)Quote(ifactorisadvancedenoughtohaveestablishedaprice)
Ifartistgot100Kbefore,agentwillaskformorethenexttime
Cancreateclausesforbonusesuponreceiptofawards(andpotentialrerelease)
Ifyouhaveaperpicturerateyoucannegotiateforasingleweekthatpreservestheirquote
Artistmaychoosetoworkforlessthantheirestablishedprice,i.e.,ifartistworksonanindie
picture

Artistsoftengyratebtwnstudio(paydays)andindependentpictures
Whentheyworkonindependentpictures,theyhavetolowertheirquote
Ingeneralthestartingpointfornegotiationisnotlessthantheartistsquote(theamounttheyve
beenpaidbyaprior,similarlysituated,armslengthpayors
Whathappensiftheartistasksforlessthantheyareworth/theirquote(topursueanindependent
pictureproject)andyoudontwanttheothersidetousethisasthenewquote
o Useanondisclosureclause,i.e.thepartiesagreethatthequoteislimitedtothisfilmand
thequotecantbediscussedwithothercompanies
o

Noquotedeal:preservesactorsnormalquoteandbindspartiesfromrevealingit
MostFavoredNationscovenantusedtogetaclusterofstarsreceivinglessthanthey
typicallywouldgarnerandtheyallreceivethesamecompensationifsomeoneelse
receivesadifferentamountitisabreachofcovenant;similartoanoquotethatfuture
studioswillnotdiscounttheirtypicalstudiodeal
Reciprocal covenants even if breached obligations remain
Contract goes forward but there are damages for breach
Vs. Conditions which break the totality of the agreement and dispose of
all obligations
Componentsofcompensation
o Frontendcompensationwhattheartistgetsincashduringtheirservices
o Fixedcompensation:guaranteedamountpaidalongnormalprocess
o Deferredcompensationmoneytobepaidatafuturetime
.
Includesadelayintimeandsomeriskthattheconditionaleventneveroccurs(negotiate
forabiggeramountfortakingonrisk).TwoKinds:
Contingentpaymentconditionedoneventthatmayormaynotoccur(i.e.100k
nowand100kuponsomecondition[saletodistributor,theatricalrelease,etc])
Anythingthatmustbepaidmustbeinthebudgetsothisisnotinbudget
(sincethereisacontingency)
Healsomentionedthephrasefixeddeferredcontingent,whichmeans
thatthedeferredcontingentfeeissomefixeddollaramount
Higherriskbecausethereisapotentialthatthiswillnotoccur
Backendcompensationisbydefinitiondeferredcontingentpayment
Guaranteed(onlydependentonpassageoftime)heclassifiedthisasitsown
category;basicallyadeferredformofcompensationwithnocontingencies
(guaranteedamount)apaymentthatmustbepaidonafuturespecificdate
Thistypeofcompensationmustbeincludedinthebudget
o Inlowerbudgetmovieswherethefrontendislower,artistswilltakemorecontingent
compensation
o Asaproducerwhohascommittedtodeferredpayments,mustensurethatdistributor
assumesresponsibilitytofulfillthisfutureobligationandpaythecostsassignpayments
tofinanciallyresponsibledistributor(thereforealsomakesuretheyhavemadean
accounting)
Terminology:
o ProRata:at/bytherate(ratio)
o PariPassu:atthesametime/atanequalpace
Whensplittingupthepool,youpaypartiesatthesametime
o Stature:positionintheindustry(howmuchtheycancommand)
o Leverage:abilitytouseyourmarketpowertomovethedealinthedirectionyouwould
likeittogo
Archimedes:GivemealeverlongenoughandIwillmovetheworld
Checklistp49:nonexhaustivelistofwhatthingsartistsaskforincontracts
o Hierarchyofartistpowersforchoosinghairartists,makeup,etc.basedonstature&
leverage
o
o

Absoluteapprovaloverhair,makeupandwardrobe(canselecttheirartists)
outrightabilitytoaccept;alsoimpliesthecorollaryrightofveto
Wantthemflownin,putupinniceaccommodations
Approvalofpreagreedlist
Approval,conditionedonaratewithinacertainbudgetaryrestriction
Consultationclause:wewilltalkaboutit,providedthatproducers(etc)decision
isbindingontheartist(toensurereasonableterminuswithfinality)
Violationisprobablyabreachdamageswouldbedifficulttocalculate
o Responsestothis?Whatiftheirpplareoutofthepricerangeofthemoviebudget?
Suchapprovalnottobeunreasonablywithheld
Putinthisprovisothisputsacounterbalanceonabsoluteveto
o Withmajorartists,youhavetopayfortheirperkpackagetheygettohaveALLthe
goodiestheywanttheresnochoice,particularlyforstudios(theyalwayscaveonthis)
o Inindependentproduction,youusuallyget,WellconsultwithyouandWellhireur
pplif
1)Theywillworkforwhatwehaveinthisbudget,AND
2)Ifworkisoccurringabroad,theycangetavisaintime(thisisoftenanissue)
o ArtistSideIwantmypersonandIdontcarewhatitcosts
o ProducerSideWantstobeabletogettheworkdonew/inthebudget
o Notefordirectors,theyoftenwantchoiceofproductiondesigner,etc
ConceptfromCreditsthatappliestopayproblemthatariseswhenyouhireaclusterof
artistsorhireactorsinanonlinearway
Lotsofrecognizableactorsinanindependentfilm
(Most)FavoredNationsclientwillgetthesame(oratleast,notworse)creditasall
theotherstarsifthereisapaycut,theywillallgetthesamereduction(sothattheyendup
atthesamenumber)(regardlessofhowmuchmoneytheynormallycommand)forpay,
actorscanalsocontractunderfavorednationstheyallendupatthesamenumber,i.e.,
everyactorgets100K

Employingpartyguaranteesthisthisisacontractcovenant(promise)
LurkingIssue?

Whataboutcredit?Whatifallofthemgot1stpositioncreditbefore?
Howdoyousortoutcreditwhenthereisaclusterofstars?

SAGdoesntprovidemuchguidanceonwhatcreditshavetobe
givenartists

Fairwaytosolvethis,andpopularway,istoliststarsby
alphabeticalorder
o
Whendonethisway,thereisnoimplicationthatfirst
actorlistedisprimusinterpares(firstamongequals)
Alphabeticalorderundercutsimplicationthatoneactorismore
importantinthepicture
Ifsomeoneendsupnotgettingpaidthesameinafavorednationsagreement,thatisabreach
thatwouldleadtodamages
CommercialEndorsements:issuesthatmaydistortthestorylinethatactors/directorsaregrowing
increasinglyfrustratedwith:
o Producerisreservingthecommercialtieinsandpromotionalrights
o AppearanceofbrandsonregulatedTVforcompensationhas(?)tobedisclosed

Gradationsofcommercialpromotion:extenttowhichactorsareaskedtobeapromoting
agentandarethustiedtoaproduct(canbeconstrainedbyendorsementdealswithcompeting
brandsi.e.RussellWilsonwearsBeatsbyDrewhenNFLsponsoredbyBose)unionscare
aboutthelevelofendorsementrequired
Productplacementtheproductappearsinthemovieasitwouldinreal
life(Kellogsboxgetspushedacrossthebreakfasttable)
Thisisntusuallyarguedtoomuchbyartistsbecauseitspassive
Productintegrationreference/mentionorplotpointcenteredaround;
wovenintothescript;almostbecomespartofthemovie(corvettein
Transformers,FedExinCastaway)
Programlengthcommercialsotherwisedramaticshowhasarealproduct
interwovenintothewholefeature;thewholeshow/movieabouttennisshoes
orsomeproduct
Wanttoapproveouttakes,stuntdoubles,dubbingandnudity
o Dubbing:whowillbespeakingyourvoiceinanotherlanguage(typicallyusedovera
longperiodoftimeconsistency)
o Nudity:explainingthesceneandpurpose,negotiateparticularcompensationforit
Taxindemnity:ifbeingtransportedintoaforeignjurisdictionensureemployerwillpay
compensationtoextentthattaxishigherthaninUS
InsurancePolicy:namedundererrorsandomissions
o Ifsomeonesuestheytypicallynameeveryoneinvolvedsoartistswanttobeinsured
againstpotentialdamages
o Unionnowrequiresthesepoliciestobeincludedautomatically

CREDITS
Hefocusedonwritersforthecreditsexamplesbecausetheytendtohavethemostcomplexissues
Default:collectivebargainingsubjecttominimumunionterms
Consideration:expectationofreciprocaladvantage
PurposeofCredits
Sourceattribution:rightfullyrecognizecreatorofwork
o Alsowanttoaccuratelyidentifythesource
Careeradvancement:morecreditsisbetter
o Careermove:TVtofilm
Money
Payorplayimplications:maygetpaidbutyoudontgetcredit
o Letssaythereisawriterwhowritesascript,butanotherwritercomesonandchangesthe
script
o Guildrulesdetermine
o Fergusoncase
Holding:Judicialreviewofarbitrationislimitedto1)whetherthepartiesagreedto
submittheissuetoarbitrationand2)whetherthearbitratorexceededthepower
grantedbytheagreement(i.e.theemployeeisaunionmembersothecourtwont
stepinunlessunionpowerisexceeded)

Themechanismtheentindustryhasevolvedbeforecreditsareaccordedtoawriter,
theproducermustfileatentativenoticeofwritingcredits(whichistheproducers
goodfaithassertionofcreditsthattheproducerfeelsshouldbeassigned)
Sowhathappensifthefirstscriptisdumped?
Unionrequiresthatproducerlist:
Thetypeofcreditstobegiven
o ScriptcreditA,storytoB,etc
o InfectingthechainofwritingifyougiveastorycredittoB,
chancesarehewillgetthescriptcredittoo(becauseitshares
elements)
Thenproducersendshiscommentstoacommitteeandthecommittee
decideswhogetswhatcredit
&meansthewritersworkedtogetherasateam;andmeanstheydidnt
worktogether
o Has real meaning when a contract grants a bonus for having a sole
screen credit&-team is treated as a unit (jointly and severally the
sole writer)
Agentsalwayswanttheirclienttogetthecredit,butontheotherhandyoucantin
goodfaith(andfairdealing)sayinadvancethatthefinalscriptisgoingtobethe
productofthatwriter(becausethescriptmaybesubstantiallychangedduring
shootingorduringpreproduction);thegoodnewsforproducersisthatcreditsare
outofyourhandsonceyousubmityourrecommendations
o Anactor,director,etconpayorplaywontgetcreditiftheydontappearorworkonthe
movie
Whatgovernsthesystemofcredits?Freebargainingsubjecttooutsideconstraints
o Privatecontractbetweenparties
Creditsaregenerallygovernedbyfreecontractunionagreementsgenerally
representtheminimumcontractobligation,butpeopletrytonegotiateformore
o Unionagreements(collectivebargainingagreements)provideatleastacertainkindofcredit,
inacertainformandcertainposition
Onlycares/willstepinforissuesoflessercreditthatdonotmeetitsminimum
standards(ex.directorwhoownedthefilmanddidnotaccordhimselfminimum
unioncreditandgotintrouble)
o Constrainedbythetypeofserviceperformed
IATSEdonotexercisepowerovercreditslikeabovethelineprofessionals(actors,
writers,producers,etc)
o Statelaw(7yearrule,etc)
o Federallaw
Whatkindsofcreditsarethere?
o Logo:graphicoranimation
Ex.MGMLion,WBshield,20thCenturylighthouse
Distributorormaybeproductionfirst
o PresentationcreditPresentedbycreditusuallydistributorgetsthis
1) ex. X Presents or A X Presentation (typically a studio)
This is a distributor
2) If there is more than one, you see In association with

US is not a signatory on any co-production treaty (which were designed for

purpose of financing)
Involved in financing or creative elements of the field
Even if there is negative pick-up (financed after production) it will still be
credited as X presents
3) Does not imply PFD
Even if there is negative pick-up (financed after production) it will still be
credited as X presents
ProductioncreditaCitadelentertainmentcorpthecompanythatproducedthefilm
(usuallythesedaysitsmorethanone)producer
InEuropetherearealotofthese
Possessorycredit(Afilmby...)director
Beforethe70sorso,youdidntseethesecreditsinfilms
Intheearlydays,writershadaproblemwiththiswhyshouldadirectorgeta
possessorycredit?
Itusedtobethatwriters+directorscouldonlygetthecredit,butnowdirectorscanget
it
Afterthepremoviecredits(above)thetraditionalorderoftheothercreditswere(inthis
order):
Written
Produced
Directed
Filmstart
Thischangedabout6yearsagoandtheorderisnow:
Produced
Written
Directed
FilmStart
Theunderlyingprincipalisthatitisdeemedtobepreferabletobeclosertothedirector
(consideredthemostimportantrolesotheyhavethecreditwithclosestproximitytothe
beginningofthemovie)
Oppositeforactors:wanttobefirstintime(firstposition)canbenegotiatedas
abovethetitle
Writers now follow producers, which is a demotion to producers (because the writers
are closer to the directorPWD or DWP)
Sometimesthedirectorcantakehiscreditafterthelastframeofthefilm,andyouseethe
aboveorderinreverseitisstillpreferabletobelistedclosetothedirector
Directorshavesomuchpowertheyevengettheirnameinabox
Position:
Firstposition:logo,presentation,possessoryandproductionandprincipalcast
Middlecredits:cinematographeryadayada
Creditsattheend:
Alphabeticalorder
Orderofappearance
Producerhasdiscretionabouthowmanycreditstoallocate
o
1.AboveTheLineCreditstheprincipalcreativecreditsactors,directors,
writers,producers

i.e.,Writtenby,Producedby,Directedby
Formforalloftheseisspecifiedbytheunions
refertothemselvesasguildsi.e.artisanal
o ProducersGuildofAmerica(PGA)hasgainedmomentumrecentlybutit
isNOTaunion,merelyatradeassociation
o ScreenActorsGuild,WritersGuild,etc.
InBritain,theyjustsayProducerorDirector
DGAiszealousabouthavingconformingdirectorcredits
2.BelowTheLineCreditsalltheothercredits
o DirectorsgetothercreditsinadditiontothedefaultDirectedBy:The3Psthese
arethesubjectofnegotiation
1.Presentationcredits______presentsfora______presentation

Historically,givenoftentochiefcreativeexecofastudiowhogreenlitthe
production

i.e.,SamGoldwynpresents

Now,thistendstogotothedistributor

i.e.,ColumbiaPicturesPresents
NOTE:nounioncoversthiscredititisthesubjectofcontractnegotiation
2.ProductioncreditsA______production

Oftenthiscomesupmultipletimesinafilm,particularlywhentherearemultiple
financiers,eachofwhichclaimstheyareresponsiblefortheproduction

Canbeaccordedtotheproductioncompanythatmadethefilm

Occursoftenwhenanindependentprod.co.soldmovietoabigstudioat
somepoint(i.e.,atCannes)

i.e.,ColumbiaPicturespresentsaKillerFilmsProduction

SeparateCardwhenacreditisaloneonscreenforafixedperiodoftime

i.e.,ProducedbyStevenSpielbergthisisonscreen,alone,fora
coupleofseconds

Scrollingisdoneataspeedsothatthereissomepointwhenitisalone
onthescreenfor35seconds
o Groupofpeopleisasharedcard
Whathappensinacrawl?
Ascreditscrawlup,theseparatecardhastobeonscreen,alone,asits
crawlingup,foracertainnumberofseconds
Sometimes,youwillseesomethinglikeInAssociationWith

Thisisextremelycommoninmulticountrycoproductions

Thiscangoeitherwithapresentationoraproductioncredit(sometimesonone
cardandsometimessplit)

i.e.,ColumbiaPicturesPresentsinAssociationwithSilverScreen
PartnersorAKillerFilmsProductioninAssociationwithSilverScreen
Partners

Again,thisisacontractualcredit(bargainedfor)
3.Possessorycreditsifaccorded,goestodirector,onthetheorythattheauthorofthe
filmisthedirector

Mostimportantofthe3creditsfromthedirectorsPOV

Cametotheforeinthelate1950sideaisthatthedirectoristheauthorofthe
filmoriginally,thiswasaFrenchtheory

i.e.,AStevenSpielbergFilmorAFilmbyStevenSpielberg

ImpliesthatitsHISfilm
Again,thisisnegotiatedfornotcalledforbyanyoftheunions
Iftheadisonabillboardthedirectorscreditmustbeinabox
Theseregularlygetconfused,BUTtheyarealldifferent!
Creditsappearin2forms
o Onscreen
Before/aftertheprincipalaction
Singlecardcreditcreditaloneonscreenforafinitebutmeasurableperiodoftime
(eitheronastandalonecard,oronascrollbutitappearsbyitselffor34seconds)
Sharedcardshareacardwithanotherperson
Maintitle(clusterbeginningorendofthefilm):subsetofonscreen
Whatever is clustered with the director has right to be last credit before
principal action or last frame of movie then first of main credits after the film
is over
o Paidadvertisingprint,TV,fullpageads,etc(asopposedtoanonpaidadvertisement,like
aninterview)
Keyartmainartworkusedintheadvertisingcampaign
Hepointedoutinkeyartthereisthebigtitleaspartoftheartwork(artworktitle)
andtheresalsothetitleinsmallprintamongthecredits(calledstandardtitle/real
title/regulartitle)
Intermsofcreditlisting,whowantstobefirst?
o Forthecastitisalittledifferentthantheschemediscussedabove(wherepeoplewanttobe
closetothedirector)butforthecast,themainstarswanttobelistedfirst
Theexceptioniswhenanactorissetoffbyand...orandintroducingetc
o Cannegotiatepositioni.e.notlessfavorablethan3rd
o Whenyoudosomethinglikeinorderofappearanceorinalphabeticalorder,yourejust
makingitclearthatyourenotlistingbyorderofimportance,yourejusttryingtobefair
Howdoyouenforcethesecredits?
o Youaccordcreditbyreleasingtothedistributorthetypesofcreditstobegiven
Theproducerdeliversthenegative,thecreditsintheformofanopticalstrip(or
digital)principalactionoffilmandthecreditsareseparateelements
o Typicallygofirsttotheunion
o Ifthisisabovetheunion(youvecompliedwithunionrules)yougotocourt
o Mayalsogotoarbitration
o Whataboutthefailuretoaccordacredit?Whatsortsofremediesareprovided?Whattypes
ofclausesmightanemployer(morelikelytobesuedovercreditdispute)seekinorderto
protecthimselfincreditnegotiationintheoriginalcontract?
Almosteveryentertainmentcontracthas3or4standardprovisionsthatgive
thepartywhoundertooktoaccordthecreditsomeleeway(amongothers)
First,it'salmostalwaysprovidedthatfailuretoaccordacredit(akaabreach)will
NOTgiverisetoaninjunction(unfairtopreventmoviereleaseifjustonecreditis
missing)[antiinjunctionclause]
Second,damagesthemselvesarewaivedThereshallbeNOdamagesfora
casualorinadvertentfailuretoaccordcreditifsomeonemakesamistake,
nodamages

Ifitsnotcasualorinadvertentyouhavetoprovethatitwasrecklessor
intentional
Third,clausethatsayscureneedbeprospectiveonly
Anythingthatsalreadyoutthereisdonethusevenifafilmcomesoutand
givesanincorrectcredit,youcantmakeretrospectivechanges
Fourth,bindthirdpartiestocredittermsandyouarenotliableifthedownstream
assigneesdontperformprovidednobreachbya3rdpartyshallbedeemedbreach
byemployerhereunder
Ifsomeonebreachesdownthedistributionline,youcantcomeafterthe
employer
Thewaytogetthetalenttoagreeisthatyousayyouwillaccordallthird
partiestoassignthecreditAwillaccordacreditandAwillrequireall3rd
partiestoaccordacredit,thenyouhavecreatedacauseofactionforthe
artistagainst3rdparties;yourecreatingprivity/acauseofactionforthe
client
Thereasonforthisclusterofclausesisbecausedistributorsdontwantanyliability
forthingsoutsidetheircontrol(leveragedistributorshavethepower)
Togetaroundtheseclausesthatremovedistributorliability,lawyerstriedanew
theoryunderMarinov.WGA
Lawyerssaid,youresellingaproductthatisunfairlylabeledtothe
detrimentofthepublicbecausetheartistsnameisnotonit,sothe
distributoristhusliable
o Court:Afailuretoaccordcreditdoesnotconstitutereversepassing
off(creditnotthere);theonlythingthatscognizableiswhetherthe
manufacturer(distributor)isincorrectlylisted.origin of goods
correspond to manufacturer/provider not the services contained in
the goods)
o I.e.ifitsaysitsanMGMmovie,butitsreallyaParamountmovie,
thatmightbeacognizableclaim
ThisistheMarinorule,whichtriedtoinvoketheLanhamact,whichwasa
lawagainstsellingmislabeledgoods
How would you measure damages for the failure to accord credit?
o Theories for what the credit was worth (using expert testimony)
o What fee would you have taken to waive your credit?
Some incentive plans (to qualify for tax incentive) can have limit on
Usually has some relation to their pay (like 50% or pay)
Show that others have accepted absence of credit within this range
o What the party can demonstrate that they actually did on the project
o Whether those functions actually contributed to the films success
o Actual projects that the party is previously or subsequently associated with
o Value of credit taken as severed part of the contract is completely speculative
o Liquidateddamagesarenotindustrypractice
Screenplay By: writer afforded this credit was assigned underlying material (often accompanied with,
the note based on the novel or based on an idea)
o Writer has the right to choose screenplay by or written for the screen by
Teleplay: this is the television version (also working with underlying material)
Story By: underlying material later used to create a screenplay

Written By: either this person wrote both the underlying work and the screenplay, or it was all
original to this authoreverything appearing on the screen is the work of this personthis is a strong
credit (fusion of story by and screenplay by)

PaidAdvertising
o
DOCUMENT

CompareCitizenKane[1941]credits(notmany)toSleepWalking[2008]
Credits(many)

88Minutesterriblemovie

AllthreePcredits(presentation/production/possessory)intheright
order

MusicBy,CostumeDesigner,DirectorofPhotography,and
ProductionDesignertheseimportant,creativecreditstendtobeclustered
together,astheyapproachthedirectorcredit

ThereareTONSofexecutiveproducercredits

Sameperson,here,has"producedby"and"directedby"credit

HISTORY:Importantdirectorsseektheproducedbycreditdothis
b/ctheywantanOscar(producersgettheBestPictureAward)

Iftherearemanyproducers,onlythetop3producers
(determinedbyPGA)cangettheBestPictureOscar

LineProducerthejourneypersonwhomadethefilmfromatechnical
standpointbutdidntcreatethefilm(i.e.,putallthepartsofittogether)theseppl
usedtoendupgettingtheOscarwhentheydidntdeserveitsodirectorsstarted
seekingtheproducedbycredit;Britishism

"88Minutesisinthe3rdlinethisiscalledthestandardcreditthisis
thecreditagainstwhichyoumeasurethesizeoftheothercredits

Defaultyouwantyourcredittobeofthesamesizeandtypeof
thetitleofthemovie

Now,typically,allcreditsare100%ofthetitle

Ifyouwantdiff.colorsorsomethingelsegoofy,youhavetoget
awaiver(usuallygrantedaslongastypeisofthesamesize)

HannahMontanaTheMovie

StandardCredit/BillingBlockthisiswhatissentoutbyacredit
administratortoeveryonewhomightbeplacingads,domesticandforeign,inthe
movie

HannahMontanaTheMovieiscircledthisiscalledanartworktitle
b/citisusuallyrenderedinafancifulway
Verycommontoday,butnoteverymoviehasthem
MileyCyrusisbothabovetheartworktitleandbelowitbut
beforethestandardcredit/billingblock

Whatwasthefirstcardonscreen?

1.WaltDisneyPicturesPresents

2.MileyCyrus

3.HannahMontanaTheMovie

Notice,thedirectoristhelastcredit,aspercustom
TRANSFERCONTROLS

Page111continuumoftransfercontrolsembeddedinanagreementbetweenaninitialtransferee
andtransferorwithrespecttoanarrayofrightsthatmayariseandthatwhichtheoriginalgrantee
wantstohavetheirlunchhooksintheywanttohavecontroloverthoserights
InotherwordsContractuallimitationsontheabilityofagrantingpartytoexercise,ina
fetteredorunfetteredway,futuregrantsbasicallythereissomeinitialgrantbetweengrantor
(e.g.author)andgrantee(e.g.producer/buyer)andthepartiescontemplatefuturetransactions
theproducerwantsprioritytofutureworksbecauseofhisinvestmentintheoriginalwork
Usually,thesetransfercontrolsareattachedtoapriorgrantofsomekind,i.e.,agrantof
afirstnovelandtherearefuturenovelsyettocome(andthegranteewantstoexercisecertain
controloverwhathappenstothose)
Freenegotiation|RightoffirstnegotiationRightoffirstrefusalRightoflast
refusalOption|Approval
o Leftweakend
o Rightstrongend
o Strength/weaknessmeasuredbythepartythatcanexercisethecontrol(nottheparty
underthelimitation,a.k.a.thepartytowhomthecontrolhasbeengranted)
o Example:Partiesareengagedinaninitialrelationshipandenvisionafuture
relationship,i.e.,1)worksyettobewritten(i.e.,unwrittenJamesBondnovels),2)
worksthatalreadyexistbutwhicharenotthesubjectofthisgrant(setofbooks
alreadywrittenbutyoureonlystartingoutwithone),3)sequelrights,and4)when
onesetofrightsinabookisgrantedbutothersarewithheld(i.e.,motionpicture
andTVrightsaregranted,butlivestagerightsarenotgranted)
Sequelv.remakesequelisafollowuptothefirststory,andaremakeisa
retellingofthesamestory
Bycustom,asequelwasastoryinvolvingsomeorallofthecharactersata
differentperiodintime(prequelisactuallyamisnomer)
Traditionallyasequelisconsideredmorevaluable(becauseitpresumesthe
firstonewasabigsuccess);remakesrequireapassageoftime
Rebootaremakethatsomehowreconsiders,reimaginestheoriginalstory
morethanjustaslavishremake
Technically,rebootsandremakesare,ifnottwins,veryclosesiblings
o Inallofthesecases,theauthororco.thatacquiredtheworkfromtheauthorwill
perhapsagreetooneormoreofthetransfercontrols
1)Freenegotiationyouhavetherighttoaskforrightstofutureworks;ex:Ihearyoure
writinganewbook,Idliketobuyit
o Ifoneorbothpartieswanttotalktoeachotheraboutthosefuturerights,theycando
so
o NOobligationhereforeithersidenotmuchofaconstraintatall
o MutualOptionthisiszero/nadaeachsidehassomesetofrightsorsome
opportunitytoexercisenothing!
Butthiscomesupquasi/pseudolawyerwaytoexplainopennegotiation
thateachpartyhastherighttoasktheotherpartyforsomething
o Butweallhavethatrightinalmosteveryaspectofourpersonalandeconomiclives
youcanalwaysask
2)Rightoffirstnegotiation(ROFN)involvesanactualconstraintonthegrantorif
thegrantorwantstodosomethingwiththoserights,hehastocometothegranteefirst

o
o
o
o

o
o

Grantorhasrighttosellcontrols,butbeforehe/shecandoso,he/shemustgoto
originalgranteefirst
Typically includes specific provisions requiring a time-frame, conducted in good
faith
Grantor must present terms of proposed negotiation to grantee
Usuallygrantedintandemwithrightoffirstrefusal
WhathappensifgrantorhasthisROFNobligation,butinsteadofhonoringit,sellsit
toanotherstudiow/oanynotice?
ThishappensALLthetime
Isthisactionable?YES
Whatstheremedy?Damages?Hardtoproveactualdamages
Grantorcouldsaywewerenevergoingtomakeadealwithyou
anyway
Speculativeastowhetherornottheywouldhaveclosedthe
deal
So,damagesisaremedyw/omuchteeth
Counter?
Saywepaidforthe1stbook,andwouldhavepaidforthe2ndbook,
butwedidntevengetachance
Remedy?
Aninjunction
Youprobablyhaveanexclusivegrantonthe1stbook,andthe
effectiveremedyisnottojustletsomeonetakeawayyourfranchise
Ginsburgthinksthisisaseriousbreach!
Cure?
Thereneedstobesomenoticeinwriting
SaysomethinglikeIfwedontmakethedealin30days,thenthis
rightgoesaway
Ifnosetdaylimit(i.e.,30days),courtsdefertoareasonable
amountoftime
Theresadifferenceinreasonabletimebtwnrightstoa
regularnovelandahotnovel
Iffirstnovelwas$1mil,isthesequelworthmoreorless?
SequeltofirstHarryPotterisworthmoreitsafranchise,
hasaudienceawarenessitsafranchiseitsgot
followers
So,putinPriceshallbeNOTLESSTHANasumequalto
i.e.,150%ofsumspaidinallcategoriesforthefirstnovel
Thisisaradicalchangefrompreviousstudioclause(a
modelwhichexistedfor5060yrsinthemotionpicture
industry)
ROFNisarealobligationyoumustdowhatyousayyouregoingtodo
SupposeyouputinThefailuretoaccordROFN,bytheforegoingterms,shallgive
risetotherightofnegativeinjunction
Youareagreeingyouhavetherighttoseektheinjunctionwillactually
argueaboutwhetherornotyoucangettheinjunctionincourt
TheWatchmentransferrightbelongedtoFoxbutmoviegotmadebyWarnerBros

Sameissuew/DukesofHazard
Inbothcases,WarnerBrossettledquitequickly
SomehavearguedthatFox,inthesettlement,mademorebynotgettingthe
chancetomakethemoviethantheywouldhaveiftheymadethemovie
Whatmightyouseekifyouarethesecondstudiogettingthegrant?
Indemnityforbreach
Askyourgrantortoattestthatyourepresentandwarrantsubjecttoanindemnification
thatno3rdpartyrightsinhereintherightsbeinggrantedthatyouhaveclearandunfettered
rightyourself,presentlytograntwhatyouregrantingus
3)Rightoffirstrefusalcontractualrightthatgivesitsholderpowertoenterinto
businesstransactionw/ownerofsomethingbeforetheownerisentitledtoenterintothe
transactionw/anotherparty
o Howisthisdiff.fromROFN?
ROFNIhavetocometoyoufirstwhenIaminterestedinselling
ROFRfocusonrefusalgrantorisactuallyallowedtotalkw/a3rd
partyandtosetsomeprice
LetssayBook1wentfor$1miltoParamount;grantornegotiates
noww/Sonyandsetsnewprice,i.e.,$3millionBUTCANT
CLOSEb/cburdenedbyROFR
Beforeyoucanclosew/a3rdpartywhoisreadyand
willingtobuy,youHAVETODISCLOSEto3rdparty
theROFR(ashort,fixedperiodoftimewhenyouhaveto
gobacktofirstowner)
o Ifyoudontdisclose,itsabreachofcontractw/
firststudio
o Also,youcouldbeintroublew/the2ndstudio(they
mightthinkyouarejustusingthemasaleverjustto
getthepriceup)
Sothereisafixedperiodoftimewhereyoumustgobacktoholder
ofROFR(Paramountinthishypo)andsayIamreadytosellfor
$3mil.Youcanmatchthisorrefuseit.
IfParamountrefuses,thenIcanclosewithSony
o ROFRisusuallyshort,i.e.,2days,72hours,1week,etc.
o Whenthegrantorgoesbacktotheoriginalgrantee,therearetwothingsthe
originalgranteecando:matchoroverbid(determinedcontractually)
Matchingright:paythesamepriceasthethirdparty
OverbidRight:paythesamepriceasthethirdparty,plussome
additionalincrement(suchas5or10%)rewardstheadditionallegworkthat
thegrantorhadtodobynegotiatingwithanotherparty

HYPO

OverbidRight
Iamreadytoclosefor$3mil(offerbyStudio2)
Idontthinkitsfairthatyoupaysamepricetheyoffered
IwillonlytakeofferfromtheStudio1iftheypayMORE
than2ndstudiooffered

So,sometimesthereisamatchingright;othertimesthereisan
overbidright(youhavetoputtheseintothecontractandspecify
whichistherequirement)
Concern?
Afakebiddingwar(settingupaphony3rdparty)[thisis
calledshillbidding]
Thus,youarerequiredtodisclosethenameoftheother
partyinthebiddingwarsoyoucancallthemandcheck
theprice(andknowthattheyexistandarereal)
AttheinstantyouturndownaROFR,obligationjustgoesaway(expunges)

Whathappensifthepartythatofferedmorebreachesorgoesbankruptor
rescinds?DoesholderofROFR,aftertherefusal,haveanymoreholdon
thepropertyatthispoint?
NO!
o Directorscanhavethesetoensurei.e.,thattheygettodirectthesequel
4)Rightoflastrefusalifyouhavelastrefusal,youalmostautomaticallyhavefirst
refusal;itsacontinuingrightoffirstrefusal(thedifferenceisfirstrefusalisaonetime
eventbutalastrefusalisacontinuingevent)
o Hegavetheexampleinthereaderwherearightoffirstrefusalwastreatedasaright
oflastrefusallooksverysimilartoarightoffirstrefusal
o HYPO
Igota$3milofferfromanotherstudio;Iwenttothestudioholdingthe
ROFR(LetssayParamount);theyturneditdowndealw/2ndstudio,for
somereason(i.e.,breach,bankruptcy,dispute,claim,lawsuit,etc.),does
NOTclose
ParamountalsohastheROLR
InowgotoLionsgate,whichoffers$5mil
Beforebeingabletoclose,youhavetogobacktoholderofROLR
(Paramount)
AROLRisacontinuingobligationtocomeback,inthishypo,to
Paramount(theholderoftheROLR),everytimethedealw/the2 ndstudio
fallsthrough
Youhavetokeepcomingbackif,foranyreason,theintervening
dealsdontclose
Thiscreatesaninterestingproblemthepartytryingtobid(nottheoriginal
grantee)hastobidwhattheythinktheprojectisworth,buttheycant
underbidforfearoftheoriginalgranteematching
Whataboutnonmonetaryterms?
o Youcansaythattheonlymaterialtermsarepurchasepriceandmaybecontingent
compensation
o ORyoucansaythereareothermaterialterms,i.e.,theofferhastobefroma
similarlysituatedstudio/distributorcapableofacomparabledomestic/foreignrelease
Some$3miloffersareNOTequali.e.,abigstudioversusatinyindependentstudiomaking
thefilmforthesameamountofmoneyabigstudiocanactuallyplacethefilmintoworld
widecommerce,whereastheindependentstudiocouldgobankrupttomorrow

5)Optionanoptionistheabsoluterighttobuyitonfixed,knowntermsusuallyupon
writtennotice/exercisebeforeexpirationofoption,andoften,thoughnotalways,
accompaniedbytenderingpayment
o Forafixedterm,forafixedprice,partywhoholdstheoptionhastherighttoexercise
purchaseofsomethingtimeisoftheessence
o Youhavetheabsoluteabilitytopreventeveryoneelsefromgettingit
o Untilexpirationofoption,youhaveabsolutepowertobuyit
o Howtoextendanoption?
Offermoremoney!
o Inthesetypesofdeals,itisverycommontoallowfortherealityofthebusinessthe
timeittakestoreadyaproperty
i.e.,whenyouoptionanovelyouwanttoallowenoughtimetocauseascript
tobewrittenandtoattachadirectorthisusuallytakes23yrsso
structureofthesedealstakesintoaccountthislagtime
o HYPO
Bytradition,optionpriceiscreditableagainstpurchaseprice
3mil=purchaseprice
1mil=optionprice
3mil1mil=2mil(dueonanexercise)
Oftenyoucannegotiateanextensionterm(extensionmoney)
often,itsnotapplicableagainstthepurchaseprice,soyoustillhave
topaythe$2mil
Whatsthediff.btwnanoptionandapurchasew/abonus?
Thedifferenceiswhoownsitdiff.iswheretitleis
Ifoption,titlestaysw/grantoruntiltheexerciseoftheoption
Ifpurchasew/bonus,titlepasses
6)Approvalonepartyhasthefinalrighttoapprovesomeactionbytheotherparty;thisis
adiff.sortofbeast,hencethesquigglyline
o Usually the right of one party or the other to not necessarily acquire rights but
exercise some constraint over how theyre exercised
o i.e.,whentalentgetstoapprovehair,makeup,etc.
o Strongrightifyoudontgettheapproval,itamountstoaveto
o Itsusuallynotaboutthefundamentalrightitselfusuallypartyw/rightof
approvalwantstoexercisesomecreativecontrol,i.e.,whothedirectoris,i.e.,an
artistapprovingwhodoestheirhair/makeup
o ContractProviso:suchapprovalnottobeunreasonablywithheld
Approvalisareasonablerighttosayyesorno,BUTithastobe
exercisedreasonably
Sometimes,therewillbeaparagraphpreapprovingacoupleof
entities/parties
i.e.,anauthormightwanttoapprovethedistributorofthemovie
(basedonthebook)ifitsnotoneofthese,youhavetocome
backtomeandgetmyapprovalbasically,themajorstudiosget
preapprovedandothersapprovedbywriterlater
Authormightalsowantfinalapprovalofbudget,cast

Ifleftunnegotiatedorwordedbadly,anapprovalrightcouldbeleftsoabsolutethat
inactionordisapprovalcanleavetheotherpartyfrozen;couldpreventthetransferof
rights

DISTRIBUTIONFINANCINGSOURCESANDCYCLES

GoldStandardfordistributionfinancePFD(production,finance,distribution)
Ifyougetthis,yourenotgoingtobelookingveryfarforotherfinancing
Notveryeasytogetthis
Othersourcesoffunding:
1)PRESALES
o A)Territorialpresales;B)Loansagainstpresales
o 95%offilmsdoNOTgetPFDs(asinglemultiterritorydealonapresalebasis)
o Whatkindofdistributionrightsmightyoupresell?
o Foreignrights,domesticrights,medium(TV,internet,etc)
Sometimes,theUSterritoryisactuallytheUS&Canada(meaningtheyare1
territoryforfinancingpurposes)
Canadais1011%oftheNorthAmericanmarket(ashighas20%ifspecialty
film)
o Youmightbeabletopresellthepictureforthetotalamountofthepictureonacash
basis
o Mostofthetime,ifyousellapicturefor100K,nobodypaysyou100Krightaway,
unlessthepicturehasalreadybeenshotanddelivered
o Letssayaterritorysellsfor100K
E.g.Yougetanadvanceof10k,then90Kgetspaidondelivery
ToWho?
Towhoeverisspecifiedinthepresaleagmt
Youdeliveraccordingtoascheduleandoftenyoudeliverto
thelaboratory(i.e.,CFIHollywood,Technicolor,etc.)
ratherthanthedistributionco.
Eachagmtspecifiesthetechnicalaspectsofdelivery,i.e.,
whatexactlyconstitutesdelivery
FinishingafilmdoesNOTmeanyoudeliveraDVDofthe
filmdeliveryofthefilmmeansyouhavetodelivereither
certainelements,i.e.,aninternegative,aninterpositive,2
prints,atextlessmaster(thefilmw/oanytitles),sound
elements,ORyoudeliveranaccessletterwhichsaysall
thosematerialshavebeendepositedataspecificlab
Thenlabcertifiesthatalltheelementsspecifiesinthe
deliveryschedulehavebeenreceived
o Youcansellafilmformorethanitcosts(so,youknowthebudgetis100mil,butyou
preselltheworldformorethanthat)
Thereisnoproblemw/oversellingthebudgettheexcessissimply
profittothecompanysellingit
Infact,youexpecttogetbackmorethanthefilmcostyou
YouWANTtomakeaprofit

Whatyoucantsellismorethan100%ofeitherthe(equity)ownership
inthefilmormorethan100%ofthecontingentproceeds
o Youcouldintentionallyselllessthanthebudget(thisissomewhatriskybutcouldbe
rewardingiffilmdoeswellandyoufigureoutanotherwaytofinancethefilm)
TheGAP=thespacebtwnwhatthefilmcostyouincashtoproduceand
themoneyyouhaveatanappropriatetimeduringproduction
o HYPO
Filmcosts10mil
Chancesarethatinthisbudgetis~1mil(this#varies)thisnumberdoesnot
havetobeextendedduringproductiontothirdparties
i.e.,theProducersFee(producermightelectnottotakethisfee
thus,thismoneydoesNOThavetoberaisedduringproductionifthe
produceriswillingtotakearisk)
Normallywhenyoumakeafilm,youarepayingmoneytothirdparties
(actors,writers,crew,locationservices,travelservices,hair,makeup,etc.)
HYPO
Letssay65%ofbudgetisraised
Gapis35%
Producersfeeisinthisgap
Ifproducerdoesntneedtheproducersfee,thenthatmoney
doesnotneedtoberaised
So,theproducerfeeisinthebudget,butnot100%ofthe
budgetneedstobespent/raised
2)LIBRARYASCOLLATERAL
o HYPO
ProducerorProd.Co.involvedhasaLibraryoffilmsindistributionwith
availablerightsorwithabundleofrightsthatareproducingincome(i.e.,
fromhomevideo)
Libraryhassomefilmswhichhavenotyetbeensoldtocertain
territoriesorcertainmedia(i.e.,PayTV)butwhichcouldbesold
Ex)Amoviehasgonethroughonecycle(usually57yrs)in
foreignTVandtheProd.Co.isassessingwhatthenext
foreigncycleisworth(TVgoesupanddowninvalue
dependingontheshowanddependingontheforeign
market)
Wheremightyougoafteryouhavedecidedtoselltonomoreterritories,to
gettherestofthebalancewhenyouredonesellingtoterritories?
Goalistocashifythelibrarydrawvalueoutofitgetmoney
outofitw/osellingit
Usethebundleofrightsascollateral(youarenotsellingthelibrary
whenyoudothis)
Borrow1020%more(youthinkthisisNOTriskyb/cthe
twopartiesarethinkingthateither1)thecollateral(money
comingfromtheLibrary)willbackupthepotentialofnon
receiptOR2)whenpictureisdone,Iwillselloffthose
rightsforamuchhighervalue)

Whenapictureiscompleted,thishasahigher
incomepotential(thanwhenpictureisnotyet
completed)
o InotherwordsSothecompanygettingtheloanis
thinkingtheywillbeabletopayitoffeither1)w/
furtherrevenuefromtheLibraryOR2)from
revenuefromthefilm
Thereisasetofbanks/lendersthatspecializeinfilmfinancing
oneofthetoolstheyuseinthecollateralizationoftheirloansisa
library
o GinsburgsCo.almostalwaysdecidedtoraisejustenoughmoneytomakethe
projectandthentaketheupsideafterwardsinternationally
However,whentheirlibrarywasbigenough(1020titles),hesolditfora
multiplebuyerboughtthelibraryandboughtthecompanywithallofthe
developmentprojectscontractedGinsburgsco.tocontinueworkingfor
two4yrcycles(first4yrswerecontractedfor;second4yrswerebasedon
anoptionthatthebuyercouldchoosetouseornot)
Thisisanexampleoftakingthechancethat,onaverage,Iwilldobetterby
holdingoffandsellingthegaplater
3)BANKLOANS
o Howdoescollateralwork?
Itsjustlikeamortgage
Iftheydontpay,youfileaUCC1formintheCopyrightOfficeandin1or
morejurisdictionswhereyouwanttobeabletoenforcethesecurityinterest
IntheUS,youwouldtypicallyfileinCA,NY,andtheresident
statesoftheborrowerandthelender,maybeacoupleofothers,and
sometimesinkeyforeignterritories(ifthereisacentralregistration
systemforthatkindofrightundercopyrightinthatterritorynot
everyterritoryhasthatkindofregistrationsystemforencumbered
copyrights)
So,youfileevidencethatyouhavemortgagedtheseproperties(meaningthe
copyrightisencumbered)andifyoudontpay,theycanforecloseonthem
theygetthepropertyback
Essentially,theyhaveadeedoftrusttheyarenowownersfor
purposesofliquidation
LOOKATDOCUMENTNotificationofDispositionofCollateral
o Onceafilmismortgaged,iftheydontpayitback,thelibraryfilmsgetsoldto
thehighestbidderatfairmarketvalue
o
Lenderthinksifworstcomestoworst,Iwillsellthemortgaged
property
o Interestwhatyoupaywhenyouhavemoneytodayandyoupayitbacklater
o Discountyouarebeinglentmoneytodayagainstmoneyyouwillhavelater
thepresentvalueofafuturesum(soifyouwillhave$100inayear,andinterest
is10%,youwillbeleant$90now)
SOFAR,wehavetalkedaboutpresalesandloans
Whatelsecanyousell?
4)EQUITY
o

Equityinterests/investmentsinthefilmyoutakeonbusinesspartners(NOTE:
thisisNOTthelegaldefinitionofpartners)
o Whatdoesabusinesspartnermean?
Alegal,technicalpartnerhasunlimitedliability,jointlyandseverally,with
theotherpartners
Limitedpartnersdonttheyhaveliabilityuptothelimitsoftheir
investmentgenerally(buttheresalwaysageneralpartnerwithwhomtheyre
partneredwhohasunlimitedliability)
o Here,apartnerissomeonewhoyoutakeonwhojoinswithyoutoacquire
equityinthefilmyouareprobablygoingtobethemajoritycontrolling
interest
o Intheory,100%oftheequityownershipofthefilmisavailable(thefactthat
alreadyi.e.,65%ofthefilmhasbeensoldoffinpresalesdoesNOTmatter
b/cthebuyerswereNOTequityinvestors)
o Equity=Yourebuyingashareofeithertitleinthemovie,ORashareof
therevenuethatflowsfromtheproject
Theequityisintheownershipvehicleowningashareofthatwhichownsthemovie
Typically,theseare1picturevehicles(b/ctheownersofotherpropertiesdoNOTwant
tobecrosscollateralizedtheydontwantthewins/lossesfromthispicturetooffsetthe
wins/lossesfromotherpictures)
o KeystoneFinancing
Thisisthelaststonethatgetsputintoprovidethesupportforthefilm
(nameisbasedonthelaststone,shapedlikeawedge,thatwasputintoan
archtomakeitstableinRomantimes)
Thelastinvestoringetsahighershare(premiumvalue)
LIFO
LastIn,FirstOut
i.e.,Keystonefinancerputsin$2milofthe$10milandwants50%ofequity
thisisnormal
Whatdolendersget?
o Theygettheprincipal(themoneytheyleantyou)PLUSinterest,thatsit![versus
equityownerswhogetthebenefitsofthefilm]
o Itdoesntmatterhowwellthefilmdoes(theydontgetmoremoneybackiffilm
makesalot)
5)SUBSIDIES&INCENTIVES
o Thereisanotherwholesourceoffundingsubsidiesandincentivesthis
areahasgonewildinpast10years
o Avg.studiofilmcosts$6575milliontomake
o Offeredbystatesandforeignjurisdictionstoincentivizeyoutocomethere
andfilmbecauseyoullspendmoneylocally,paytaxes,hirelocalpeople
theideaisthenetofthisvs.theincentivesyouget,thestateswillearnmoney
(ifthesystemworks)
o Theydifferfromplacetoplace
o Someofthemrequireyou,ineffect,topartnerw/alocalproducer
Why?b/cthesubsidyisconditionedonprovidingataxbenefittoalocaltaxpayer
o

So,ifyourecomingfromLA,chancesareyourenotataxpayerinLouisiana(where
yourefilming)generally,youhavetobesomewherefor180daysinorderfortaxes
fromthatstate/countrytoattach
So,toactuallygetthebenefit,theproducersellsthebenefit(whichhecantusecuzhes
notalocaltaxpayer)toalocaltaxpayerandmakesthemoneythisway
Legislaturemakesthebenefitsaleable/transferrable(b/cproducerhas
abenefithecantusesinceheisnotataxpayeroftheforeign
location)
o Talkedabouttaxshelters,whichdontexistanymore,buttransitionedintotalking
abouttaxincentivesthatstilldoapply
o Subsidy(taxbenefit)isusuallybasedonthetotalamountofmoneyyouhavespent
inthestate
Deductionreducesgrossincome
Creditreducestaxascalculated
o Severaldiff.schemesofsubsidy/incentivization:
1.Provideadeduction/creditusually,ithastobetransferablethereare
variousschemeoftransferabilitytheeasiestisthatyoucansellit
Letssayyousella$1milcredithowmuchdoyougetfromthe
localtaxpayeryousoldittowhowantsthetaxcredit?
Thereareintermediarybrokersthattradeinthesesold
likesharesso,theresadiscountratesobuyer(local
taxpayer)getsabiggercreditthanhepaid(i.e.,gets$1mil
whenheonlypaid$850K)
Youneedthisdiscount;otherwisetherewouldbenopoint
forthelocaltaxpayertobuythecredit
o Subsidies:grant(muchmoretypicalin,thoughnotlimitedto,foreigntaxincentives)
DirectSubsidiesgrant;yousimplygetthemoney;whenyougotoa
jurisdiction,andifyouspendi.e.,$1mil,wewillgiveyouincashi.e.,5%or
8%;anotherwordforagrant
Thismoneyusuallytakesayeartogettoyou(somakesuretobuild
ininterest)
Subsidygoesfromincentivizinggovttoincentivizedparty
Canbeadeduction,credit,orchecksomethingofdirect
economicvalue
Contrastwitharebatewhichyougetbackafteryouspendmoney
deferredincentive
Anothertypeofdirectsubsidy:
Insomeschemes,youhavetohavealocalpartner
Fordecades,thewayyougotthebenefitinCanadawasby
nominallylettingaCanadianCo.produceit(onpaper,youhadto
signeverythingovertotheCanadianCo.)b/ctheCanadianCo.
thengotthebenefit,itgaveyouback85%ofit
Historically,ifyouproducedamovieinCanada,yougotfederaland
provincialbenefits,buttogetthebenefits,youhadtobealegitimate,
certifiedCanadianproducer,whichAmericanswerent
So,AmericanswouldruntheirprogramthroughaCanadian
ProductionCo.

TherearelawfirmsinCanadaw/clientswhospecializein
becomingthiskindofpartner
Soifthepartnergetsa$1milbenefitfromtheCanadian
govt,hewillgive$850KtotheUSCo.
Thepartnerisbasicallycharginga15%feeforlettingthe
foreignproduceraccesstheCanadianincentivizationplan
Remember,theAmericanProductionCo.doesallthework
intermsofmakingthemovie/tvshow,soitmakessensethat
theygetmostofthemoney
So,basically,youeithersellthedirectsubsidyoryoupartnerw/a
foreignco.togetthedirectsubsidy
IndirectSubsidiesSometerritorieshaveadomesticpolicywherebythey
requirethattheyhavetohaveacertainamountofprogramming(i.e.,10%or
15%)ascertifiedasbeingdomestic,i.e.,Canadian(showsaboutCanada
useCanadianactors,writers,directors,composers,locations,etc.)
Bycreatingaquotaforprogramming,thegovernmentindirectly
raisesthelicensefee
IfanAmericanshowsoldtoCTVitmaybeabout250k,at
thesametimealegally/certifiedCanadianshowofsimilar
budgetcouldriseashighas$1milforlicensingfee
ThustheCanadiangovernmentisntdirectlypayingthese
Canadianshows,buttheyarecreatingasystemwhereby
CanadiandistributorsmustpaymoretoacquireCanadian
programming
ThisworksbecausethereistonsofAmericanprogramming
butthereisnotthatmuchCanadianprogrammingthefew
peoplethathaveCanadianprogrammingthushavetheir
productpricedrivenupandtheCanadiannetworkshaveto
competewitheachotherforthisprogramming
Scarcitydrivesthepriceupthissystemartificiallyraises
thevalueoftheprogramming
Someterritoriesworryabouttheirowndomestic,culturalneeds
wantacertainamountofdomesticprogramming(usuallyonTV)to
ensurethattheirbroadcastschedulesarenotjustidenticalto
Americas(fordecades,thisusedtobethecaseprivateCanadian
actorsjustboughtabunchofAmericanshows)
So,certifiedCanadianproductionsbecomeacomparativelyrare
goodthisisworthmoremoneytotheCanadianbroadcaster(they
willpaymoreforthis)
Canadianbroadcasterhastohaveacertainamountof
Canadianprogrammingtokeepitslicense
So,AmericanproducerslearnedhowtomakeanAmericanshow
lookCanadian
So,Americanproducerswereabletoselltheirshowsfor
morethantheyotherwisewouldhavebeenabletosellthem

Whenyouoryourclientsareoffered,usuallyaforeignfinancingscheme,tothe
extentyouarepromisedgreaterthan10%benefitofyourbudget,youshouldexpect
thattotheextentthefineprintexceeds10%,thentheexcessisprobablyanequity
component
Thisiswhereyoufirstseetheblendofinvestmentandsubsidy
So,therearesubsidy/equitycombinations
Therearealsoloan/equitycombinations
o Aretheremixedflowsofmoney?
ForeignTaxIncentives
Sometimesindealsoffered,particularly,butnotexclusively,intheforeignmarket,
sometimesforeigninvestors,throughaforeigntaxincentive,cangenerate10%(ingeneral)
oftheproductioncostsexpendedintheforeignjurisdiction
o Youhavetospendthemoneyinthejurisdictiontogettheincentive
Whatistheforeignlocalegettingoutofit?Whyaretheygivingyouthistaxincentive?
o Youspendmoneythereinavarietyofways:
1.Youmaybeandprobablyarehiringlocaltalent(themorelocaltalentyou
hire,thehigheryourforeigntaxincentive)
Theforeigntaxincentiveplansworkbetterwhentheproducerhasto
bringfewerpplfromtheUStomakethefilm
Thenumberofpplthattheincentivizingcountry/jurisdiction
canprovideiscalledtheproductiondepth
Strongjurisdictioncanaccommodate56crewsfromlocal
staff
Weakjurisdictioncanonlyaccommodate12crews
Whenyouhavetoflyincrews/actors,youhavetopaythemper
diem(theirdailylivingallotment)
So,thelesspplyouhavetoflyin,thebetterforyouintermsof
money
Thereislessandlessreasontogototheforeignjurisdictiontofilm
iftheycantfieldafairlydeepnumberofcrewsatonetime
2.Localtaxationpaidtoforeigngovt
3.Localcatering
o Foreigncountrythinksiftheygive10%ofbudget,theyget20%backinmoneyspent
intheircountrytheyremakingmoney(otherwise,theywouldntdothis)
Foreigncountriesdoprovidedirectsubsidies,whereallyouhavetodoisbringthefilmthere,
andtheyllgiveyoumoney;andtheyalsoprovideindirectsubsidies(whereyoucreatea
locallyproducedgoodthatisrareandthusfetchesahigherpriceuponsale)
Problemwithtaxcredits:ifyouregettingtaxincentivesinaforeignjurisdiction,howdo
youreapthebenefitsofthis(youfiletaxesinCA,butyouretryingtogetacreditin
Louisiana)
o

IndirectSubsidy=diff.inpricebtwnwhattheAmerican
showwouldhavesoldforandwhattheCanadianshow
actuallydidsellfor
Thisisthequotasystemwhenyouhavetohaveasetpercentageof
certifiedlocalprogramming

TaxcreditmarketcreatedyouspendmoneyinLouisiana,youtakeyourtaxcredit
toabrokerinstate,thebroker
AnotherForeignTaxIncentiveMechanism(usedtobeusedfrequentlyinCanada)frequent
mechanismbywhichindirectsubsidycanbesimultaneouslyofvaluew/adirectsubsidy;
whiletheforeigntaxincentivecreatesatransferableasset,thismechanisminvolvesallying
yourselfwithaforeigncountryjusttogetataxbreak
o Sometimes,foreignproducergetssubsidizedforbringingfilmthere(somewhere
around10%)
o Sometimes,veryelegantproductionscanbecreatedwhichqualifyunderaparallel
schemecalledInternationalCoProductionschemesbywhichcountries,via
treaty,agreetocooperatetocreateTV/movies,andifcertainconditionsaresatisfied,
theywillsimultaneouslybecertifiedaslocalproductforBOTHcountries(asifthe
filmwere100%madeinbothcountries)
Thisiscinematicalchemysincethisisntphysicallypossible
o CoProductionacertifiable,signed,internationaltreatythatprovidesfor
certaintaxandotherbenefitsagreedtobytheotherparties
Theseweredesignedinthelast50s/early60sasameansbywhichDavid
(smallerforeigncountries)couldfightGoliath(US)
Goalwastomakeitsoothercountriescouldmakefilmsofsimilarqualityto
theUS(filmsthatcould,atleasttheoretically,competew/Goliath)
o NOW,therearenomorecoproductiontreatiestowhichtheUSisa
party
o Butlotsofothercountrieshavemadecoproductions,i.e.,AngloFrenchCo
Production
o Thereisaloosermeaningofcoproductionwherefilmslistlike20co
producers(thisisNOTthetruetreatycoproduction)
Theygetrighttodistributefilmintheirhomecountry,andundercertaincircumstances,
maybesometreatybenefits
TreatybenefitsbtwncountriesthatarealreadyEUmembershavesortofdeclinedin
recentyrsbyvirtueofthephilosophyoftheEU,wheretheyseethemselvesassisteror
siblingstatesw/inapolitical,economicunionso,theyalreadyprovideforcrossborder
laborw/otariffsandotherrestrictions
o So,greatestvitalityofcoproductiontreatiesisbtwnanycountryintheEUand
formerCommonwealthcountries(i.e.,Australia,Canada)
ThereislittleincentiveforEUcountriestohavecoproductionsw/each
otherb/coftheywaytheEUissetup
o ExampleCanada
10points:story,writer,director,composer,actor(1stor2ndlead),editor,etc.
Thesearepoints
Ifyougetatleast3pointsyoucanbeminorpartner;ifatleast6
points,youcanbemajorpartner
Sometimes,youcangetwaivers
Inalmostallcoproductionsthereisamajoritypartnerandaminoritypartner
(rarely50/50)
Stilltreatedasfullylocalinbothcountries
HYPO
GinsburgmadefilmaboutplottoassassinateGorbachev
o

Theywantedtogetitintotheatresb4oneoftwothings
happened:a)GorbachevwasoutofofficeORb)Gorbachev
wasactuallyassassinated
o Theygotitinb4a)
DirectorNewZealand;ComposerUK;FirstLeadUS;
SecondleadUK;EditorUK
ShotcompletelyonlocationinHungarylookedliked
SovietUnion
o Shotthereb/ctheywantedHungarystreaty
connectionw/Canada
TherewasanexistingtreatybtwnHungaryandCanadaand
GermanyandtheUK
So,thisfilmwasaHungarianCanadianGermanUKCo
Productionbut,afterblowingawayallthesmoke,it
endedupa30/70CanadianUKproduction
o Greatdeal!
o Youcanstackelementsaslongasallrequirements
arefulfilled
o HungarianTVrightsinc.indirectsubsidy
o Also,anindirectsubsidyinGermany(indirect
subsidiesin2countriesatthesametime)
Ifitsaminorcountry,theyjustwantabitofinput
IfitwastrulyjustaCanadianUKCoProduction,thenit
wouldhavehadtohavebeenshotinoneofthosecountries
Aslongastreatyissatisfied,youcanbringonotherpartners(countries)
Youendupw/localbenefitsbasedonprobablynomorethan10%ofthe
localparticipation
Iffilmmakersinthe2countriesactuallytakesplitownershippositions,then
theymightgetlocalbenefitsANDanequityshareontopofit
Thisleadstogreaterthan10%benefit
Inexchangeforthecreativecompromisingandblendingyouhavetodoinaco
production,i.e.,sellingforeigntalenttoanAmericanbuyer/network(e.g.,therewas
atimewhenitwashardtoimagineHelenMirrenstarringinanAmerican
production),theproductiongetsleveredintoalotofmoney
Mainbenefitofatreatycoproduction,asidefromanylocalsubsidieswhichyou
wouldhavegottenanyway,w/orw/othesuperveningtreatyrelationshipbtwnthe2
parties,the2partnersincoproduction,bothgetbenefitofbeingfullydomestic
productionsintheirhometerritory(eventhe30%partnerisdeemedfullyCanadian)
Itsoftennoteasytogetpartiestoagreetodoacoproductionbecauseitshardto
convinceeveryonethattheresultingcoproductionwillbebeneficialfactorsto
considerwhendedcidingwhethertotakeonacoproduction:
Absolutevalueyougetoutoftheproduction(indirectorindirectsubsidy)
Creativeorotherbenefityougetfromthemix
Makesuretoadheretolocallaw/customtogetallthebenefitsofatreatyco
production(costforlocalcounsel)
Isitworthittotransferanentirecrewtoanothercountrytogetthebenefitof
thetreaty?

Delayevenifyouapplyforthebenefits,youdontgetthembefore
productionorevenrightafterproductionyouonlygetthebenefitafter
submittingauditedrecordsofeverything(thusyouhavetobeabletofront
thebenefit)
6)CROWDFUNDING:
o Postedachartthatcomparescrowdfundingtotraditionalinvestment
o BoostedbytheInternet
o Therearesecuritiesregulationissuesassociated
o ThenLendingClub,CircleUp,etc,othercompanieshavetreatedcrowdfundingas
thoughitreallyisasaleofasecurityandworkingwiththeregulations
Hethengavesomecrowdfundingregulationsthatcanallowcapital
formationtoproceed(foranytypeofbusiness,includingfilms)without
havingtodealwithsecurities
Thisstillraisessomeissueswhatisdefinedasaproject?IsaTVshowa
project?Oneepisode?Oneseason?Ifpeoplearecontributingmoneyto
differentepisodes,howdoyoudeterminewhogetswhatshareofprofits
whenyousellaboxsetoftheseason?
o KansasandGeorgiahavecreatedexceptionstoallowcrowdfundingandtheSEC
seemstobewillingtoletitslide
FINANCINGCYCLESboomandbust
Phenomenonthereisarepeatingcycleoffinancialschemes/fadsthatcomeintoandfall
outofvoguew/uncannypredictability;riseofmethod,abuse,fall
o
Ppl(i.e.,jurisdictions,hedgefundmanagers,entrepreneurs,etc.)attractsomeofthemost
gullible/thirstyusersofmoneyproducers
o
Risesandfallsofinvestmentschemesinmovies:

First(beforeGinsburgstime):USTaxShelters

1)CanadianContentCanadianTaxBenefits1977startedin1975inthe
firstgenerationofbenefits,theyhadalocalincentivizationscheme,wherebythey
providedforunbelievablegoodiesinitsfirstgenerationthegoodieinthefirst
generationwasofmoniesinvestedinCanadianfilmsupuntilabout1979,the
goodiewas

Letssayyouspent$10milonmovieyougottodeduct10%infirstiteration
ofCanadiantaxsheltersbenefitsCanadiantaxshelters

GoalistobenefitlocalCanadians

Whoalsobenefitted?

Americanshugeamountsofmoneyweregeneratedinto
Americanpicturesbythisdevice
o
Canadianpartnerjustwantedtobeapartnerinthefilm

GovtcaughtonSo,theychangedtherules

7686institutedAtRiskRules,meaningyogyoureallhadtobeon
hookforthemoney

Iftheyinvested10mil,theywouldputup1milincashandborrow9mil
however,theywoulddeduct50%ofthe10mil

so,for1mil,theycoulddeduct5mil

ledtopotentialforabuse

2)Canada2

Anechoofthefirstone

ThereisalwaysaCycleof:Inception,PeakInvestment,Abuse,Changeinthe
Rules,Decline,AddSomethingNew

3)NextcameBritishContentfilms

Tonsoffilmsgotmade(therewasaCanadianBritishtreaty)

Hadagreatcoupleofyears

Thentheruleschanged

Wentintodecline(periodofindecision1)ruleschanged,and2)allof
theCanadiannetworks,whichwerethecustomersforthesethings,allof
theirlicenseswereabolished,soeverybodyhadtoreapplyandgetanew
licenseso,theownershipofBritishcommercialTVchangedtheplayers
changed)

4)Next,bigperiodofforeignbanklendinggivingawaymoneyshoveling
moniesintofilms

ByproductoftheseSchemesfilmsgotmadethatshouldneverhavebeen
made

5)JapaneseBubbleeverythingyouboughtinJapanwentupinvalueduetoa
colossaleconomicboom

CrashithasbeentenyrsandJapanhasstillnotfullyrecoveredfrom
thatcrash
6)GermanBubbleGermanStockMarket&AmericanStockMarket1999
2001Americanshadalargebubble;Germanywasinvestingtonsofmoney
Americanssmelledforeignersw/money(likesharksinwater)
Germanstockmarketcollapsedbillionswerelost
7)InsuranceBackedLendingaround1997,abunchofA.insuranceco.s
(thathadsortofgottenexperienceincompletionbonds)decidedtoissueinsurance
policiesthatifthemoneythatthebankslendisnotpaidbackbydistribution,wewill
payofftheinsurancepolicywewillensurethemarketperformanceoffilms
Ins.Co.swerenotgoodatpredictingwhichmovieswouldcatchfire
Whenfilmsflopped,Ins.Co.saiditwasnotcovered(didnothonorwhat
theysaidtheywoulddo)theseIns.Co.sdidNOTpay!
8)HedgeFundswhynotformahedgefundformovies
Billionswerelostinmoviehedgefunds
Butthebrokersmademoney;investorsthoughttheywouldmakemoney
someinvestorsjustdidntcareintheend

Thesecyclesofboomandbustgoonandonandon

Wheredidmoneythatyougotfromtheseschemesgo?

Thisisalloutsidestudiosthisisallindependentfinancing

Moneytendedtogotothegap

Ifmoneywenttoprimaryfinancingoffilm,theeventuallosswaseven
bigger
Ginsburgsuspectsthatcrowdfundingwillbethenextriseandfall
o
MoorethinksitsinadfinancingGinsburgdisagrees
o
Adfinancersdo3things:

1.ProductPlacementproductappearsonscreen

2.ProductIntegrationitsanelement/characterinthemovie,i.e.,James
BondsAstonMartin(italmostbecomesacharacterinthemovieratherthanset

dressing)usuallyrequirescharactertoutterdialoguere:theproductproduct
getsusedandmentionedmaterially

SAGisagainstthisdoesntlikeitsartistsbeingforcedtosaythenames
ofproducts
3.ProgramLengthContenti.e.,movieaboutwinningasoccermatch(and
Adidasisseeneverywherethroughoutthemovie)

BUDGET

Patternbudgettopsheetonpage117everystudiohasslightvariationsonthispatternbudget
Topsheetthissheetgoesontopofbudgetamodel/templateprovidesachartof
accountsoften,1page
Budget(prospective)isnotwhatamoviecosts,itswhattheanticipatedcostsofthemovieare
Whatamovieactuallycosts(inretrospect)isgiveninthe:
Finalcoststatement(whichreflectsthenegativecost)retrospective
o Negativecostcostofproducingthefilmsnegative(butnotdistribution)slang
term
Whatsinabudget?
Allcostsincurredtogetthefilmproduced
Hewentthroughallthecommonelements
Abovethelineeverythingattendanttostory,producer,director,andcast(+travel/livingand
fringebenefits)
Belowthelinecategoriesofexpendituresduringthetimethefilmisbeingphotographed
Contingencytheamountallottedforwiggleroomincasethingscostslightlymore
Overhead1520%ofthefilmsbudgethugesourceofstudiorecoupmentforlosses
Completionbond3rdpartyspeciesofinsurancepolicy
o Itisusuallyafixedpercentageofthebudgetusually1.53%ofthebudget
Whocaresaboutthebudget?
1)Distributorspaya%inapresaleenvironment(payinginadvanceofamovies
production)
2)Insurancepackagebasedon%ofbudget
o Producerspackagepolicy
o 3rdpartyliability
o Setdestruction
o Medicalillness
o Errorsandomissions
o Ruleofthumbinsuranceis57%obudget(doesnotincludecompletionbond)
o Overhead:1520%ofbudgettoaccountforcostsofoperation
o Contingencyis10%ofallothercostsallowsforoverages
Unallocatedandundifferentiatedadditionalcost
3)PuffingthebudgetLenderscareaboutthis,peoplewhohaveagreedtopaya%ofthe
budgetinapresale,completionguarantors,etc(doneinordertoclosethegap)
o Becauseifsomeonehasagreedtopaya%ofthebudget,itmakesadifferenceto
themwhetherthebudgetis10milor12miliftheextra2milwasjustpuffedup(just
sayingitsgoingtocostmoreandthenyoucomeupshortit'sa10milfilm

budgetedas12miltogetmoremoneyupfrontandthenthefilmendsupcosting
around10mil)
o Typically,youlookforthecategoriesthatareproductionvaluecategories(usually4
6),i.e.,specialeffects,location,specialmusicscore,extras,etc.(categoriesthat
buyerwantstoseeonthescreenasvaluethisiswhatthebuyerispayingfor)
theseareauditablecategoriesateamofauditorsauditsthesecategories
o So,whenyouknowacertainsetofcategoriesisgoingtobeaudited,youDONT
puffthosecategoriesmaketheseareasaccurateaspossiblealso,checkon
theseoften
o Partiesmaydemandarighttoauditatwill,uponnotice
CoststhatareNOTAudited
Itisgenerallyassumedthatnonauditableexpensesarecross
collateralizable(youcanuseareaswhereyouareunderto
compensateforareaswhereyouareoverinthebudget)thereareat
least3placeswherethistermcomesupinentertainmentindustry:
1.Lending/Loansi.e.,houses,if1or2dropinvalue,you
canselltheotheronestomakeupthedifferencesooutof
thepoolofproperties,thelendersellsenoughofthe
propertiestogetbacktheamountthatwasleant
2.Distributionsmallmoviesdontrecovertheircosts
producersofi.e.,AvatarworrythathighrevenuesofAvatar
willbebledtooffsetthelossesofthesmallmoviesthere
isusuallycoveredbyacontractclausethatsaysyoucant
crosscollateralize;rather,youhavetoaccountforeach
movieindividually
3.Innonauditablecategoriesletssaythereareunderages
availableinthingsthatarenotaudited(i.e.,castline,travel
line,filmstockline,etc.),butthereareoveragesinother
categories,i.e.,construction,transportation,paint,etc.
underagesinonecategorycanbeshiftedtoserveoveragesin
othercategoriessothat,asawhole,youdontgoover
thisisnotregardedascheatingb/cthesearejustestimates
o ProspectiveCostStatementfortheweek:Amountto
Complete(yourestimateofwhatitsgoingtocostto
makethefilm)willbethesame;BUTtheamount
availablewillbediff.(i.e.,ifyouborrowedfrom
transportandaddedtoconstruction,theamount
availablefortransportwillbelessandtheamount
availableforconstructionwillbemore)
o Mayalsoforcetheproducertocertifythecoststatement

QuestionCanyousay,ImunderinallthesecategoriesandImisestimatedtheproducersfee?
Inotherwords,cananunderageevergotoaproducer?
o Generallyno,butsometimesyes,i.e.,iftheproducerdoesagoodjob,thenheshould
shareintheunderagethisincentivizescarefulproducing
o Atsomelevel,youwanttoincentivizecarefulproducingandatsomelevelsyou
dont

Underbudgetconcernspartieswillcometosomeagreement:theproduceris
entitledtosome%oftheunderbudgetprofitbutnomorethanthat%cap
1)Anylimitstounderage?
2)Anyreasontodisincentivize?
Inbudgets,somecostsarevariable(cangoupordown)andothersarenot
Ifyoupay350Kforthemotionpicturerights,andthemoviegoesoverbudget,doyouget
moremoney?
o NOthisisanonvariablecost
o Rightstobuythemotionpicturethisisanonvariablecost:usuallyeither2,2.5,or
5%ofthebudget
Scriptcostsarealsousuallynonvariable,buttheyhavelimits
o Somewellrepresentedwriterscontractsprovideinaclausethattheywillget350K
fortheirscriptforafilmnottoexceedi.e.,50mil,100mil,etc.inproductioncosts
(clauseallowspurchasepricetofloatupw/anunanticipatedriseinbudget)
Theyunderstandtheirscriptisbeingforabigbudgetfilm(preventswriters
frombeingtakenadvantageofwhentheirworkisusedinabigbudget
picture)
Thissortofclauseisevenmorecommonwhentheproducerpleadspoverty
andsaysitsgoingtobealowbudgetfilm(well,ifitsnot,i.e.,theproducer
waslyingormanagedtogetmoremoney,thenwritergetspaidmore)
Bigtalentnotvariable
Variablethingsthingsthatcansotmorethananticipatedweeklyemployees(i.e.,a
cinematographer),construction

CompletionbondONLYfocusesonvariablecoststhisiscalledthebondablebaseorthe
bondablebudget
o ItdoesNOTbondchangesinitemsthatarenotgoingtogoupordown
o Doesnotcover:
Risksofmarketperformance
Againstbreach
Massivecopyrightsuitinthemiddleofproductionorrisksrelatedtochainof
title(coveredbyerrorsandomissionsinsurance)
Underbudgetingofmusic
Ifyoufailtogetacertainratinganditrequiresreshooting
Forcemajeure
Deathordisability
Fundinguptotheapprovedbudget
Artisticquality
o Eitherpayoffstrikepricetoinitialinvestors(presaledistributors)ortakeoverto
completion
soft takeover threatening takeover but not doing it
hard takeover actually taking over the production completion
guarantor uses any cash left in the production and tries to finish without
spending any more money accomplishing for the least cost means that it
risks the final product being garbage
o Fearoflosingcreativecontrolincentivizeskeepingcostsunderbudget
o Completionguaranteeagreementistheactualbondthatdefinesobligationsbetween
andamongguarantorandthebond
o

Producercompletionagreement:createsprivitybetweentheproducer(firstlineof
defenseinmakingthefilm)andbonder
Producerisliableforaclaimofbreach
o Tandemagreements:interlockingagreementsthatcreateasystemthatbolstersthe
probabilityofsuccessfulperformanceandcompletion

DifferencesbtwnTVBudgetsandMovieBudgets
Fundamentalandpersistent
Differenceshaveevolvedasamatterofcustomthebigoneisthatthereareno
contingencies
Contingencyaflatamountincludedinthebudget,asageneralpooltolessenyour
exposuretomisbudgetingusuallyatleast10%ofthebudget,oratleast10%ofthe
variablecostsyoucandrawfromthiscontingencyforallcategoriesthatgooverallows
youtobeimperfectinyourestimates
o Bycustom,contingenciesarevirtuallyuniversalinfilmbudgets
o Bycustom,contingenciesarevirtuallyabsentinTVbudgets
o Thoughofcoursethereareexceptions
o SodoesthismeanTVbudgetestimateshavetobeperfect(i.e.,haveno
contingency)?
NOthereISacontingencyitisjustinadiff.locationitscalled
saltingthebudgetpuffindividualcategories,i.e.,overtime,extras
(categorieswhereyouthinkthediscrepancywontbenoticed)
Nooneisgoingtoquestiontheamountyouallowforovertime
youcandothisinmultipleways
Iftotalovertimeaccountis250K,youcanjustmakethisa
highernumber
ORyoucanputinacertainnumberofhoursperday(i.e.,
addhalfanhouroranhourofovertimetoeachday,whether
ornotyouuseit)
o Soifyougoafewdaysw/noovertime,youare
savinganhoursworthofmoney(andsoifyoudo
goovertimeoneday,itsnotaproblem,b/cyou
haveextramoneytospend)
Note:youdontwanttopufftheauditablecategoriesthe
goalwithauditablecategoriesistobeasaccurateas
possible,becauseyoucantspendanyunderageelsewhere
Youcanriseuptoyourredlineaslongasyoukeeptrackofit
OnceyougetintothegrooveofaroutineTVshow,thebudgetsdonttendto
varymuchfromepisodetoepisode
WhatsthedifferencebtwnfilmpuffingandTVshowpuffing?
Ifyouretrulyjustpuffinginafeaturefilm,youreusuallyjust
puffingittogetahigherpercentageoutofthepresaleprice;maybe
yourepuffingitasacontingencybutyoureallowedanactual
contingencyinafilm(thatsthedifference)
Inafeaturefilm,youreallowedanactual10%contingency
toaccommodateoveragesifyoupuffoverthis,frankly,
youreedgingintofraud
o

InTV,b/cyoucantbuildinacontingencyofficially,youhaveto
builditinsomewhere,sothisishowitsdone
TVNetworksknowthistheyrefinew/itTheydontlooktoohardtheyknowthat
noonegoesintoabusinessventurew/oprotectionsowhydontthejustputinthe
contingency?A:b/cofcustom
Residuals(theamounttobep
aidforrerunsindomestic,foreign,andothermarkets,i.e.,video)areNOTincludedinfeature
budgets,BUTtheyAREincludedinTVshows(somewhereinthe$250Krange)
o Infeatures,residualsariseonlyifandwhenthefilmisdistributed
Iffilmisneverdistributed,thentherearenoresiduals
Inthefirstmediumofexploitation,thatisthemediuminwhichtheartistis
engaged,therearenoresiduals
Soifyourehiredtodoafilm,yougetnoresidualsfromtheater
profitswhenthefilmgoesonTV,thenyougetresiduals
o Residualsaretreatedasadistributionexpenseanobligationofthedistributorto
paythoseresidualstheyareNOTacostofmakingthefilm,whichiswhythey
dontshowupinthebudget
Defermentsvs.Participations
Defermentifitisguaranteedtobepaidonanoncontingenteventexceptforthe
passageoftime,andsothereforeitmustbepaid,itMUSTbeincludedinthebudget
thisisanactual,incurredproductioncostthatmustbepaid
o Guaranteedmustbepaidatsomepointinthefutureaftersomepassageintime
Includedinthebudget
o Contingentmayormaynotbepaiddependingonoccurrenceonsomecontingent
futuresale
Dontgointothebudget
ParticipationIfhowever,itistrulyacontingentevent(i.e.,paidoutofDVDrevenues,
paiduponfirstsaleofthefilmintheUK,orpaiduponfirstbroadcastofthefilminGermany
ifever),itisNOTpartofthebudgetitslidesoverintobeingadistributionexpense(it
hastobeaccounted/providedforintherelevantcontractthattriggersthepayment)
o Trulycontingentmoney(meaningitmightneverarise)stillhastobepaid(assuming
itarises)justnotw/inthebudget
Printsandadvertising
Traditionalprintsandadvertisingarenotintheproductionbudget(costofdistribution)

COMPLETIONBONDS
Completionbondsspeciesofpolicythatlookslikeaninsurancepolicy(typicallyissuedbyan
insurancepolicy)guaranteesthatthefilmwillbecompletedanddeliveredtothebeneficiaryofthe
policy,oratthediscretionoftheguarantor,anotherwaytosatisfytheguaranteeisnotbyfinishing
thefilm,butbypayingthebeneficiariesbackwhattheyspent
Inrealityitisinthecompletionguarantorsinteresttotakeoverthefilmandfinishit(ratherthan
paythestrikeprice)becauseofprofessionalismreasons
Strikepricetheamountthebondcompanypaysifitdoesntcompleteanddeliver
BondscoverthesumsofthepotentialoveragesintheVARIABLEcosts
Eitherpayoffstrikepricetoinitialinvestors(presaledistributors)ortakeovertocompletion
soft takeover threatening takeover but not doing it

hard takeover actually taking over the production completion guarantor uses any cash
left in the production and tries to finish without spending any more money accomplishing
for the least cost means that it risks the final product being garbage
Fearoflosingcreativecontrolincentivizeskeepingcostsunderbudget
Completionguaranteeagreementistheactualbondthatdefinesobligationsbetweenandamong
guarantorandthebond
Producercompletionagreement:createsprivitybetweentheproducer(firstlineofdefenseinmaking
thefilm)andbonder
Producerisliableforaclaimofbreach
Tandemagreements:interlockingagreementsthatcreateasystemthatbolsterstheprobabilityof
successfulperformanceandcompletion
PowersoftheGuarantor
(1)Givetheproducerfurthermoneyandlettheproducercompletethefilm(unusual)
(2)Payoffthebeneficiaries(strikeprice)andnotdeliverthemovie
(3)Guarantortakesovertheproductiontocompleteanddeliverthefilm(mostdrastic,most
authority,mostrare)
o Threatofatakeovergivestheguarantorleveragefortworeasons
(1)Taintsthereputationofthefilm
(2)Leavesablackmarkontherecordoftheproducer
BondPricing
Costofthebondistypically1.53%ofthe"bondablebudget"(bondablebudget=partsofbudget
thataresubjecttogoingoverbudget)
Standardrateisaround3%(ex:300Kona10Mmovie)
Youwillpaylessthan3%ifyouhaveagoodreputation,havenevercalledinabond,etc.
o However,ifyougetadiscountandthengooverbudget,youwillhavetopaythe
differencebetweenthestandard3%feeandthediscountedbasefeeyoupaid.
o Onethingyoucandoasaproducerissimplypayupthatextramoneyoutofyourown
wallettocovertheoverbudgetratherthanturningtothebonder.Thiswayyoudon't
getthe"baddrivermark"onyourrecord.
However,ifbondgetscalledin.Theycallinanotherpercentageofthebondforthefee.
o Sostructureis1.5%/3%
o Essentiallypenaltyifitgetscalledin,andincentiveifitdoesnt(noclaimsrebate)
o Thissortofthingiswhatthecontingencyinbudgetisfor
ThereforeYOUDONOTBONDTHECONTINGENCY
Ascostsgoupyoudontraisethecontingency,youspendit.
StudiosMaynotgetBonds
- theywillratherselfinsure,andpaymoremoneyifnecessary
- Thesearemoreoftenusewhentherearemultiplelenders,likebanks
Theywillneedthisbond,fromafinanciallyresponsibleguarantor,beforegivingtheloan
Presaleinvestorsusuallydontrequirethese
- Inmostindependentproduction,thisbondisalmostalwaysfor3rdpartyinvestorsasthebeneficiaries
NonBondRisks
Thereareriskswhicharenotcoveredbythebondbutinsteadotherinsuranceinthegeneral
producerspackageinsurancepolicy.
Thisincludesthingssuchasforcemajeure,actordeath,etc.

FeeStructure
- 13%ofgrossbond
- Thereismarketcompletionthough
- Butreputationofproduceranddirectormaycausethefeetogoup
Whoultimatelyhavecontroloverhowthefilmismade
Iftheyalwaysgooverbudget,thentheyregoingtogointothebond
o WoodyAllenhasareputationformovingfast.Andifhedidwanttotakemoretime,hepaid
forithimself.
Additionalfinancingsourcesbeforecallinginthebondwherethecompletionguarantorforcesthe
producertolookbeforeforcingcompletionguarantortocompletethefilm
(1)Producerfee
(2)TheContingency(10%ofthebudget)isthefirstsourceofmoneyyouturntobeforeyou
needtogototheguarantortogetextramoney(invadecontingency,exhaustcontingency)
(3)Squeezethetalentyouthinkisresponsible(usuallyProducerandDirector)getthemtoput
uptheirfee/aportionoftheirfeeproducer/directorfee
o Cannotgetthedirectorbelowscalebecauseoftheguildunlesssomeonecounterstheir
fee
(4)Shiftinglineitemunderages:youmayhavepocketsofindividualbudgetcategorieswhere
youspentlessthanyouforesawinthebudget.Ifyoucanusepocketsthatareundertofund
pocketsthatareover,thisisreferredtoasinternalcrosscollateralization(butremember
clawbacks)
(5)Presales
(6)Ask3rdpartybeneficiariestotakeonmorerisk
(7)Noclaimsrebate
ReInsuranceofBonds
Completionbondcompaniesbuyreinsurancetoinsuretheirabilitytopaytheserisks
Insuredpartywillgeta"cutthroughendorsement"whichwillallowthemtogodirectlyto
thereinsureriftheguarantordoesnotpay
Point:therelationshipexistsb/wthenominalguarantorandthereinsurer,butthecustomary
practiceistolooktotheultimateinsurerviathecutthrough.
WhatCompletionBond'sdoNOT

CoverShouldeitherbecoveredby:otherinsurance,theoriginal
budget,ortoosubjective/creative
ThevalidityoftheunderlyingRights:ifthereasonthefilmcannotbecompletedisb/cthe
underlyingrightswerenotproperlyobtained,thecompletionguarantorwillnotpayforthis
o Coveredinsteadby"errorsandomissionsinsurance"
Theunderbudgetingofcertaincreativecategories:
o Ex:Musiccannotusethecompletionbondtocovercreative/subjectiveoverages
Justwantmoremusic
o Thecompletionbondwillofcoursecoverthingslikecrewcostoverrunsb/cofdelays
MPAARatingcosts:sometimesbuyerscontractuallyrequirethatthefinalcutgetsaratingno
morerestrictivethanacertainline(oftenPG13).Obligatesproducer/directortoeditthefilm
untiltheyobtaintherequiredrating,thecostsassociatedw/thisadditionaleditingtimewillnot
becoveredbythebond.

ForceMajeure
o Otherspecializedinsurancecoversthis
Death/disabilityoftalentre:essentialelements:particularlythecast
o Coveredby"castcoverageinsurance"
DefaultoftheDistributor
o Insuringtoomanypeople
Fundinguptotheapprovedbudget:Bondwillnotcovershortfallsininitialbudgetfunding.You
needtoreachtheinitialbudgetamount,thebondisthereforoverages,notshortfalls.
Default/insolvencyoffundingparties:ifoneofthepartieswhichisfundingyourfilm(ex:
foreigndistributorgoesbankrupt)beforeyougetthemoneyyouneed(progressivepayments),
bondwillnotcoverthis.Relatingtofundingshortfalls.
Artisticquality:Ifdistributortakespositionthatthefilmisawful/notwhatheorderedand
refusespaymentoffinalchunkoffunding,bondwillnotcoverthis
o Note:scriptisusuallyanexhibittothebond,therebyallowingobjectiveanalysis
o Willnotinsureifthemovieisdoodoo.Thisistoosubjective.

Takeovers:
SoftTakeover:thethreatbyguarantortocomeinandfinishthefilm;reducestheneedforan
actualtakeover
o Guarantor(nicely)threatenstocomeincutcorners/creativelycompromisethefilm
o Motivatestheproducertofindsomeotherwaytofinance/finishthefilm(ex:sellanother
territory)

HardTakeover:anactualtakeover
o Whentheguarantor/undertheguarantor'sdirection,thecompletionofthefilmisactually
takenover.Takesthecreativereins.
o Note:ratherthanpayingthestrikeprice.
FormE&FormF
FormECompletionGuaranteeAgreement:Theactualbond,
o Note:boththescriptandthebudgetarestandardexhibits
o Directormustopinethathecancompletethefilminaccordancew/thebudget,on
scheduleandinharmonywiththescript.Directoropinesthathecanmakethefilm
o Thepartiestothisagreementarethecompletionguarantorandthefinanciers
establishestheobligationsoftheguarantortothebeneficiary
FormFProducer'sCompletionAgreement:
o Agreementw/theproducerwhichgivesthecompletionguarantorovertheproducer
o Callsontheproducertobeobligatedtodoallsortsofthingstothebonder
o Note:boththescriptandthebudgetarestandardexhibits
o RemediesforBreach
AgreementisindependentofCompletionGuaranteeAgreement
Itstheretogettheproducertodotheirjob
Exhibitisattachedthathasthedirectoragreecanmakethemovieinthetimeandmoney
constraintspresent
MooreChapter9

Intro
"CompletionGuarantee"isissuedtoguaranteethatamotionpicturewillbecompletedanddelivered
tothedistributorinaccordancew/thescriptbyastatedoutsidedateguaranteesthatthefilmwill
becompletedorthefinancierwillberepaid
o Ifthepicturerunsintoproblems,completionguarantorhasrightto:
o (1)loanmoneytoproducertofinishfilm
o (2)takeoverfilmandfinishititself
o (3)abandonthefilmandrepaythefinanciertheproductionfinancing,interestsandcertain
othercosts
Financierwillonlyfinanceonceproducerobtainsacompletionguarantee
Byallowingstudiostocontrolcoststhroughanintermediary,theyletstudioskeepagoodrelationship
w/runawayproducers=cosmeticcompletionguarantee="swishcheesebonds"
Page82listsdocumentpackage
Mostimpdocis"Producer'sCompletionAgreement"whichcreatestherightsofthecompletion
guarantoragainsttheproducerandpermitstheguarantortoensurethatitwillbeinpositionto
produceanddeliveryinaccordancew/theguarantee
RolesoftheCompletionGuarantor
ProductionManager:producer'sagreementpermitstheguarantortofunctionasproductionmanager.
Attemptstominimizeitsfinancialrisk.Reviewsbudgettomakesureeverythingaccountedfor.
Generallyinsistsonaddinga10%contingencytothebudget.Staysinvolvedw/daytoday
productionviaanonsiterepresentative.Willreceiveregularspendingupdates.
RecoupmentPosition:Righttorecoupanyamountsitadvancesorloanstotheproducertofundcosts
inexcessofbudget.Rightsaresecuredbythemotionpictureandnotagainstassetsoftheproducer
Takeover:takesovertheproductionofthepicturetocompleteit
Exclusionscostsforwhichguarantornotliable
ChainofTitle:producersfailuretoacquiretheunderlyingrightstothemotionpicture
MPAARating:notliableforfailingtodeliverpicturew/incertainrating.Problematicforfinancierb/c
distributionagreementsusuallystateacceptablerating.Getdistributortonotmaketheratinga
paymentcondition.
ArtisticContent:issuesrelatedtoartisticcontentofthefilm
Insolvency/breachbydistributor:creditworthinessofdistributorisfinancier'srisk
Conditionsprecedenttoguarantor'sliability:
o Financiermusthaveallfinancinginplace
o Guarantormustreceiveitsfee
o Preapprovalofcertainproductionrelateddocuments,thecommencementofprincipal
photographyandcertainkeyinsurancebeinginplace
Delivery
Completionguarantor'sdeliveryrequirementsextendtodeliveryofallthephysicalelementsrequired
forthemotionpictureandaregenerallythesamerequirementscontainedinthedistribution
agreement
Mustthereforecarefullyreviewdistributionagreement,esp.w/respectto:
o Timelinemustleaveroomforproductiondelays
o Noartisticqualitytyperestrictionsindistributionagreement
o Deleteanyothersubjectiveapprovals
Takeover
PreTakeoverDueDiligence:Reviewalltalentrelatedagreements(esp.produceranddirector's
contracts)re:changeofcontrolprovisions

Makesurecanbecomesolesignatorytobankaccount+abletodrawdownfinancing
Guarantorcaneliminateanyenhancementsdirector/producerwantjobistocompletefilmcheaply
Realityoftakeovers:
o Veryfewactuallyhappen
o "Softtakeovers"morecommon.Completionguarantorwillexercisemoreadministrative
controls,includingcontrolsovertheexpensesandthebankaccounts,butwillleavethecast
andcrewtodealw/daytoday.Willrequiretheproducer/directortoimplementits
suggestions.
o Generally,attempttocomplyw/suggestions/softtakeovertoavoidfulltakeover
o Infulltakeover,completionguarantorproceedsastheagentoftheproducerpursuanttonan
irrevocablepowerofattorney:
POAstructuregetsaroundassignmentclausesintalentagreement(inshoesof)
However,shoulddraftclauseinagreementsw/talentthatproducercanassign
Righttofiretalentisabittricky

MooreFormE
SampleCompletionGuaranteeAgreement
Differencebetweenagreements
- PCACreatesproducersobligationstokeepthefilmontrack
Otherwisewhatwouldhecare?Bondisinplace.
MooreFormF
SampleProducer'sCompletionAgreement
UNIONS&GUILDS
Thingsthatarenotunions/guilds(donotrepresentemployees):
Managementside:TheAMPTP(associationofmotionpictureandtelevisionproducers):the
collectivebargainingunitofproducerswho'sdelegatedpurposeistonegotiatew/thevarious
unionssothateachproducerdoesnothavetoindividuallynegotiatew/theunions
o Ifaproducerwishestonegotiateindividually,theydonothavetosignontotheAMPTP
astheirbargainingrepresentative.
o Kindoflikeanoligopoly,thestudiosareallpartofthis.Whentheguildsstrike,theyare
dealingwiththeentireindustrythatconsumestheirservices.
o Hasdelegaterepresentativesforallstudiosandproductioncompaniesspeakwithone
voicewheninteractingwithactorsanddirectors
Somewhatdiminishesbargainingpowerofunionsbuttheseagreementsare
negotiatedseparatelywitheachcompany
AbovethelineUnions:
o Performerside:SAGAFTRA
o DGA:coveringdirectorsandcloselyalliedemploymentcategorieshavingtodowith
directors
o WGA:writers,splitbetweenwestandeastdonotunite
o Craftunions:IATSE(InternationalAllianceofTheatricalStageEmployees)makeup
artists,etc.
o Teamsters:transportrelatedwork:includeslocationscouts
Trueunionarena(collectivebargainingunitsrecognizedinforeigncountries):foreigncountries
havetheirownversionofAmericanunions
o Canada:ACTRA(moreallencompassingthanSAG)

Distributionside:IFTA:setsforthinternationalstandards,modeldistributionagreement,
arbitrationmechanisms.Doesnotactforemployeesthereforenotaunion
Exhibitors:NATO(nationalassociationoftheatreowners):actscollectivelyonbehalfoftheatre
owners,visvisthedistributors.
MPAA:responsibleforlobbying,ratingandtitleregistration
o Titleregistration:ifyouareamemberoftheMPAA,youcanregisterfilmtitles(1 stto
register)topreventothermembersoftheMPAAusing.
o Usuallykeywhenworldeventsoccur.PeopleruntotheMPAAtoregistertitlesthatmay
beusedforfilms(kindoflikecybersquattingnote:notsupposedtoselltheminstead
they"waivethem"forconsideration)
o LobbyinginDC/Sac
MotionPictureAcademy/TelevisionAcademy:purporttorecognizeartisticexcellencebutdo
notrepresentemployees
AcademyofTelevisionArtsandSciences:splitintwo,NYandLA
Professionalassociations:usuallytherecognitionthatapersonwhohasbeengrantedtherightto
appendthesetitlesaftertheirnamehasachievedsufficientprofessionalcredits(ex:ASC,ACE)
o Fulfillcertainrequirements
o Producersguildseekingtocreaterecognition:currentlyPGAisameretradeassociation,
notaunionNOTALLABOVETHELINEGUILDSAREUNIONS
Theoryisthattheyaremanagement,notactuallyemployedsodoesntmake
sensetoallowthemtocollectivelybargainforemployment
BUTlineproducersareengagedtoprojectinthefieldandarenot
responsibleforemployingothersyettreatedasproducer
Smallwins,suchasreceivingp.g.a.afternameincredits
o ASC(AmericanSocietyofCinematographers)havetohavedoneadesignatednumberof
movies,TVandcommercials
o ACE(AmericanCinemaEditors):Honorarysocietyoffilmindustrynewspapersand
journalssuchasVarietyandtheHollywoodReporter
o BVK:GermanSocietyofCinematographers

ato
Sign
ry re
ns h
latio

ou
(Loan
t
n
e
oym
Empl

t)

ct)
ntra
ia co
ip (v

Employers

Members
Membership

Thisrelationshipisbuilton
interlocking,mutualexclusivity
Employersandunions
Unions
Unionsensurethat
employerscanonlyhire

members
Membersandunionsmembersagreetoonlyworkforsignatoryemployers
EmployerandEmployeehavesomekindofexclusiveagreementforemployeesservices
o Guildsonlyapplytoemployees,notindependentcontractors,butforloanoutcorps.Use
inducementletter
TaftHartleyexceptionstation12yougettohiresomeonewhoisnotamemberonce
personatStation12enterstheirinformationintoatrackingdatabasethatensuresthatyoucant
doitagain
SAGAFTRAGlobalRuleOne:
NOTtherulethatobtainsinotherunions
Nomembershallworkasaperformerormakeanagreementtoworkasaperformerforany
producerwhohasnotexecutedabasicminimumagreementwiththeguildwhichisinfullforce
andeffect
o asaperformer:SAGcanonlyobjectifyoureworkingasaperformer
o makeanagreementtowork:scaresagents,cantsayornegotiatetowork
SAGwantsmemberstoalwaysbegovernedbyaunioncontract,butrecognizesthatthismightbe
aforeignunioncontractunderverylimitedcircumstances
Exception1:SAGmemberswhoareforeignnationals,andarenotresidentintheUS,may
choosetoacceptemploymentunderaunioncontractapplicabletotheircountryofresidence
wheretheproductiontakesplacecompletelyoutsidetheUS.Iftheproductionisnotsignedtothe
unioncontractoftheperformerscountryofresidencethentheperformermustworkundera
SAGcontract.cantcompletelycontrolforeignfilmswithforeignunions
o MustbeamemberofSAGandamemberofhomecountrysunion
o Mustbeaforeignnational
o ProductiontakesplaceentirelyoutsideoftheUS
o Productionmustbesignatorywithforeignunionthatactorisamemberof
o IntendedtolimitactorstojoiningunionsonlyinhomecountryandSAG

Exception2:globalrule1doesnotapplytononEnglishproductionsthatareshotwithintheJX
ofanothercountrysperformersunion.BUT,nonEnglishproductionsshotinUSunderruleone
IntentwasnotreallytosweepemploymentintoUS,butthiswastheeffect
Ifaforeigncompanywantstodoacoupleofdays(ofshooting)intheUSforalimitedportionof
thefilmandtherestisabroad
1. Carveout:SAGgivesonepicturesideletter,withrespecttoSAGmembersgetproductionto
agreetoallworkingconditionsandresidualsandabidebythoseforthetermoftheirwork
intheUSyouwillpaythemasiftheyarebeingpaidfortheirtermintheUS,therestofthe
workwillbesubjecttotheirhometerritorycontract
i. NarrowsignatorystatusthatappliesonlytoSAGmembers
1. Onepicture,forthiscontract,fortheseartists
ii. NOTageneralsignatorystatusforthewholecontract,oranotherpictureyou
maybemaking,nordoesitapplytotherestofthecast
iii. Issueiswhathappenstoalloftheotheractors
2. CansignasideletterabidingtoSAGrulesforonepicture
3. CreateanewcompanythatsubjectstheirwholecasttotheSAGagreement
4. MakeanoncommittalblindcallaskingaboutwhatSAGwouldacceptintermsofanarrower
provision

Strikes
o

Agitation/discord/strikeoccursaboutevery10yrs
1960,1970,1980,2008
Correlatesw/stableincomesource(theatricalrevenues)

Ifincomesourceisstable,thennostrike
1960adventofTVsobigstrikeherewasaboutresiduals
1980bigissuewasaboutresidualsagain

Endedupsettingupaformula
2008alsoafightaboutresidualsduetodigitaldownloads/streaming
PATTERN:Somenewtechnologicalrealitygivesrisetoaneconomicincome
streamthatbecomesthebasisforargumentation
Credits,healthcare,numberofhrsperweek,etc.traditionalunionstuffthisstuffis
largelynotfoughtaboutanymorefightovereconomicstuffbroughtaboutbytechnology

TheydoNOTstrikeovertraditionalunionstuff!

Theminimumbasiccompensationisalwayssettledonday1of
negotiationstheygivesomesetraiseeveryyearduetoinflation,andthisisnever
anissue
Strikesareaboutnewtech

1980homevideo

2008digital

OTTrights(overthetoptheabilitytowatchTVormoviesthrough
adevicethatbypassesurcableTVco.andisessentiallyoverthetopofurTVviathe
internet)(aformofstreaming,i.e.,Roku)Ginsburgthinkstherewillbeastrike
aboutthis
Theretendedtobeanordertotheorganizationsstriking

WGA

DGA

SAG

Forseveralcycles,theWGAagmtbecamedue/expiredaroundOct31
(datesnotliteral;spacingandorderisimportant);DGAwasaroundDec31;and
SAGwasaroundMarch31
Thecomboofthe3yrcycles+thisorderwascalledpatternbargaining
Whatisthebenefittotheproducersofthisspacing?

Byspreadingthemout,theyCANNOTallstrikeonthesameday
andshutdowntheindustry

i.e.,ifWGAisstriking,theycangetscriptssomeotherway
(scriptsarestockpiled;cangetforeignscripts);ifDGAisstriking,youcan
useforeigndirectorsandfilmoverseas;ifSAGisstriking,youcanuse
foreignstarsandshootoverseas

Writersalwaysfeltagreatamountofresponsibilityasbeingthefirstup

Butwritershadleastleverageb/cproducerswerealwaysstockpiling
scripts

Ifwriterssettledmateriallybelowwhattheotherorganizationswere
countingon,thentheDGAandSAGwouldbescrewed

Sothewritersaretheoneswhohavetogoonstriketomakesure
thisdoesnthappen

WhynotmaketheDGAgofirst?

DGAhasneverhadastrike

BythetimetheproducersgettoDGA,theyareworndown/
softenedup,soDGAgetswhattheywant

IntheWGAstrikeof2008,theDGAhiredKenZiffrenandTom
Wolzien(topmotionpictureindustryfinanceanalyst)
o
TheycheckedthatAMPTPwasnotlyingaboutfinances
didadeepfinancialanalysisaboutwhattheAMPTPwassaying
aboutfuturestreamingrevenues
o
Theyconcludedsomethingstartlingthatdespitethe
WGAsclaims,theAMPTPwastellingthetruth!(DHAwas
persuadedb4theysatdownthatAMPTPsnegotiatingpostureand
financialperformancewasgenuinelywhattheycouldpay)

So,theDGAagreedtocontracttermsthatwere
contentious

Atthispoint,DGArelishedthefactthatthe
AMPTPwassoftenedup,sotheDGAdidnthavetofight
veryhardtogetthetermstheywanted
o
Theyalsoputinasunsetclause,sayingthatallthe
thingsjustagreeduponintheareasofcontentionwouldnotbethe
basisforthenextnegotiation

Also,theyagreedtodoasimilarfinancial
reassessmentthenexttimetheyhavetorenegotiatethe
contract

OncetheDGAsettles,WGAsettlesrightaway(stopsstriking)(basedon
thesameconditions/ratestheDGAagreedtow/ostriking)

WGAhadverybelligerentmanagementattimeof2008strike
verystrikeprone

o
ManagementofWGAthatledthecatastrophicstrike
wasvotedoutduringthenextelection
o
Instead,theybroughtinmoremiddleoftheroadppl

SAGextremelybelligerentmanagementduring2008however,
delegationswenttothosemanagersandtheywereconvincedtosignontotheDGA
modelagmt

Specifically,delegations,includingClooneyandHanks,begged
managementnottostrike

Thismanagementwasalsovotedoutduringthenextelection

B/cTHISstrikewentsolong,WGAgotsomething

AMPTPwantedWGAcontacttobebackdatedtoOct31,BUT
WGAwantedtheircontacttobeinsynchronyw/SAGsWGAwonthis
battle
Unions/Guilds
Labor:Aunionorguildrecognizedassuchbyitsmembersandthelabouractisthesamething.
Nodifferenceb/wthewordsunion/guild
o Highfalutinwaytolooksartisanlike=guild
o Sothattheydontlooklikebluecollarworkers
Note:ifyouareshootingoverseas,thedomestic(US)unionswillapplytostaffyouflewover,
andthelocalunionswillapplytopeopleyouhirethere
DomesticUnions:
SAGScreenactorsguild:coversperformers,primarilywho'sperformancesoriginatedonfilm
AFTRA(Americanfederationoftelevisionandradioartists):beganasanorgthatgrewoutof
radiointotelevision.ManypeoplearemembersofbothSAGandAFTRA.Signedmanyshows
duringtheSAGstrike.(Hasmergedw/SAG)
WGAWritersguildofAmerica:writers
o Note:splitintoWGAeandWGAweastandwestbranches
DGADirectorsguildofAmerica:directors
Teamsters:teamsters
IATSEInternationalAllianceofTheatricalStageEmployees
ForeignUnions
ACTRA,etc
Ifyou'reshootinginanyforeignjurisdictionandareemployingpeoplethere,youneedtoobtain
localcounseltobeadvisedofyourlocalunionobligations
Structurewhatunitesallofthese:

Employer(Producer)
Employee(orloanout)

Union

MinimumBasicAgreement(MBA):Youcannothire(ex)aSAGemployeew/outbeing
signatorytotheSAGagreement.Whentheemployersignsthis,theyagreetoonlyhireSAG
membersandadheretoallthetermsintheMBA(whichwasnegotiatedbytheAMPTP)

o MBAsetstheminimumstandardsforemployment
"shoprules":referstotherulesthattheemployeesagreetoadheretovisvistheirunion
Note:theThreeyearcyclesarereferredtoas"patternbargaining".Thisisimportantb/cdonot
wantalltheunionagreementstoendonthesamedateb/c
Whydoesthislinkexist:ifyouwanttohirethepeoplethathavereachedaminimumlevelof
successortheyarejustthepeopleyouwanttohire,youneedtogetunionmembers.i.e.thetalent
signedw/unionssoyouneedtosignwithSAGmembers.
Loanout'sandunionagreements:theloanoutcompanyemploystheartistandloanstheir
servicestothestudioemployer.Theunionstherebyrequirethattheloanoutcompanyneeds
tobesignatorytotheunionagreement.
o Requesttoreimburse:thisrelationshipremovestheobligationfromstudiostopaycertain
benefitstotheartistsdueundertheunionagreements.Loanoutcompaniestrytogetthe
studiotoreimbursethemb/ctheywouldhavehadtopaythisbutfortheloanoutco.
Aggressiveresponseistosay,wellifyouwanttousealoanout,thenpaytheassociated
costs
Station12/TAFTHARTLEYException:thisistheexceptionthatallowssignatoriestohire
talentthatisnotyetintheunion.Ifthetalentneverworkedbeforeandisnotmemberofany
union.Thatfirstjobistheonlywaytohirenonuniontalentasasignatory.Simultaneously
allowsproducertoverifythelegalityofhiringthispersonwhilealsoinformingtheunionofthis
personsnonmembership
o Itistheemployer'sobligationtodeterminetheartist'smembershipstatus
o Employerthereforecallsunionandfindsoutthattheyhaventbeenamemberandcan
hirethem,resultisthatunionistheninformedthatthepersonisnotyetamember

JurisdictionofSAG
Historically,thejurisdictionofunionswaslimitedtotheUSASAGhoweverexpandedits
jurisdictionbyaddingthefollowingruletoitsconstitution:
GlobalRule1:"nomembershallworkasaperformer,ormakeanagreementtoworkasa
performer,foranyproducerwhohasnotexecutedabasicminimumagreementw/aguildwhich
isinfullforceandeffect"thisrulehasworldwideeffect.
o ThisrulehasbeeninterpretedtomeanthatSAGmembersmustalwaysworkunderSAG
contractseverywhereintheworld(subjecttoStation12exception)
o Theyareassertingworldwidejurisdiction
SAGmemberswhoareforeignnationals:(i)IfallworktakesplaceoutsideoftheUSAand(ii)if
theSAGmemberisalsoasignedmemberoftheirhomeunionand(iii)theyareworkingunder
thathomeagreement(producermustbecomesignatorytohomeagreement).However,ifthe
productionisnotsignedtotheunioncontractofthecountriesresidence,thentheymustwork
underSAG
Foreignlanguageproductions:"Globalrule1alsodoesnotapplytononEnglish(language)
productionsthatareshotw/inthejurisdictionofanothercountry'sperformersunion.Butnon
English(language)productionsshotanywhereintheUSaresubjecttoSAG'sjurisdiction."
GlobalRule1andResiduals
EmployeeswantSAG,employersdonot
ArtistswanttheproductiontobeaSAGproductionb/cofresiduals.
ProducersprefernonSAGb/clowerresidualsobligations.Othercountries'unionsdonothave
thesamestandonresiduals.(Ex:Canada)

Inthefirsttwoyearsalone,GlobalRule1increasedthemembers'earningsby$120Mand$6M
totheguild'spensionfund.

ForeignNationals
Ifaproducerhiresaforeignnationalwhodoesnothaveagreencard,heneedstogetawork
visa.
Employmentagreementshouldcontainarepresentationandwarrantythattheforeignnationalcan
workintheUS.
TogetavisaitmustbeproventhattheartistisspecialandthatnoUSnationalcouldreplacehim
andthishastobeacceptedandconfirmedbySAG.Mustbeartistof"somerepute"
GuildSignatoryStatus
Flowsdownhillbutnotuphill.Subsidiariesareboundbyparent'sstatus.Inversedoesnotapply.
Trickistosignatthelowestlevelpossible
Shouldtherebeamistakeandarepresentativeofthemothercompanysignedtheagreement,two
options:
o (1)Callthebusinessmanagerattheunionandtellthemtheydidn'thaveauthoritytosign.
I.e.trytonegotiatew/theunion.
o (2)Ifthatfails,createanothercompanythatwillbetheproductioncompany.This
companywillhireallthetalentandthereforewillneedtobeanewsignatory=limitthe
tainttooneco.
Thiswayyoucanhavemultiplecompaniesw/differentunionprofileswhich
allowsyoutobemoreflexibleforallaspectsofyourproduction.
SIGNATTHELOWESTLEVELPOSSIBLE
Note:durationofstatus:defaultruleisthatyouareboundforthebalanceofthethreeyearcycle
oftheMBA.
MooreChapter7
Membersoftheguildsmayworkonlyforguildsignatoriesandguildsignatoriesmayhireonly
guildmembers=exclusivity
Jurisdictionextendstoindependentcontractorsworkingunderloanoutcorporations
Allsubsidiariesofaguildsignatoryaredeemedsignatoriestoguildagreement
Guildsincreasefilmcostsinmanyways(primarilythecostofresidualsandbenefit/pension
paymentsowedtothetalentandtheguild,respectively
CasebookDocument28:EntertainmentIndustryUnionsandGuilds
Justalistofanddescriptionofthedifferentunions
SystemofExclusivity
Eachunionhasacontractwiththestudioisexclusive
RESIDUALS
Intro:
"Residuals":contingentamountsowedtotalent.Percentageof"definedatsourcegrossreceipts"
derivedfromtheproduction'sexploitation

Contractualcontingentcompensationthatyougetbyvirtueofbeinganemployedmemberofa
unionwhichhasnegotiatedforthoserights.
UnionMBAsetoutresidualrights,talentdoesnotneedtoaskforit.
Purposeofresiduals:duetothefeastandfaminenatureofthisindustry,residualsarevitalfor
talentastheyprovideasteadystreamoflongtermincome.
Contingentcompensation
OnlyincludedinTVbudgets(initiallicensefortelevision),notfilmbudgets,b/cbroadcasters
wanttoknowthattheminimumnumberofrunshasbeenpaidfor

CalculationofResiduals
Whocalculates:distributor
o Itisthedistributorsintherespectivepropertythatisresponsibleforcalculating/paying
theresiduals.Itispracticallyimpossiblefortheproducer(outsideofaPFD)to
account/reporttotheartistb/checannotkeeptrackoftheactualuse.Therefore
independentproducer'sresidualobligationsmustbeenforcedbythedistributors
Whendotheyarise:whenusedbeyondprimaryuse
o Generallyspeaking,therearenoresidualspayablefortheprimaryemployment/primary
initialmedium
Ex:ifyou'rehiredforafeaturefilm,thatfilmcanbedisplayedonscreensinthe
marketw/outrequiringthepaymentofresiduals
o Itisonlywhentheproductisreused(ex:featurefilmbroadcastonTV),whenitgoes
beyondtheinitialmedium,thatresidualsarise
o However,w/TVthisisabitmorecomplicatedb/crerunsstilloccurinthesamemedium
(TV),buttotheextentthattheyoccurbeyondtheinitialcontractagreement,theywill
giverisetoresidualsb/citisnolongertheprimaryuse.
GrossRevenue:thesumsthataretakenitatthe"atsource"point(seechartbelow
o Guild'sposition:inthecontextofanymediaforwhichtheproducerreceivesaminimum
guarantee(thatistosay,iftheproducersellsTVrightstoamotionpicturefor$10M,
thatistheminimumguarantee/flatpriceforthatright)theyareentitledtoreceive
residualsatthegreaterof(i)whatthefilmproducerhasreceived(theminimum
guarantee)or(ii)whatthedistributorwillbereceivingatsource.
Note:vitaltoknow(i)howdotheunionsgetaccountedtoand(ii)atonepointintherevenue
stream
CasebookDocument11:IncomeStreamsandAtSourceRevenue
SEEChart
Foreachmedium(theatrical,video,CableTV,etc)thereisaflowofmoney(incomestream)that
flowsultimatelytothestudios
Example,theatrical
o StudioSubdistributor(ifapplicable)atsourceTheaterPublic
o Thetheatricalatsourcedefinitionistherefore"whatthetheatresaccounttothenextlink"
o Note:$100Mboxofficeis$50Maccountableatsource

TheatricalatSource:wheretheatrespaysthenextlink(distributor/subdistributor)
HomeVideoatSource:whereretailerpaysthenextlink(wholesaler)

FreeTVatSource:wherebroadcasterpaysthenextlink(distributor/subdistributor)
CableTVatSource:wherecablechannelpaysthenextlink(studio)
Merchandising/SoundtrackatSource:wheremanufacturerpaysthenextlink(studio)
InternetatSource:wherewebsitepaysthenextlink(studio)

Note:thatforCableTVtherearetworevenuestreamsflowingintothecablechannel,fromthe
cableco.forsubscribersandsecondlyfromadvertiserstothecablechannel
Streamingvs.Downloading:iftheendresultisthatyouarestreamingit,thenitfallsintothe
Internetmodel.Ifyou'redownloadingit,sothatyouwindupw/acopythatyoucankeep,thatis
treatedlikehomevideo.
o NotehoweverthatthereisanewtrendthatNetflixrevenuemodelwillnowbetreated
liketelevisionrevenueb/cNetflixisgraduallyreplacingTV(Dreamworks)

CasebookDocument12:ResidualCalculations
SEECHART
Note:thatyouonlyneedtoknowfortheexamwhatisabovethelineonthedocument
Atthetopisasamplemodelofalicenseofafilmfora$30Mminimumguarantee
o $10MTheatrical$0atsourceresidualb/ctheatricalfilmthereforefirstexhibition/primary
o $10MTV$10Matsourceallocabletotelevision
o $10MVideo$2Mtobepaidinresiduals($10MVideox20%videoresidualdefault%)
o Total:$30Mgrosse,$12Mresidualgrosse
o Guildfees:Residualgrossex15%=1.8MowedtoGuilds(15%isruleofthumbaggregate
residualforallguilds)
Summary
Step1:Calculatetheresidualgrosse(Grosse+allocations)
Step2:Calculatetheguildfees(ResidualGrosseXGuild%)
o Whogetstheresiduals:Dependingontheunion,thismoneywilleitherbepaiddirectlyto
thetalent/workers(abovethelineunionsSAG,DGA,WGA)orwillbepaidintothebenefit
system(expensions)oftheguild(belowthelineunionsIATSI,Teamsters)
QuickReview:
Videoisaroyalty
o Note:Homevideogrosseisapercentageb/cthatsjusthowitevolved.Itcamefromthe
recordindustrymodelasVHSwasoriginallysoldinrecordstores.
Tvusuallypassesthroughinfull
DigitalistreatedlikeInternetifnopermanentcopy,andlikevideoifitisadownload
SecuringResiduals
Residualsaresoimportantthatunionsseeksecurity
How:FileaUCC1statementtoputalienonaproduction
Also,unionsseek,butwillsometimeswaive,acashescrowaccountduringproduction(showas
uniondepositsonbudget)
Usuallydoneforproductionsthatareunderfinancedorwithnewproducers
ChainofObligations:

Theobligationsb/wtheproducerandunionsre:residualsmustsomehowbeconnectedtothe
ultimatedistributors
Thereforeyouwantthedistributortoassumetheobligationstopaytheresidualsinthe
distributioncontractassumptionagreement
Twokindsofassumptionsagreements:
o "distributor'sassumptionagreement":distributoragreestotakeonthirdparty
payments
However,iftheydon'tpay,theunionstakethepositionthattheoriginal
employerisstillonthehookundersecondaryliability
o "buyer'sassumptionagreement":Buyernowstandsinyourshoes.Isineffecta
novation.Usuallycountersignedandacceptedbytheunion.Buyerhasthereforefully
assumedtheobligationandnosecondaryliability.

CasebookDocument33:NewTVPilotLanguagePuttingaSqueezeonResiduals
Networksaretryingtogetresidualpaymentsforfirstrunrerunstobeincludedinactorssalary.
Whereasbeforeanactormaking$30,000anepisodewouldexpectanextra$2,5005,000forthefirst
runrerun,nowstudioswantthatthattobeincludedintheiroriginalsalary.
Foreignresidualsalsobeingtargeted.ThisiskosherunderguildrulesastheCBA'sprovidethat
studioshavetherighttodeferupto35%ofanactor'sminimumcompensationasprepaymentfor
futureforeignresidualsiftheactorismakingmorethanguildminimums.
DISTRIBUTION
Intro:
Distribution:Wheretheproductthatismanufacturedisturnedtoaccountandtransitionsfromthe
manufacturer(studio)tothedistributor(~wholesaler)totheexhibitor(~retailer)
Copyrightenablesdistribution:
o Rightofpublicperformance
o Rightofdistribution
o Righttomakecopies,DW,etc.
Keyquestionsre:Distribution,yourdistributionrightswillbelimitedby:
1. Exclusivityvs.nonexclusivity
2. Territorialscopeofyourrights
3. Time/Termofyourrights
4. Medium/Media
5. Languagerights(ex:EnglishlanguagerightswillnotgrantyouGermanlanguagerights)
6. Assignability
ReviewedPFDs,negativepickupsandpresales.
o Thesesalemodels(notPFD)willhavevaryingterms,i.e.canhaveanegativepickup
withonlytheatresinagiventerritory
AsidefromPFDs,whichimplycashwillbepaidduringproduction,paymentona
presale/negativepickupisusuallymadeondelivery
Distributionfee:whatdistributorschargetodistributeamovie,thecuttheytakeattheatsource
pointfromthetheatres.Standardfeenowis35%
o Ex:theatretakesin$2,reportablegrosseis$1todistributor.Thedistributorthentakesits
%,andthentheremaining$0.65isreturnedtothestudio
o Notealsothatdistributorswillnotpayyouproceedsfromtheperformanceofthefilm
untiltheirinitialadvance(Ex:atthefilmfestival)hasbeenrepaid

Ex:$1Madvance,witha35%distributionfee,needtocollect$1.35Mfromthe
theatrebeforeanywillbeginaccruingtotheotherparticipantsintheincome
streamandthereforeboxmusthavebeen$2.7M

Modesofgettingfilmsintotheatres:
PFD:studioisalsodistributor
Presale/NegativePickup:Distributorbuysdistributionrightsviaanadvancetotheproduction
entity.Thencollectsa35%feeonreportablegrosse
RentaSystem:whennodistributoriswillingtopaymoneyupfronttosecurethedistribution
rightsagainstanadvance(i.e.notwillingtogiveaminimumguarantee),youhavetopaythe
distributortodistributethefilm(i.e.you'rerentingtheirdistributionexchange),ratherthanthe
distributorgivingyouadistributionadvancesystem(feeisusually12.517.5%ofthemoneythat
getscollected/reported)Distributordoesnotgiveyouanadvance,feeislower,and
distributorlikelynotpayingdistributionexpenses.
Multiplepicturedeals:distributionstructurewheredistributorhasagreementwithproduction
entityforanumberofyears/films(ex:PixarandDisneyhada5picturedeal)
Inalloftheabovemodels,thedistributorhasalicensetodistributethisdocumentonsome
exclusivebasisthereisatransferoftitle
Salesagency:inasalesagency,yourrelationshipw/thesalesagentdoesnotinvolveatitle
transfer.Itisanalogoustoarealtor.Youarehiringanagenttoattempttoprocureadistributor
(majorforeignterritories).Salesagentneverhastitletothemovie.
Risk/Rewardanalysis:
Themorethatisputupasaminimumguarantee,themorethatthatmilitatesinfavorofa
strongerdistributionfee
TermofDistributionDeal:
Beginningofterm:Youmadeadeal,nowwhendoesthetermstart?
o Ondelivery:usuallydefinedaswhenthelabcertifiesthatalloftheelements,both
film/digitalanddocumentary(documentsoftitle,contracts,etc.)havebeendelivered
o Dateofexecutionofthedocuments:preferredbythelicenseethatthetermbeginatthe
datetheagreementisenteredintob/cgivesthemagreaterrightofcontrol(ex:
advertisingcampaign),butdonotwanttopayanymoneyyet
o Datepaymentismade:
o Point:thedatethetermstartsissomethingtoconsiderwhenmakingthedealb/clotsof
thingscangowrongbeforebothpartieshavefulfilledtheirobligations
LengthofTerm:
o Typicalcommerciallyfeasibleperiodofexploitationduringwhichthebuyer/licenseecan
beexpectedtorecouptheirinvestment.Akatheeconomiclifeofthatmedium.
o Thereforeyouwantthetermtorepresentthisreality(typically2030yearterms)term
isusuallybasedonsomecustomaryeconomiclife.
But,aslicenseeyoumaywantaprovisionthatprovidesthat"if,upontheexpiry
oftheterm,theinitialinvestmenthasnotbeenrecouped,thelicenseehasthe
righttogivenoticetoexercisetheiroptiontoextendforXyears"
o "collateralization":wanttogetrightsforallmediums(i.e.theatre,tv,dvds,etc)b/c
allowsyoufurtheropportunitytomakebackyourinvestment

Mediums:
Theatrical:displayonascreentoanaudienceviaprojection
Nontheatrical:stuffexhibitedtoanaudiencebutnotinatheatergenerallymeanssmallvenues
andmuchsmallerpublicsimultaneousviewers(ex:hotels,airlines,prisons,schools,shipsatsea,
military,etc.areallnontheatricaldistribution)Swankismajorcompanyhandlingnon
theatricalforWB.
Video/DVD:selfexplanatory
Videoondemand(VOD):
o VOD:traditionalVOD
o NVOD:nearvideoondemandrepeatingscheduleofshowings(ratherthanstartingon
demand)
o SVOD:subscriptionvideoondemandforafixedfee(monthly)yougettowatchlotsof
videoondemand
o TVOD:transactionalVOD,includesPPV,forthatonetransactionyouarepayingafee
(ex:sportingevents)
o AVOD:audioondemand(ex:pickingchannelsonairlinestolistentomusic)
o PVOD:premiumVOD(seeTowerHeistreading)
EST:ElectronicSellthroughwhenyoubuyanddownloadacopyofamovie(akadownloadto
own)
Televisiontranches:
o FreeTV(broadcast):ABC,CBS,NBC,FOX
o Basiccable:nonpremiumpaybutdeliveredoveracable/satellitedish
o Premium/payTV:HBOandthelike
o Payperview+theVODclub
Ecosystem:theoryiscorrelationbetweenyoungerandwillingnesstowatchonsmallerscreen.
Cloudspace:canwatchoncomputer,tablet,phone,etc.
o Residual:distinguishratesbasedonownershipvs.rentalforresiduals
leasingvs.ownership:waypplwanttohaveaccesstomaterial.Themodel20
30yrsagowasbasedoncollectorvalue:youwanttoowncollectiononshelfto
lookat.
Ginstheory:chartofnumberofplaysvs.weeksinowning
CD/packagedmusic.Hereswhathappened:yougotyourfixofthe
song,andthenyoudidntplayitthatmuchanymore.Histheory:lower
thepricerentalonlywillbeenough
ClustersofDistributionRights
(1)PrimaryRights:Traditionally,primaryrightsaretheinitialrightswhichthegrantee
intendsasthefirst/initialmediumofexploitation.
o Example:inanoptiontomakeamotionpicture,thetheatricalrightsaretheprimary
rights;ifapublisheracquiresamanuscriptforanoveltheprimaryrightsarelikelythe
print/publicationrights
o NOTE:Canbecomebroadersetofprimaryrightswherecloselyrelatedrightsareused
inclosetemporalproximity
Ex:hardcoverpublication+epublicationofanovel
(2)SubsidiaryRights:rightswhicharesubsidiarytotheprimaryright(typicallyderivative
worksinothermedia)

Ex:Primaryrightsaretherighttopublish/distributeabookandyouwillhavesecondary
rightstoturnthatbookintoamovie
(3)AncillaryRights:therighttousecharacters/images/otherelementsinothercontext
o Rightsthatencompasselementslessthanthewholework
o Ex:soundtrackrights,merchandising,musicpublishing
(4)Alliedandincidentalrights:catchallcategory
o Ex:sequels,prequels,remakes,spinoffs
Note:videogamesuncertainwhichcategorytheyfallinto,therule:"includetheminaseparate
paragraph"
Standardphrasetocatchunspecifiedrights:theforegoinggrantincludes,without
limitation,rightsinallmediaeitherhereknownorhereafterdevisedortransmittedthroughout
theuniverseeithernoworinperpetuity.
o Covers(i)technology,(ii)transmissionmode,(iii)geography,(iv)time
o Noteon"perpetuity":eventhoughCRislimitedintime,youseekperpetuityb/ccertain
rightsexistforever(trademark)andyouwanttobesuccessorforaslongaslegally
permitted
o

Misc.otherrights:
Foreignrights/rightsoutsidetheUSA
Livestagerights
Distribution"Windows"ReviewandRecap:
MediaWindowTimeline
Domestic
Theatrical
Initial
Releas
e

Non
theatrical
:Airline/
Hotel

ForeignTheatrical(can
comebeforedomestic)

B
u
m
p
er
SVOD

Ultraviolet
and
VOD/TVOD

DVDand
BD

Pay
TV

Free
TV

Syndi
cation

Assumelargefeaturefilmforabovemodel
Traditionallytherewasagapb/wtheatricalandhomevideorelease,thisgaphasnowclosedand
weareevenseeingoverlap
o usedtobe6monthsbutnowshrinkingto120days,90days.
"dayanddate"releasedattheexactsametimeas
Foreign:formerlyheldbackbcofpiracyissues(esp.inChina,India,Russia,andCanada)but
nowadayslotsofsimultaneousworldwidereleases
Bumper:restperiodwhennotavailabledeadspotwhennotappearinginanymedium.
Nowadays,moreorlessathingofthepast

TerritorialWindows
Tendtobedividedbylanguageand/orgeography
Majorterritories:USA,Canada,Australia,UK

Typicallyalargeblockofterritories,ratherthansinglecountries(ex:GermanspeakingEurope,
SouthAmerica,SpanishSouthAmerica/PortugueseSouthAmerica)
Note:FranceusuallyacquiresforFranceanditsoverseasterritories/departments(formercolonies
Note:NorthAmericavs.USA:
o UsuallymeansCanadaandUSA
o CansayUSAterritoryordefinitionincludesCanada
o NorthAmericadoesntincludeMexico
o Pointambiguoussomakethecontractclear!
o Domesticrights:USAandCanada

TransferofTitle:
Howdoyoudealwithpaymentinexchangefordeliveryforthefilm?Whendoestitlechange?
o Keepyoureyeonwhohastitle
o Distributor(?)cangetsecurityinterestinthefilmandifdontgetthefilmthencan
forecloseonit
o Beneficiaryofcompletionbond:canarguethatdistributorisnotbeneficiary,butcanalso
arguethattheydobenefitbecausegetwhattheywantontimedelivery!
Payability
1)Advancepayments
o Misnomer.

Btwn1020%oftheadvanceisusuallypaidasadeposituponexecutionofthelicense,
withbalancepaidupondeliveryofthefilmtothelicense.
Usuallynotadjustedupforcostoveragesordownwhenfilmisproducedbelow
budget
o Whattriggerspaymentofthebalanceoftheadvance?
Typicallymadeupondeliveryoffilmtolicensee
Battleisthuswhatconstitutesdelivery?
Licensorswantsittomeanthatfilmmaterialsarereadyandavailable
forduplication
LicenseesWanttherighttoinspectthephysicalmaterial,andscreen
thefilmbeforepaying
IndustryPractice
Bankstypicallywillnotfundproductionofafilmunlessthelicensee
signsanoticethat:
o 1.LicenseeWAIVESallconditionsprecedenttopaymentofthe
advanceOTHERthanavailabilityofphysicalmaterial.
o 2.LicenseealsoWAIVEStherighttowithholdpaymentofthe
advance.
o 3.Licenseesexclusiveremedyforanybreachofitscontrolor
approvalrightsistosueformonetarydamages
Allthelicenseecanhopeforistherighttoinspectandacceptthe
technicalqualityofthefilm,thatthefilmbebasedonthescripts,and
thatthekeycastincludecertainactorsnamedasessentialelements
2)SecurityandLettersofCredit:Producer(licensor)willgenerallyinsistthatpaymentofthe
advancebesecuredinsomemanner(b/cdistrustfulthatthedistributorwillactuallypayon
delivery).Assuch,mayrequire:
o 1)Largeinitialdepositthatissubjecttoforfeiture
o 2)Guaranteefromathirdparty
o 3)Letterofcredit
Directcontractualcommitmentrequiringthedistributorsbank(theissuing
bank)topaythelicensororitsbank(thebeneficiary)theamountofthe
advanceupondelivery.
Twotypes:
Standby
o Distributorisexpectedtopaytheadvancedirectly,andthe
issuingbankstandsbytomakepaymentifdistributordefaults
Payment
o Distributorisnotexpectedtopayadvance,whichispaidby
issuingbankofletter
Drawdowndocuments:Documentsthattriggerpaymentundertheletterof
credit
Usuallyeither:
o Anoticeofacceptancesignedbythedistributoror
o Anarbitratorsawardthatdeliveryhasoccurred
Mustbepayableuponpresentationofpreagreeddocuments;therecan
benorequirementthatthebankconfirmanythingoutsidethewritten
docs
o

o Butthreedaywaitingperiodbwpresentationofdrawdown
docsandpaymentbyissuingbank
Conversely,thecreditorwillgetasecurityinterestinproducersworktomakesurethat
hegetswhathebargained/paidfor

TurnaroundsinTransferControls:
Turnaround:whathappenswhenaccordingtothecontract,somedefinedrightisnot
exercisedw/inthedefinedperiod.Ifeitheranoptionisntexercisedoranoptionisexercisedbut
productiondoesntgoforwardoradevelopmentdealdoesntgoforward,thentheresa
turnaroundwheretherightsshiftfromthestudiobacktotheoriginalproducer,writer,etc.
o Allowstheproducer,writer,etctotrytoreselltheprojecttoanotherstudiotheyhave
theunderlyingrights,sotheynowhavetheopportunitytotrytosetupthescriptand
unifythetwo.
o Scenarios:1)Option:neverexercised,thentitlenevermoved;2)OptionwasExercised:
Reversionclause:exercised,sotitlemoved,butnowrevertedback.
usuallyaboutthescripts
o Ex:Youareoptioningascript,and(asdiscussed)thereisanoptionrighttosomefuture
material.Whenthatright/optionisforalimitedtime.Asecondscripthasbeenprepared
buttheproductionwasntcompletedbeforetheunderlyingrightsexpired.The
turnaroundperiod(stopsshortofreversion),wouldthenkickintoallowtheholderof
theunderlyingrightstoselltheunderlyingrightsandthescriptforadefinedperiodof
time
Usuallytherightsaresomewherefor2years,thensometimesevenjointfora
fewyears,theneventuallyinonelocation.
Note:tothisthestudioshouldattachsomesortofrightoffirstrefusaltogive
themtheopportunitytomatchthatoffer
Note:Changedelementclause(niftytransfercontrol)givenoticetoStudio#1
iftherehasbeena"changedelement"whichisusuallydefinedassomemajor
change(suchasGeorgeClooneybeingattachedtothemovie)
ifanelementthatwouldhavemadeadifferencetothem(intheirsole
judgment)duringtheirdecisionmakingprocesshaschanged,thenthey
needtimetoconsiderthis(ex:"ifweknewGeorgeClooneywouldhave
playedthelead,wewouldhavemadethefilm)
LikeROLR,theoriginalstudiomayhaveachangedelementsclausein
itscontract,namelythatifthewriter,producer,etc.changesamaterial
elementfromitsoriginalproject(astar,adirector,anewscript),then
theyhavetobringtheprojectbacktothestudiosothatthestudiohas
anotherbiteattheapple.
Havetohave1)notice,2)elementsaffected(?),and3)specifiedperiod
oftime
Whatifchangedelementisimpossibleone?Ithastobeanelementthat
youcangetorgetaccessto.Butintheindustry,thatmeansatsome
amountofmoneythatcanhappen.
Therefore,mustdisclose(i)theoffertobuybyStudio#2and(ii)ifyou've
attachedanelementthey'veneverattachedbefore.Ineithercase,theoriginal
studiohastherighttobuytherightsatthatprice,failuretosatisfyeitherof
theseelementswouldeitherbeabreachorafailureofgrantofthoserights

Disclosureoftransfercontrolschills3rdpartyinvolvement
Note:secondarydefinition:thetimeb/wreleasefromworkondayoneandthetimeon
thenextdayyoumustshowuptowork,SAGagreementprovidesacertainturnaround
period(notrelevant)

Jurisdictional/Governinglawclauses:clauseswhichgovernjurisdictionofdisputeresolutionis
vitalb/cwehaveaveryinternationalscenerightnow.
o Consider:territorialjurisdiction,arbitrationclausesvs.recoursetocourts.
Largecompaniespreferrecoursetocourtsb/ccanlitigateforever.Havemoreresourcestouse
litigationasasword,ratherthansubmittingtofinaljurisdictionof"somebabysplitter"wealthy
partieswanttohavethebenefitoflitigation

Lectures19to21RevenueandContingentPaymentsSEEONLINE
ContingentRevenuesIntro:
Coreofthisissomespeciesofaccountingmechanism(we'vealreadyanalyzedatsourcepoints
andwhopaystowhom,nowwe'relookingathowthemoneyissplit)
MethodsofAccounting
Accountingrules:GAAPnotusedasthebasisoffilmaccounting
Taxaccounting:whatyouuseforyourtaxes(createdbyCongress,IRS,states)notusedasthe
basisoffilmaccounting
Equityaccounting:forsecuritiesandinvestmentcompliancenotusedasthebasisoffilm
accounting
Contract!Themethodusedinfilmaccountingiswhateverthepartiessayitis!Itisthe
definitionofwhatevertherelevantmeasurementis(ex:grossafterbreakevendefinition)
o Acontractualshareofsomespeciesofcontingentrevenue
Point:everythingwewillbetalkingaboutinthismodulewillbedeterminedbytheparties
accordingtotheirleverage,theirpoliciesandtheirprioragreements.
Keyisdefiningthepoolofmoneyoutofwhichsomedefinableshareismeasuredandpayed
Note:"blendedaggregate"distributionfees:isthetotalforalldistributionfeesamongstall
medias,whichhavedifferentfees
Beneficiaries
Talent,writers,directors,producers
Definitions:(fromlargestpooltosmallest)
"Puregross"grossproceedsmeasuredatsourcew/outanydeductionsfordistributionsfeesor
expensesorproductioncosts
o Themostadvantageoustypeofparticipationforparticipants(mosttransparentto
calculate/auditandbiggestpie)
o Rarest
o Note:mostpuregrossedefinitionsusuallyallowarecoupmentofproductioncosts(what
thefilmcost))
"adjustedgross"puregrosslesscertainoffthetopexpenses
o Offthetopexpensesare:checkingcosts(whatitcoststomakesuremoneywas
remitted),currencyconversioncosts,collectioncosts,taxcosts,tradeassociationdues

Note:insomeadjustedgrossdefinitions,certainotherexpenses(usuallydistribution),are
allowedtobew/held

October20,2011

"cashbreakeven(CBE)"puregrosslessalldistributioncosts,productioncosts,interestanda
reduced(orzero)distributionfee.(Tip:ifdistributionfeelessthan35%usuallycashbreak
even)
"actualbreakeven(ABE)"puregrosslessalldistributioncosts,productioncosts,interestandfull
distributionfee(Tip:fullfeeisusually35%)[CBEthereforebetterforparticipants,thereforethe
moreleverageanartisthasthemorelikelytheyaretogetCBE]
"netprofits"whatisleft(ifanything)afterallconceivabledeductionsarerecoupedandkeptby
thestudioincludingalltheothercontingentparticipants.
o Ifyourparticipationiscalculatedbasedonnetprofits,theparticipationsofallother
participantsareremovedfirst(sortoflikeaprioritysystem)
Noteongradepointscomeintwoflavors:ex:initialbreakevenvs.rollingbreakeven
o InitialGradePoints:
Onceyouhavereachedthebreakevenamount,nootherdeductionswillbe
calculatedforpaymentterms(expensesnolongerconsidered)
Ex:2ndquarteroffilm'sreleasebringin$1,000,000buthave500Kexpensesyour
participationwouldbecalculatedon$1M=moreadvantageous
ICBE=Initialcashbreakeven
IABE=initialactualbreakeven
o RollingGradepoints:
Inarollingbreak,evenastherevenuekeepsrollingin,thestudiogetstodeduct
fromthatrevenue=continuingdeductionsofexpensesbydistributor
Ex:2ndquarteroffilm'sreleasebringin$1,000,000buthave500Kexpensesyour
participationwouldbecalculatedon$9.5M=lessadvantageous
RCBE=rollingcashbreakeven
RABE=rollingactualbreakeven
"Sumsequalto"and"X%of100%"
o Sumsequalto:thisphraseisusedtopreventanyargumentthatthestudioisholdingthe
participationintrust(tocounterthecreationofaconstructivetrust)
o X%of100%:100%makessurethatyou'remeasuringitagainstaconstantpool
Notere:distributionfeesthesearecalculatedonthehighestgross,thereforeona20%
distributionfeew/$40MinDE+PC,theDistributionfeewillbe$10(20%calculatedoutof50,
not40)

FormulatocalculategrossBreakpoint:
DE+PC=G
1X

DE:Distributionexpenses(usuallyincludingoffthetops)(ex$10)
PC:Productioncosts+interest(ex:$30)
X=applicableDistributionFeepercentage(Ex:2%(CBE))[note:the>theDistributionFee,the
lateryourbreakevenwillbe]

G=Grossatbreakpoint

10+30
10.2

40=50Millionthereforewon'treachCBEbeforeyouhave50millionofrevenue
0.8

October25,2011

"hardfloor"vs."softfloor"
o TypicalinPFDdeals.Forexampleifaproducerisgetting30%ofNetProfitshewill
needtopaycertainthirdpartiesoutofhisparticipation(ex:5%fordirector,12%for
talent,etc.).Iftheproduceronlyhastopaythirdpartiesuptoahardfloorof15%,then
evenifthethirdpartiesamounttomorethathalf,hewillnotgetless.Studiowillbearthe
restoftheburden.
o Hardfloor:lowestpointatwhichcostswillbededucted
o Softfloor:afterthesoftfloorisreached,theremainderofthecostsaresplitbetweenthe
producerandthestudio
o Therefore,Softfloor=Sharingoffuturethirdpartyexpenses.Producerbearssomeof
futureparticipations,butnotall.Hardfloormeansnofurtherreductionswhatsoever.

Distributor/Affiliatepayments:
o Ifyourepresenttalentyoudonotwantdistributorstreatingcostspaidtotheiraffiliates
likeothercostsb/ctheyarejustshiftingprofitsb/wdivisions
o Concernisthatdistributorwillpayaffiliateanamountgreaterthanthemarketrateto
increasedistributionexpensesw/outitactuallycostingthemanythingandtheyare
shavingmoneyfromparticipations
o Havesimilarconcernw/salestonetworkswhichareownedbythestudios.Donotwant
themtounderpricethecontenttherebybenefitingtheaffiliateandshavingparticipations
o Contractualprovisiontopreventthis:"allcontractualarrangementsb/wdistributorandan
affiliate,whetherwhollyownedorotherwise,shallbedoneatarmslengthfairmarket
valuebetweenarm'slengthpartiesarrivedatingoodfaith"
Rebates:
o Closelyrelatedtoaffiliateaccounting.Largestudiosusuallyhavearrangementsthatgive
themrebates/discountsonproduction/distributioncosts.
o Ifyouarerepresentingaparticipant,youwantthemtocredittherebatetothefilm.Get
thebenefitofallratablerebates.

TimingWhenaretheseamountsmeasures:
Expensesoccurbeforerevenueisgenerated(productioncosts,distributioncosts,marketingcosts)
Accountingstatementsareusuallysetupforfilmstoberenderedquarterlyforthefirsttwoyears
afterrelease.
Thereforeateachquarterlypointyouaccountforgross,expensesandparticipations.Theseare
justarbitrarydatesthatarechosenforcalculationpurposes
Periodicityofaccountingperiods:
o Quarterlyforfirsttwoyears(maybethree)afterinitialrelease
o Then,annuallyforaperiodofyears(threetofive)
o Thereafter,onlyanannualreportwhererevenuewasreceived
o Usuallyanaddedonrighttorequestonestatementperyear

 Peopletendtoforgetlateronandstopasking
Distributorsareoftenallowedtokeepareserveincaseofresiduals
Guildsmaycomeafteryoulaterasaresultofassumptionagreement
Allowforreasonablereservesbutnegotiatetermafterwhichtheywillbe
disgorgedandkeepreserveatacapdollaramount
Ifnotindistributioncantkeepitatallifsomethingbecomesalibrarytitlethat
isnotdistributedanywhere
o Auditright:canalsoaskfor,ifnotprovided(usuallyprovided),anauditnomorethan
annually(usuallywaitforitayearortwoour)
Atdistributorsplaceofbusiness,bringyourownaccountantandtheyprovideall
oftheirreceiptsthisisexpensive
Iftheauditfindsmorethan10%errorthanyoucanpotentiallygetcostofaudit
(ifincludedincontract)
Studiosmayreserverighttoselldistributioninterestinthepicturewantflexibility
o Participanthasashareofforthcomingrevenue,ifany,soconcernedabout:
Newdistributormustbe:(oftenamonglistofmajorormini
Financiallyresponsible
Similarlysituated
Oftenfrompreapprovedlist(majorandminimajor)
Giveschoiceofpercentageofflatsalepriceofrights(knownliquidated
value)ORwaiveanyinterestinthesaleandlooktofuturerevenuesof
newbuyer
Whatthetermsofthenewdealare
Wooodv.LadyLucyDuffGordon:Exclusiveholderofexploitationrightshasthe
obligation,unlesswaived,tousebest/goodfaitheffortstoexploitthem
Expensesaccountedforwhenspent,butrevenuesdeemedreceivedonlastdayofaccounting
period.Resultisthatinterestisearnedontheexpensesbutnotontherevenues.Thereforeyou
wantthistoberemovedandallcashtobeaccountedforwhenreceivedtostoptheinterestclock.
o

MooreChapter13Fourwaystocalculatenetprofits
Intro:
Fourpurposesforwhichstudioscalculatenetprofits:
o 1)CalculatingearningsbasedonGAAPforreportingtoshareholders,SEC,lenders
o 2)Calculatingincome/lossfortaxpurposes
o 3)Calculatingpaymentstoprofitparticipants
o 4)Calculationcashavailabletomakedistributionstoequityholders
GAAP:
Goalistoreportnetprofitsashighaspossible(increaseshareprice)
Achievethisbyvariousmethods:capitalizeanumberofitems(ex:developmentcosts);report
incomeon"availabilitydate";deductfilmcostsslowlybasedonestimatedfutureincomeduring
firsttenyearsofrelease
TaxPurposes:
Goal:reportnetprofitsaslowaspossible
Achievethisby:reportincomewhenitispayable(vs.available);underestimatefutureincometo
deductthingsasfastaspossible
Participations:
Goal:reportnetprofitsaslowaspossible

Calculationisgovernedbycontract,notstatute.Reportgrossreceiptsaslowandlateaspossible,
offsetgrossreceiptsforhomevideow/alargereserveforpotentialrefunds,reportdistribution
expensesasearlyandashighaspossible
Distributionstoequityholders:
Complicatedcalculationbasedon(i)cashonhand,(ii)contractual/corporatedocuments,and(iii)
statutoryrequirementsfordistributions(ex:nobankruptcy)
MooreChapter15ContingentPaymentstoTalentandLicensors
GrossReceipts
DateofreportingGrossReceipts:goalistodelayreportingasmuchaspossible(byex:offset
incomew/largereserveforrefunds(homevideo),onlycountincomeoncereceivedinUSinUS$
ExclusionsfromGrossReceipts:Trytoexcludeasmuchaspossible(ex:themeparkexploitation
licensefees,litigationproceeds,"exclusivityfees"whichcovermultiplefilmsarenotcounted
towardsgrossreceiptsofanyofthefilms)
Allocations:allocatinggrossreceiptsfromthefilminquestiontosomethingelseisanotherway
tominimizegrossreceipts.(ex:whensellingfilmsaspackages,divideproceedsb/wallfilms
ratherthangivingalottothesuccessfulfilm,whichwillhaveparticipationrights)
LicensingtoAffiliates:allocaterightstoaffiliates,andonlycountthemoneyfromtheaffiliateas
grossreceiptssomostoftheincomestaysw/theaffiliatewhichhasnoparticipationobligations
HomeVideo:industrypracticeistoincludeonly20%ofhomevideogrossreceiptsinthegross
receipts.GuildsdidnotacceptforVOD,soVODisincludedat100%
DistributionFee
CalculationBasedonGrossreceipts:distributionfeesarecalculatedongrossnotnetreceipts.
Inanindustrywheredistortionexpenses(excludingdistributionfees)averageapprox40%of
grossreceipts,thepracticeofcalculatingdistributionfeesonGRinflatesthefees
Rate:distributionfeeaverages25%andcanincreaseto40%forTVsyndication.
DistributionExpenses
InGeneral:includeseverythingunderthesun,donotreflectdiscountsthestudiosreceive
Accruals:filmcompaniesacceleratedistributionexpensesbyaccruinganddeductingexpensesto
beincurredinthefuturedonotfollowGAAP
PaymentstoAffiliates:oftendeductpaymentstoaffiliatesservicesatactualormarkedupcosts
TradeDuesandTradeShows:deductalltradedue/tradeshowcosts,eventhoughdonotaccrueto
anyoneparticularfilm(contrastw/homevideorevenuewherewon'tincludeinGRpackage
revenueb/cdoesntrelatetoanyonefilm)
Taxes:deductwithholdingtaxes
DeductingGrossParticipations:standardpracticeistocalculatenetprofitsafterdeductinggross
participationspayabletothirdparties.
CostsofDevelopingAncillarymedia:
ProductionCosts:
Similarproblemstodistributionfeestypicallyincludepaymentstoaffiliates
Addthe"overheadfee"of15%
Chargeinterest
PossibleAlternative:

Haveparticipationstieddirectlytoworldwideboxoffice(WBO)grossasreportedinthetrades
HistoricalratioofWBOgrossforanyfilmcomparedtotheworldwiderevenuefromallmedia
forthatfilmreceivedbythestudiois~1:1.5(foreach$1MinWBO,afilmcanbeexpectedto
generateatotalof$1.5Mfromallmediatothestudio
Othervariablestoinclude:(i)costofthefilm,(ii)distributionexpenses,(iii)distributionfee
Benefitsare:noaudits,decreasedlegalfees,lesslitigation,fasterpayments,etc.

CasebookDocument15GuidetoDealStructures
Definedtermscoveredinclass(CBE,Netreceipts,etc)
CasebookDocument16ThirdPartyParticipationDealMemoProvisions
Exampleofdifferentdegreesofparticipation.TheOnesatthetoparemuchmorefavourabletothe
participantanddecreaseasyougoloweronthepage.
CasebookDocument17ContingentCompensationAnalyzingProspectiveBreakeven
Chartshowinginitialbreakevenwithafulldistributionfeeof30%.Asthefeemoves,thebreakeven
pointmoves.Discussedaboveinclass.
CasebookDocument18GrossBreakpointFormula
FormulatocalculateGrossBreakpoint
DE+PC=G
1X
DE=DistributionExpenses
PC=Productioncosts(plusinterest)
X=Applicabledistributionfeepercentage;expressedasadecimal
G=Grossatbreakpoint
Ex:

10+30=50
10.20(20%)

CasebookDocument19HardandSoftFloors
Purpose:toensurethattheparticipantisnotsubjectedtohavingall(ormost)netprofitsharesbeing
givenawaytootherparties,therebyreducingtheoriginalparticipant'sshare
Hardfloor:definestheminimumpoolfromwhichsumsduetheproducerwillbecalculated
participantsparticipationisreducedbyothercontingentparticipants,butcannotbereducedbeyond
thehardfloor(strictminimum)
Softfloor:definesalevelbelowwhichanyfurtherpaymentstothirdpartieswillbesplitb/wthe
distributorandproducerinagreedproportionsparticipantsparticipationisreducedbyother
contingentparticipants,but,belowthesoftfloor,theparticipationsarebornebyboththestudioand
thereducedparticipant.Onceyoureachthesoftfloor,burdenofadditionalparticipationsisshared
b/wstudioandparticipant.
CasebookDocument20Accountantsputthebiteon"Alien"
Note:Articledoesntprovidethattheaccountingwasdifferentfromwhatthepartieshadagreed
Alientookin$100millionatthebox,butthemoviefinished$2.4millioninthered.
Fox'sresponsetoarticle:"it'salittlenaveforpeopletoexpectapayoutsosoonafteramovie's
release."

Residualspoolgetseatenatby:distributionexpenses,marketingexpenses,studios'distributionfees
NotehowFoxdebitsitsaccountswhenithascommittedmoneybutdoesntcredititsaccountsuntilit
collectsmoneythismakessensetomeasyouhaveanobligationtopaybutnoguaranteetogetpaid

CasebookDocument21ForMovieStars,theBigmoneyisnowDeferred
Upfrontsalariesforactorsshrinkingandmoremoneycomingfromparticipationthereforeincome
istiedtosuccessofafilm
Shiftfromparticipationbasedonapercentageoffirstdollargrossreceiptstocashbreakzero(CB
zero)wherethestarorfilmmakerbeginscollectingashareofprofitsafterthestudiohasreachedthe
breakevenpoint
Lecture22AgencyandManagement
October27,2011
CASE:Celador
Inthiscase,ajuryawarded$270Milliontotheoriginalparticipant,theparticipantsgot$21M,
theiragentsgot$16M
Thiscasethusbridgesparticipationandagency
Who'sontheteam(seedoc#22)
Agents:meansapersonorcorporationwhoengagesintheoccupationofprocuring,offering,
promising,orattemptingtoprocureemploymentorengagementsforanartistorartists
o Notehowbroadthetestisforwhatanagentis.Becauseofthis,managersoftencross
overintoagentterritorywithoutalicense(thinkofEfromEntourage)
o Fundamentaldifferenceb/wagentsandmanagersisthatagentsmusthavealicenseto
practice.
o IfyouperformthetaskscoveredunderSection1700.4(CaliforniaLabourCode)thenyou
mustbelicensedasanagent
Managers:accordingtolaborcode,adviseoncareerchoices(i.e.shouldtheyacceptarole,cut
ratetoworkwithsomeone,etc.)
o personalmanagementcontractsshouldbe:(1)inwriting,(2)Callingupontorender
adviceuponyourcareerandnottoprocureemployment:(3)definenatureof
employmentasdisclaiminganythingthatcomesunderTAA
Somepersonalmanagersincludeexpressclause:intheeventthatitisdetermined
thatanyoftheservicesthatIrenderedpursuanttothisagreementaredeemed
withinpurviewofTAAtheyshallbeseverable
Consistentwithpublicpolicy
Understoodandagreedthatcoterminousofagreementyouwillbe
representedbyanagentlicensedunderTAAsoastoshiftresponsibility
Lawyerandpersonalmanagementcanleanonagentsotheyare
ostensiblynotthepartyprocuringorattemptingtoprocure

BusinessManagers:generallyaccountantswhomanagethebusinessaffairsofhighwealth
clients.Usuallyworkona%.Mightalsoadviseastootherthings,suchasinvestments.Arenot
generallyeitherprocuringemploymentorrecommendingcoursesofemploymentthatwillaffect
anartistscreativecareer.
ClientAgentrelations

Mutualobligations
o Clientsmustpay
o Agentsmustusetheirbesteffortstogettheirclientswork(becauseinmediatheyare
typicallyexclusive,howevertheymayhavedifferentagentsfordifferentservices)
1700onlygovernstheagentdutiesasdefinedinTAA(1700)
Boundbyagencyagreementoversometerm
o Unionshaveinsistedthattherearesomemeasuresofperformancethatallowthislength
Continuityofmanagement:artistnamesone,agentnamesoneandmaybe
mutuallyagreeonthirdotherwisevoidable
Typicallyartistsignstheagentthatrecruitedthemandtheagencyselects
presidentofagency(likelytomaintaincontinuityofmanagement)
Asartistsgetmoreleveragetheytypicallylisttheirpersonalagentand
saytheygowhereitgoes
Offersofemploymentthatareingoodfaithandattheartistsapproximaterateof
compensationpresentedtothemnotlessfrequentlythanX(somerelativelyshort
amountoftime)
Otherwisetiedtoagencynotgettingyouwork

TalentAgentActSec.1700

Ifperformingafunctiongovernedbythisactbutnotlicensedunderittheninviolationandmay
besubjecttopenalties
Attempttoregulateindustryofpurportingtofindpeoplework
Engagedinoccupationofprocuring,offering,promising,orattemptingtoprocure(byofferingor
promising)employment/engagementsforanartist(exceptrecordingartists)
o Recordingcontractstreatedseparatelyinordertomakeiteasierforyoungmusiciansto
getrepresentation
Agenciesareprotected
o Agenciesholdamasterlicenseandindividualagentsarecoveredunderthis,therefore
salesagencymaygetmoneyfrominvestmentinafilm(informofdistribution
agreement,presalesorinvestmentinfilms)
o Also,gettingmoneytoinvestinafilmisnotprocuringemploymentsonotcovered
withindefinitionoftalentagency
Affirmativeobligationtoacquirelicense(byapplication)under1700.6beforeengaginginactions
oftalentagentasdefinedunder1700.4
TAAprohibitspersonalmanagersfrommakingphonecallstoprocureemployment,inthe
absenceofanagent,andtakingcommission
o Ifdonebutlaterthereisabreachthentheclientcangobackanddisgorgethemanager
forallfundspaidforperformingthisfunction
o Lawyersalsocannotperformthisfunction,thoughsomeareunderthebeliefthattheycan
andhaveactedthiswayfordecades
Cannottakeacommissionforgettingsomeoneajob
Solisv.Blancarte:lawyerorderedtodisgorgepastfeesfortakingcommission
NationalConferenceofPersonalManagersv.Brown:clamthatactisunconstitutional,and
thereforeunenforceable
o Districtcourtdismissedtheclaim,onappealto9thCir.

FeestructureforrepresentingartistsasartistsforemploymentisnotdefinedbytheAct,butis
cappedbyunionsfranchiseagreements10%
o Managershavefewerclientsandtypicallychargethehigherfeeof15%sotheydonot
wanttobelicensedasagentsbecauseofthispaycut
o Laborcommissionerhasstated(persuasiveauthority)that10%iscap
Lawyerswouldnotwanttoaddtheextraconstraints

Unions
Franchised
Talent

Agencies

Commission:
ThereisnothinginSection1700.24oranywhereinthestatutethatsetsamaximumonthe
amountofcommissionyoucouldaskformatterofcontract.
Whyis10%theindustrystandardthen?Thefeecapsaresetoutintheunion(franchise)
agreements.Itisundertheseunionagreementsthatthefeeof10%hasbeensetoutfortalent
agents.
o Note:in2002thefranchisingagreementb/wSAGandthecollectivebargaining
associationforagentsfailedtonegotiateanextensionofthefranchiseagreement.The
resultwasthattheagencieswerenolongersubjecttothelimitationsofthefranchise
agreementandnolongerboundbythe10%feelimitation.Document29showsthe
practicalimpactofthis.
Thereishowevernocaponunlicensedmanagers'fees
Whataboutlawyers?Aretheyexemptfromcharginga10%commissionw/outbeinglicensed?
Theansweristhattheyaresubjecttothetalentagencyact.Justbeingalawyerdoesnotexempt
you.Youcannotparticipateinatalentagencysituationw/outbeinglicensed.Thereisofcoursea
littleoverlap,ifyou'renegotiatingthefinepointsofacontractthat'sfine,butifyou'reactually
goingoutandgettingthejobs,thenyoushouldbelicensed
Packaging:additionaltypeofcompensationtoagencywhenartistperformsworkoutsidescopeoftheir
servicesrenderedasdefinedbytheTAA
Distinguishpackaging(notsubjectto10%)frompersonalservices(subjecttothe10%rule).
Ifyouarerepresentingpersonalservices,yourfeeis10%
Inpackaging,theagentrepresentssomeversionoftheproducerortheproduction.
Theyarerepresentingtheshoworthemovie.(originatedintelevision)
Historically,packagetogethertalentandawritertopackageaproduction.Inlateryearswesee
packagingwhereagentsrepresentjustascriptorsmallerthingslikethis.
Sincetheyarerepresentingtheproduction,theyarenotlimitedbythe10%rule.
Packagingcommissionisdifferentfrompersonalservicescommissionb/ctheyarenottaking
commissionfromthetalent,butratheraregainingrevenuefromtheproduct.However,ifthe
producerispickingsomeonewhoisoutsideofthatpackage,thenthatpersonwillhavetopaythe
fee.
"Packagecommission":commonlycalled3/3/10tobecontinuedinnextlecture

PackageCommissions:
"Packagecommission":commonlycalled3/3/10%,isthestandardcommissioningarrangement
foranagencythatisrepresentingapackageinsteadofthepersonalservicesoftheartist.Note:
licensefeeisperepisode.
o First3%(calculatedonlicensefee)Thebaseonwhichthesenumbersarecalculated
areasfollows:imaginealicensefeeof$1Million.Thisiswhattheoriginalbroadcasting
networkispayingfortherighttoshowtheshowoversomenumberofrunsandperiodof
time.Thisisthebaseformeasuringthepackagecommission.Itisnotmeasuredbythe
budget.Itisbasedonthelicensefee.Paidoutofthebudget.
o Second3%(calculatedbasedonlicensefeethussameamtasfirst3%)usually
comesoutfromacomplexformulathatbasicallylookslike100%ofnetprofits.Pointis,
whateverdefinitiontheproducergetsisthedefinitiontheagencywillgetfor
participatinginthosecontingentproceeds.
Thatsecond3%shallbetakenoutofasumequalto50%ofwhatthe
Producer'scontingentshareis,untilthatsecond3%isrecouped.Paidoutof
backendofthefilm.
Whateverthedefinitionis,thatamount(ex:netprofits)willbesplitintotwo
streams,halftargetedattheproducerandhalftargetedattheagency.Theagency
willthenget3%licensefeebaseoutoftheirrespectivestream
Example:Netprofitsof$50,000.SplitintoAgencystream($25,000)and
Producerstream($25,000).Theagencywillthenget3%(calculatedbasedon
thelicensefee)fromonlythepooloftheirstream.Inthisexampletheyhavea
payableof3%*100,000=$30,000buttheirstreamallocationismax$25,000so
theyonlyget$25,000
Whyhasthisdeveloped?Becauseotherwiseproducerswouldloseoutontheir
commission.Thissystemguaranteesthattheproducerwillgetsomecontingent
proceedsifthereareany
o The10%Ifthebackendstreamexceedsthesecond3%forboththeagencyandthe
producer,theagencytakes10%outofthecompletepool.Revertstoastandard10%
commissionfortheentiretyoftheprojectslifecycle,againfrombackend.
o "3310''model.Thatmeansthatanagencygets3percentofthelicensefeeoftheshow,
payablewhenanepisodeisproduced;3percentofthebudgetoftheshow,whichis
deferreduntiltheshowhitsnetprofits;and10percentofthebackendoftheshow,when
itissoldintosyndication.CLARIFYTHISATREVIEWSESSION
"AgencySplits":Whennooneagencyrepresents100%ofthepackage.Theywillarrangesome
formofsplitforthecommissionasbetweenthem.Forourexamplesthough,wewillassumeone
agencyisdoingtheentirepackage.
Renegotiationstalentisgenerallysetoutasetamountperseason.I.e.seasononeyouget
$10K/episode,withannual$2,500/epincreases.However,whenashowtakesoff,whatthecast
doesitrenegotiate(i.e.threatentoquitiftheydon'tgetapayincrease)
Commonly,asmallagencywillfindtalentandthattalentwillleavethemlaterintheircareerfor
abiggeragency.Ifthathappensinaseries,thatagencywillstillgettheoriginal
commissions/backendowedtoit.
Featurepackagingexistswhenyoupresellcertainrights(i.e.toanotherterritory)thentake10%
offofthissale???
CASE:MarathonvBlasi

PriortoBlasi,amanagement/agencycontractw/anunlicensedpartyperformingthedutiesofan
agentwouldhavebeeninvalidated.Thiscase,changedthatandappliedseverability.
Courtfoundthatitwasunfair/unjusttoinvalidatetheentirecontract.Rather,applyseverability
andreducecommissionstoremoveunlicensedtransactions.Servicesthatdon'trequirealicense
shouldnotbedisgorged.

Renegotiation

Seaso
n
1
2
3
4
5
6
7

Agency #1 Episodic
10,000
12,500
15,000
17,500
20,000
22,5000
25,000

Agency #2 Fees

35,000
40,000
45,000
50,000
55,000

Ifshowishot,canthreatenbreach(to
forcerenegotiation)

Eitherbecauseartistisinvestigatinganotheragencyorisapproachedbyanotheragentthatsaystheycan
dobetter.Secondlineiswhatthesecondagentsaystheycandoorhasactuallydone.(Expresspolicyof
bigagenciesnottopoachfromsmallagencies)
Usuallyforatermofyears:theyoungerthetalentthelongerthetalent,themoresuccessfulthe
shorter
o Needcontinuityofmanagementandregularsimilaremployment
Ifstillundercontractwithagency1
o Agency1cansendceaseanddesistlettertoagency2fortortiousinterferenceofcontract
o Secondagencywilloffertopayprojectedcommissionoffirstagencytobuytheclient
outoftheircontract
Couldevenoffertogivecommissiononthespreadofnewcommission
Ifagency1complainsaboutlosingpotentialcommissionoffofstardomofartist
o Speculativefuturecommissions
o Agency2couldoffertopaysomeportionofcommission
Agent1reallyhelpsbuildcareersbyinvestingandworkingwithtalentduringthehardestportion
oftheircareer,thefirstfewyears
Remedies
Getfullcommissionfromfirstcontractasprojected,asitarosewithintheagencystime
o (evenifKwithagentwas4yearsandserieswas7agentwouldgetcommissionfromall
7becausethecontractwascreatedduringtheirtime)
Sometimesgetalittlemore
o Spreadofadditionalincomeoncurrentcontract
o Someamountofcommissionfromadditionalcontractspickedupthatwouldhavebeen
withintherelevantyearsofcontractwiththeagent

CasebookDocument22CaliforniaLawsRelatingtoTalentAgencies
ExcerptsfromtheCalifornialabourcodeseeDocument22,onlycoveredhereonesdiscussedinclass
1700.4.(a)"Talentagency/agent"meansapersonorcorporationwhoengagesintheoccupationof
procuring,offering,promising,orattemptingtoprocureemploymentorengagementsforanartist
orartists,exceptthattheactivitiesofprocuring,offering,orpromisingtoprocurerecordingcontractsfor
anartistorartistsshallnotofitselfsubjectapersonorcorporationtoregulationandlicensingunderthis
chapter.Talentagenciesmay,inaddition,counselordirectartistsinthedevelopmentoftheirprofessional
careers.

1700.24.EverytalentagencyshallfilewiththeLaborCommissionerascheduleoffeestobecharged
andcollectedintheconductofthatoccupation,andshallalsokeepacopyoftheschedulepostedina
conspicuousplaceintheofficeofthetalentagency.Changesintheschedulemaybemadefromtimeto
time,butnofeeorchangeoffeeshallbecomeeffectiveuntilsevendaysafterthedateoffilingthereof
withtheLaborCommissioneranduntilpostedfornotlessthansevendaysinaconspicuousplaceinthe
officeofthetalentagency.(doesnotsetoutmaximum!)
CasebookDocument23WhatYouReallyWantToKnowAboutManagersandAgents
Discussesthedifferencesb/wagentsandmanagerswewentoverinclass
Mainpointdon'tactlikeanagent(i.e.bookgigs)unlessyouarelicensedagentinNYorCal
But,theCaliforniaTalentAgencyacthasanexemptionformanagershelpinggettheirclients
recordingcontractswithoutbeinglicensed.Soyoucangetarecordingcontractw/outalicense.
CasebookDocument24MarathonEntertainment,Inc.v.Blasi,2Cal.4th974(2008)
Facts:MarathonandBlasienteredintoanoralcontractforMarathontoserveasBlasi'spersonalmanager
inexchangeforapercentageofherentertainmentemploymentincome.Blasi,whowasrepresentedbya
licensedtalentagentthroughoutthetermofherpersonalmanagementcontractwithMarathon,terminated
themanagementcontractinthefallof2001.Thereafter,BlasisuccessfullyinvokedMarathon'salleged
violationoftheAct'slicensingrequirementsasadefensetoherobligationtopayMarathonacommission
onher20002001earningsfromthetelevisionseriesStrongMedicine,
Issues:(i)applicabilityoftheacttomanagers;(ii)doesprocuringemploymentw/outalicensevoidthe
entireagreement?
Holding:(i)Yes,appliestomanagers;(ii)No,canseverthatpartofcontract
Reasoning:
Ratio:
Agentsprocureroles;theyputartistsonthescreen,onthestage,behindthecameras;indeed,by
law,onlytheymaydoso.Managerscoordinateeverythingelse;theycounselandadvise,take
careofbusinessarrangements,andchartthecourseofanartistscareer.
ManagerssubjecttoTalentAgencyActiftheirconductisunderthedefinitionof1700.4;
DoctrineofSeverabilityapplicabletomanagerclientKs,thusmanagerentitledtopayforwork
performed,i.e.partialenforcementoftheseK,eveniftheyviolatedtheTalentAgencyActby
procuringemployment(Thatmeansiftheydid1%ofillegalconduct,theywontlosetheother99%of
thestufftheydid)
Note:PostBlasimanagementcontract:
PostBlasicontractwouldbeawrittencontractstipulating:fee;descriptionofdutiesespecially

prohibitingtheprocurementofemployment;Agentclausemightwanttosaythatagentisprocuring
employmentatalltimesandwithaseparatecommission;Severabilityclause
CasebookDocument25TalentAgenciesonMissiontoDiversify
Talentagenciesarediversifyingtheirbusiness.
Especiallyimportant(i)b/cofwriter'sstrikeand(ii)b/cofchangeinthewaypeopleconsumemedia
Strikeresistantbusinesssuchasmusic(touring),publishing,realityTV,sportsanddigitalcontent
veryimportantTV/Filmwillbebreadandbutterbuttheseareasincreasinglysignificant
Newinternationalmarketsveryimportant
CasebookDocument26MillionaireAftermath:CeladorLeavesDoorOpentoSueAgents
Casehighlightedthetensionb/wagents'"packagefees"(anoffthetop5%feetakenfromnetwork
licensefees)andtheparticipationsthattheclientsget.Questionconflictofinterestswhereagents
hurry/fightforpackagefeeanddonotpayenoughattentiontoparticipations
Packagingfeesputagenciesinaconflictedpositionb/ctheygetpaidiftheshowasawholedoes
well,notnecessarilywhethertheirclientsareespeciallyprotected
CasebookDocument27LawsuitClaimsCAACheatedTVCreators
Tensionb/wpackagingfeesandcontingentcompensationforclients.Thedealgavemoneytothe
agency(packagefeesandcontingent)onamorefavourablebasisthantheagency'sclients(thecreatorsof
theshow).ButfortheAgency'shighparticipations,thecreatorswouldhavereceivedresiduals.
CasebookDocument29ComparingSAGRule16(g)totheGSA
PointbypointcomparisonofwhatSAGexpecteditsfranchiseagentstogoverntheircontractsand
(sincethefranchiseagreementfailedtobeextended)whattheagentsusedintheircontractswithout
beinggovernedbySAG'sminimumtermsandconditions.
ShowsthattheAgenciesrespondedbydraftingtheirownminimumstandardsagreement("GSA")to
governthemselves.
Inpractice,themajoragencies,justkeptonwiththesameagreementwhichhadbeenfranchised.
Afewsmalleragencies,startedusingtheGSAandoffereddecreasedprotectionfortalent
ButmosttalentgotthesamedealasunderSAG
Lecture23Insurance,LitigationandADR
Producer'sPackagePolicy(Document39):
Standardgroupofcoveragesyougettocovertherisksinvolvedthatariseinfilmproduction
Include:cast,props/sets/wardrobe,extraexpense,foreignliability,aircraft,errorsandomissions,
etc.
ErrorsandOmissionsInsurance
MainprotectionforIP/rightsrelatedcontentofentertainmentindustry
"Claimsmade"coverage:coveragethatappliesonlytoclaimswhicharemadeduringthe
coverageofyourpolicy.Formostpolicies,ademandletterissufficientforaclaimtohavebeen
consideredashavingbeenmade
Note:"tail"referstopostterminsurance,insurancewhichcoverspasttheexpiryofthefirstterm
ofyourinsuranceagreement.Youwanttokeepthefilmunderconstantcoverageuntilyousell
thefilm(atwhichpointthebuyerwillhavetogettheinsurance

Ifyoudeliverafilmduringthefirstterm,typically,theproducer'sE&Oinsurancebecomes
supersededbythedistributorscoveragetransitionfromproductiontodistributioncoverage
WhatiscoveredinanE&Opolicy:
o Libel,slanderorotherformsofdefamation
Note:"tradelibel"whereyoudefameamark/business(ex:showaFordhaving
failingbreaks)
o Invasionoftherightsofprivacyorpublicity(somethinginyourfilmdisclosessomething
thatthepersonhadarighttobelievewouldbeprivatemorecommoninfilmsbasedon
factthanbasedonfiction)
[Note:thereareclearinghouseswhichrunsearchestomakesureeithernoone
ormanypeoplehavethenameofacharacterandinsuranceco'susuallyrequire
thattheproductionattorneysignoffonthescripthavingbeencleared]
o Unauthorizeduseofnames,tradenames,servicemarks,ideas,characters,character
names,
o InfringementofCopyright:
AlsoincludescaseslikeDodgeball,wheretheexpressionwastakenthrougha
chainofpassingiton
o Worldwidecoverage:importantb/clawsuitsoftenoriginatefromoutsidetheUSA
Note:policiesalsosetoutadefencefundtodefendagainstsuitsagainstyou

CastInsurance:
Coversyouintheeventthatthereisadelay/lossofscheduledcastmembers
Tobeconsideredascheduledcastmember,musthavegonethroughaprecoverage/pre
productionphysicalexam
Othertypesofinsurance
Negative,film,videotapecoverage:coversthelossoffilmthatwouldrepair/covercostofre
shootinglostfilm.onlyreallyappliestoshootingonfilmasopposedtodigital
o Ifyouarefilminginaremotelocation,thesepoliciesgenerallyrequirethatyousendthe
filmoutoftheremotelocationveryfrequentlyandhaveitprocessedasap
Faultystockandcameraprocessing:problemsw/thefilmwhenitwasmadeorprocessing
problemswhichruinedthefilmagainnotadigitalissue
Litigationasitconcernstheentertainmentindustry
Rampantb/cofseveralfactors:
o (i)Informalityindealsand/ororalagreements
o (ii)Weird,incomprehensibleandconflictingterminology
o (iii)Oldgrantsofrightsi.e.isVOD"HomeVideo"ornot?
Governinglaw:
o EntertainmentlitigationisgovernedbythetraditionalbodiesoflawaswellasCopyright
lawandmanyareasthatareuniqueoruniquelyimportanttotheindustry
Evidence:Assumethatallwrittendocumentswillbesubmittedintoevidence(emails,contracts,
metalanguage,trackchanges,letters,etc)
Attorney/clientprivilege:Assumethattherewillbenobindinglyassertableprivilegeasb/wa
lawyerandhisclientb/ctheclientcanwaiveit
Whenondefenceyouwanttodefeattheclaimonsummaryjudgment(savescost,lower
settlementcost)

Forumshopping:strategicchoiceofvenue(ex:statevs.federal;whichstate;whichcountry)

ADRAlternativeDisputeResolution
IncreasedrelianceonADRb/cofcloggedcourts
Arbitrationandmediationaretheprimemethods
Arbitration
o arisesunderunionagreementsandalsoundercontractualprovisionsb/wparties
(thereforecanbecompulsoryordiscretionary)
o Problemisnoappeal.Decisionsnotattackableunlessthereisfraudbythearbitrator,
failuretoadmitpertinentevidence;oregregiousconduct
o Partiesw/moremoneyprefertolitigateoverarbitrateb/cyougetmorebitesattheapple
o Decisionisimposedbyarbitrator
Mediation:
o Mediatorcannotimposearesultontheparties.Partiesmustagreetothesettlement
FinalityinADR:whatmakesthecaseabsolutelyfinalonceyou'vecometoasettlement?
o Remember,asettlementagreementismerelyanothercontract.Youwanttobesurethat
theproblemwillgoawaypermanently.
o Thetechniqueforachievingfinalityis
(a)Plaintiffentersadismissalw/prejudice(preventsrefiling);and
(b)settlementagreementcontainsasection1542declaration(waivesrightsyou
wouldotherwisehave).Intheabsenceofas.1542waiver,youcangobackand
say"ifI'dknownthesenewlydiscoveredfacts,Ineverwouldhavesettled)[note:
realfraudgetsaroundwaiver]
MooreChapter22Litigation
Reasonsnottolitigate:counterclaims;legalfees;aggravation;90%ofcasessettle,whynotjustsettle
upfrontandskipthetime/moneytryingtolitigate
Whyarbitrationisworse:absenceofdiscovery,stuckwiththearbitrator'sdecisionrightorwrong
Howtoavoidlitigation:spotschemersanddreamers;keepstructuressimple;don'trelyonoral
agreements;usecompleteandconcisecontracts,notLOIs,termsheetsanddealmemos
CasebookDocument39MotionPictureandTelevisionProductionInsurance
Sampleinsurance
Lectures24&25Copyright,DroitsMorauxandFairUse
ReviewCRFairUsenotesforEntertainmentexam
Intro:

Ginsburgreadthecopyrightclause:science/usefularts;authors/inventors;writings/discoveries
(copyright/patent);promotionofprogress;limitedtime;exclusiverights
November8,2011
1stamendmentandCRarebalancedoutbyFairUse
Note:noneedtomemorizeCRactsections
HarperRowIdeaexpressiondichotomystrikesdefinitionalbalanceb/w1 stamendmentand
CRACRdoesnotprotectideas!
Originality+Fixationinatangibleofexpressionforamorethantransitoryperiodofduration

Originalitymeansitarosethroughthecreativityoftheauthor.Testforthequantumoforiginality
isverylow.Levelofexpression/originalityneedbeabovelevelofdeminimis
Originalvs.Novel=Icameupwithitvs.itiscompletelynew.ThetestisnotnoveltyinCR
Morethanatrivialvariation
Copyrightlawdiffersb/wcountries.NeverassumeaworkprotectedinAwillbeprotectedinB
(nonextratorialeffectofCR)
Thereareinternationalconventionshowever
Scenesafaire:stockelementsnotprotectedbyCR.Cannotpointtothesesimilarelements(ex
Westernridingoffintothesunset)whentryingtoshowsubstantialsimilarityroutine/obvious
componentsthatflowfromacertaingenre/typeofshow
Exclusiverights:makecopies(prints),distribute,performpublicly
Benefitsofregistration:
o NeedtohaveasignedwritinganditmustberecordedintheCROtosueinfederalcourt
o Needittoclaimstatutorydamages
o Createsapresumptionofaccess

FirstSaleDoctrine:
ThefirstsaledoctrineappliestothephysicalcopyofCR'dworksyouhavelegallyacquired.Can
doasyoupleasewithit.
Itisthebasisfortwolargeindustries,whichcouldnotexistw/outthefirstsaledoctrine:libraries
(otherwisewouldbeaccusedofdistributingthem),usedgoodsstores,videorentals,
Currentissue#1:doesitapplytoallcopiesregardlessofwhereprocured?OmegavCostco
OmegasuedCostcob/cCostcowasbuyingthewatchesoutsidetheUSAandthensellingthemin
theUSA.TheprevailingviewintheUSAisthatthereisnofirstsaledoctrineforgoodsacquired
outsidetheUnitedStates.
Currentissue#2:Whataboutsoftware/digitalcopies?DavidsaysFUprobablydoesntapply
licensevs.sale.Mostpplviewitasnotsubjectb/cnotaphysicalcopy.
Substantialsimilarity
Wewillfocusonthe9thcircuitapproach(CroftvMcDonald)
Courtisrequiredtosubjecttheallegedlyinfringingmaterialtotwotests:
o (i)Extrinsictest:
Objectivetastebasedonexpertanalysisusingfiltration(lookonlyatthe
protectablesimilarities,ex:removethescenesafairefromtheanalysis)andon
thatbasisseeiftheyaresimilar
Note:MetcalfvBotchcotroublingcaseb/csaidyoucouldcreatea"compilation
ofideasinanorder"thatwasprotectable.Creatingtheorderofideasprotectable.
Allcasessincethishavehatedonthiscasetothepointthatitisalmostignored.
Itisuptothejudgetodeterminewhetherasamatteroflawajurycould
conclude,basedonsubstantialsimilarity,thattherewasinfringement
Involvedtwoelements:(1)copyinginfact/actualcopyingand(2)copyingatlaw
(takingsomethingthatisprotectableexpression)substantialsimilarity
Ifnosubstantialsimilarity,caseisknockedoutinsummaryjudgment
o (ii)Intrinsictest:
Onceacasesurvivestheextrinsictest,theintrinsictestisthenapplied
FairUse(S107)

Fourparttest
1)Purposeandcharacteroftheuse(commercialvs.nonprofit;consumptivevs.transformative)
o Note:beabletodistinguishb/wparodyandsatire.Parodyattackstheoriginalwork
whereassatireisacommentaryonsocietyingeneral.1stamendmentfavorsparodical
treatment,takeenoughoftheoriginaltoparodyit.
2)NatureoftheCR'dwork
o Factualvs.fiction;publishedvs.unpublished;
3)AmountandsubstantialityoftheuseinrelationtotheCR'dworkasawhole(theP'swork)
4)Effectonthemarket.(HarryPotterLexicon)
[listentolectureNov17,2011firsttwentyminutes]

CASE:LensvUniversal:(fairuseandDMCA)
BabydancingtoasongtakendownbyUniversalviaDMCAtakedownnotice.SuedUniversal
arguingthattheymustmakeafairuseevaluationpriortosendingaDMCAtakedownnotice
Courtagreedw/this,holdingthatCRownersmustatleastmakea

primafacie

determination
aboutwhetherornotthisisafairuse,priortosendingatakedownnotice
DocumentaryUseInsurance
Specialbreedforinsurancefordocumentarieswhereyouattestthatyouareusinganother's
contentbutsayingthatitisupfrontfairuse.
Threeparttestfilmmakermustattest:
o (1)theyneededtheCR'dmaterialtotelltheirnarrativeb/c
o (2)theytooknomorethannecessarytoaccomplish#1
o (3)Totheobjectiveviewer,istheneedanduse,internallyjustified,explainedorobvious
totheaudience
MoralRights
Doctrinegroundedintheinherentauthorialrightsofthecreator.Focusesontheinherentrights
ofcreators(overwhathappenstotheirworks),overmarketbasedanalysis
Classic4moralrights:
o (1)Rightofdisclosure:onlytheauthorcandeterminewhen/bywhomworkcanbe
disclosedtothepublic(soundslikeUScopyrightlaw)
o (2)Rightofwithdrawalofawork:whentheworkcanbecalledback/modified
o (3)Rightofattribution:righttoreceiveauthorshipcreditbyrealname,pseudonymously,
anonymously(soundsliketherighttoreceivecreditfromguilds)
o (4)Rightofintegrity:authormaypreventthepresentationofworkinamannerorcontext
whichhedeemsharmfultoreputationordamagingtotheworkitself
Thesemoralrightsmustbeexercisedingoodfaith
MattersforUSfilmmakersforacoupleofreasons:(i)internationaldistribution;(ii)USCR
adjustedtobe(atleastminimally)compliantw/moralrightsb/cofBerneConvention
o USfilmmakershavetriedtoenforcecopyrightsovertheirworksbygoingtoother
countrieswherethesetypesofrightsarerecognizedUSdirectorJohnHoustontriedto
copyrightblackandwhiteandfilmnoire,wasunsuccessfulinUScourts,sotookthecase
toFrance

MooreChapter17Copyright
CountrybyCountryDetermination
CRexistsonacountrybycountrybasis.Undertreaties,publicationinonecountrytriggersCR
protectioninothercountries,butsubjecttotheCRlawsofthosejurisdictions
ProtectedWorks
CRAprotects"originalworksofauthorship"thatare"fixedinanytangiblemediumofexpression,
nowknownorlaterdeveloped,fromwhichtheycanbeperceived,reproduced,orotherwise
communicated,eitherdirectlyorw/theaidofamachineordevice"
DerivativeWorks
Worksofauthorshipthatare"basedupon"aCR'dworksubstantialsimilaritystandard
Chainoftitleveryimportantb/ctomake(ex)asequeltoafilmyouwillneedtheauthorizationfrom
theCRholderoftherightsintheNovelTreatmentScreenplayFilm.
TermofCR
Individuals:life+70years
Iflicensedtoathirdparty,obtainnonwaivablerighttoterminatelicenseafter35years(not
applicabletoworksforhire;notapplicabletoderivativeworkscreatedbylicenseeunderthelicense)
Workmadeforhire:95yearsfromthedateofpublication
Transfers
CRisabundleofrights,cangiveawayverysmallindividualrights(mustbeexclusivetobeownerof
thatparticularcopyright)
Exclusiverightsmustbegrantedinwritingtobevalidandmustexpresslygrantexclusiverights
CompetingTransfers
Incompetingexclusiverighttransfers,thatwhichisregisteredfirstw/CROtakespriority
FairUseDefense
Fairusedefence,vitalanditsamess
CasebookDocument40CopyrightAct101,102,106,106Aand107
Sect.102.Subjectmatterofcopyright:Ingeneral
(a)Copyrightprotectionsubsists,inaccordancewiththistitle[17USCSSects.101etseq.],inoriginal
worksofauthorshipfixedinanytangiblemediumofexpression,nowknownorlaterdeveloped,from
whichtheycanbeperceived,reproduced,orotherwisecommunicated,eitherdirectlyorwiththeaidofa
machineordevice.Worksofauthorshipincludethefollowingcategories:
[]
(b)Innocasedoescopyrightprotectionforanoriginalworkofauthorshipextendtoanyidea,
procedure,process,system,methodofoperation,concept,principle,ordiscovery,regardlessofthe
forminwhichitisdescribed,explained,illustrated,orembodiedinsuchwork.
HouseReport:CRdoesnotprecludeothersfromusingtheideasorinforevealedbytheauthor'swork.
106Exclusiverightsincopyrightedworks
Subjecttosections107through122,theownerofcopyrightunderthistitlehastheexclusiverightstodoandto
authorizeanyofthefollowing:
(1)toreproducethecopyrightedworkincopiesorphonorecords;
(2)topreparederivativeworksbaseduponthecopyrightedwork;
(3)todistributecopiesorphonorecordsofthecopyrightedworktothepublicbysaleorothertransferof
ownership,orbyrental,lease,orlending;
(4)inthecaseofliterary,musical,dramatic,andchoreographicworks,pantomimes,andmotionpicturesandother

audiovisualworks,toperformthecopyrightedworkpublicly;
(5)inthecaseofliterary,musical,dramatic,andchoreographicworks,pantomimes,andpictorial,graphic,or
sculpturalworks,includingtheindividualimagesofamotionpictureorotheraudiovisualwork,todisplaythe
copyrightedworkpublicly;and
(6)inthecaseofsoundrecordings,toperformthecopyrightedworkpubliclybymeansofadigitalaudio
transmission.
107Limitationsonexclusiverights:Fairuse
Notwithstandingtheprovisionsofsections106and106A,thefairuseofacopyrightedwork,including
suchusebyreproductionincopiesorphonorecordsorbyanyothermeansspecifiedbythatsection,for
purposessuchascriticism,comment,newsreporting,teaching(includingmultiplecopiesforclassroom
use),scholarship,orresearch,isnotaninfringementofcopyright.Indeterminingwhethertheusemade
ofaworkinanyparticularcaseisafairusethefactorstobeconsideredshallinclude
(1)thepurposeandcharacteroftheuse,includingwhethersuchuseisofacommercialnatureorisfor
nonprofiteducationalpurposes;
(2)thenatureofthecopyrightedwork;
(3)theamountandsubstantialityoftheportionusedinrelationtothecopyrightedworkasawhole;and
(4)theeffectoftheuseuponthepotentialmarketfororvalueofthecopyrightedwork.
Thefactthataworkisunpublishedshallnotitselfbarafindingoffairuseifsuchfindingismadeupon
considerationofalltheabovefactors.
CasebookDocument42WorksMadeforHire
RequirementsforWFHtwocontexts:
(1)Employmentcontext:workpreparedbyemployeewithinthescopeofemployment
o Requiresbothemployeeemployerrelationshipandw/inscopeofemployment
o Factorstoconsidertodetermineif"ee/errelationship":
Controlbytheemployeroverthework
Controlbyemployerovertheemployee
Statusandconductofemployer(ifpaysbenefits,likelyer/eerelationship)
(2)Commissionedwork:mustbeoneoftypesofworkslistedinSection101(2)ANDexpress
agreementinwritingb/wthepartiesthatthecommissionedworkisaWFH
o (i)Contributiontoacollectivework;(ii)Partofamotionpictureoraudiovisualwork;(iii)
Translation;(iv)Supplementarywork(e.g,abooksintroduction,illustrations,index);(v)
Compilation;(vi)Instructionaltext;(vii)Test;(viii)Answermaterialforatest;(ix)Atlas.
Term:95yearsfromdateofpublicationor120yearsfromcreation,whicheverexpiresfirst
35yearassignmentterminationrightsdonotapplytoWMFH
CasebookDocument43UnbundlingFairUses

CasebookDocument44Samuelsonarticlefairuseoutline(summary)
Policiesthatunderliemodernfairuse:
(i)Promotingfreedomofspeechandofexpression
(ii)Theongoingprogressofauthorship,learning,accesstoinformation,truthtellingortruthseeking
(iii)Competition
(iv)Technologicalinnovation

(v)PrivacyandAutonomyofinterestsofusers

Lecture 26 Reality Television

ClassesofRealityTV

GamedocumentariesSurvivor,AmazingRace,etc
Realworlddocumentariesvouyeristicshows
Dating/romance/marriageshowsTheBachelor
MakeovershowsTheSwan,Doctor90210,etc
TalentcontestsAmericanIdol,TheVoice,etc
FishoutofwatershowsWifeSwap
HowcantheseshowsmaintainprotectioninrealityTV?
LevelsofProtection/WhatisprotectableinrealityTV:
(1)Creativity:(whollyoriginal?)
(2)Derivation:(expressive,butfromsomeothersource)protectionoftheoriginalityinderivative
works
(3)Compilation:thinnestlevelofprotection
Mostprotectionatcreativity,leastatcompilation.
CroftvMacDonald
Originatedthe"totalconceptandfeel"argument
FRAPA
Plaintiff'sliketoclaimcopyrightinformat.Whichisthecoreoftheshow.Formatliessomewhereb/w
ideaandexpression.
Verytoughtoestablishexclusivityinamereformat
Allweightlossshowsarenecessarilygoingtoinvolveafatpersonwholosesweight.So
yeah,theformatisgoingtobethesame.
CopyrightAnalysisSubstantialSimilarity:
Fragmentedliteralsimilarity:Literalcopyingorcloseparaphrasingofdialogue
Comprehensivenonliteralsimilarity:Copyingaworksoverallstructure,plotline,moodthisis
whatisallegedinrealityTVinfringementcases
o Plot:problemiswemustaskwhatistheplot?Isittheconcept(ex:swappedhousewives)
orisitwhatactuallyhappensinagivenepisode(i.e.whathappenstothelousiana
housewife).Ifitisthelatter,thenyoucannotallegeplotwascopied
o Dialogue:veryhardtoshowb/wanytworealityshowsthatthe"characters"orthepeople
theyinteractedw/saythesamethingforthepurposeofCR
o Mood:comical,bleak(survivorcase)
o Setting:whatisthespecificsettingoftheshow

Paceandsequenceofevents:veryhardtoshowthereissubstantialsimilarityhere
beyondthebasicelements/scenesafaire
o Character:whoarethecharactersintheshows,aretheysubstantiallysimilar
Showsarecomparedin2ways:
o 1)Idea/pitchisclaimedtobesourceofdefendantsshow
o 2)Anexistingplaintiffshowisclaimedtobesourceofdefendantsshow
Courtsaresupposedtomakeasubstantialsimilarityinquiryandcomparethingsthataresupposedto
becompared
Plaintiffstendtoassertalaundrylistofsimilaritiesbetweendefendantsworkthatwaspresentin
theirownwork:
o Plot
o Dialogue
o Paceandsequenceofevents
o Characterscontestants,judges,trainers/mentors
o Plaintiffstendtomakelonglistsofsimilaritiesinsuchawaytomakepeoplethink,how
couldtheshowsnotbeaninfringement?
o Thinkabouthoweachofthesecanbeprovenundersubstantialsimilaritystandarditsvery
hardtoimagineaplaintiffwinningunderanyoftheseelementsinrealityTV
Ofcourse,ifduringdiscoveryamemogetsleakedwhereplaintifftriesto
o

SUBSTANTIALSIMILARITY(Metcalfe,CBS,Burlette,Zella,Milano):
Metcalfev.Botchco(9thCir.)
MpresentedideatoBviaanactor.Bdeclinedandthencreatedasimilarshow.
Metcalfevennonprotectedelementscanbeconsideredprotected.Theparticularsequencein
whichanauthorstringsanumberofunprotectedelementscanitselfbeprotected.
ThisscaredpeoplebecauseifPonlyhadtoshowideasthatwerearguablysimilar,theycouldprevail.
However,othercasescamedownandeachsubsequentcaseseemedtonarrowMetcalftoitsfacts.
Scnesfairescenesthatmustbedone.Theyarenotprotected.
o InaWestern,therearegamblingscenes,shootouts,cattlerustling,whoreswithaheartof
gold,etc.Thesedontprovescenesafairtheyareobviousstockideas.Noneoftheseare
inonewestern.
Troublingcaseb/citpurportedtoallowforacasetowinonacollectionofideas.
CBSvABC
AdvancedtheanalysisofMetcalfeonemorenotch.Metcalfeinvolvedtwofictionalworkssoitwasa
standardCRcase.CBSshowedthisanalysiscanbeimportedintorealityTV.Notionsoftheme,
dialogue,charactercanbecomparedbetweentworealityshows.
Thecasewasultimatelydismissedbytheplaintiff.
Burlette
isimportantintheMetcalfechain.ToescapetheclutchesofMetcalfe,itlimitedittotheinverseratio
access.Theydidntfindmuchsimilarity.TheCBSvABChurdlewasovercome,butwhenthey

lookedatthetwoshowstheyconcludedtheywerenotsimilarandthesimilaritiestheydidhavewere
notasconcreteastheywereinMetcalfe.
Plaintiffstendtoerronthesideofpreparinglaundrylistsofsimilaritiesb/citappearspersuasive.Evenif
theyarentpersuasive,itgivestheappearanceofsubstantialsimilarity.Scenesafaireisanotherreason.

Rule re: substantial similarity analyses "in comparing shows/any two purported works for
substantialsimilarityesp.inthe9 thcir.,asubstantialsimilarityenquirymusttakecaretoenquire
onlywhether,asbetweenthetwoworks,the protectableexpressiveelements,standingalone,are
substantiallysimilar.Particularlyatsummaryjudgmentundertheextrinsictest.

CasebookDocument46CBSv.ABC,2003U.S.Dist.Lexis20258(substantialsimilaritytest)
Facts:CBSsuedABCallegingcopyrightinfringementoftheshowSurvivorbyABC'snewshow
Celebrity.
Issues:Wastherecopyrightinfringement?
Holding:No,insufficientsubstantialsimilarity.Thecasestandsforideathatrealityshowscouldbe
analyzedundersubstantialsimilaritystandards(likescriptedworks)
Reasoning:

Courtwentoverlongdetailedanalysisofthesubstantialsimilaritytestandtheimportanceofthe
totalconceptandfeelapproachtosubstantialsimilarity

Inthiscaseitiscrucialtoconsidereachprogramseriesasawhole(likeinCastleRock)andnot
tosegregatecomponentsrigidly
Bothshowscombinewellknownandfrequentlyusedgenericelementsofearlierworks.They
haveseveralincommonbutalsoincludewellknownelementsnotpresentintheother
Mustconsidertheseelementstogetherwiththepresentationorexpressionofthoseelements
Providingprotectiontoacombinationofgenericelementswithoutconsideringthe
presentation/expressionofthoseelements,wouldstifleinnovationandthecreativeprocess(ex:
wouldstifletheprocessthatgaveusJayLenoandLetterman,BewitchedandIdreamofGenie)
Thetotalconceptandfeelisdifferentw/thesetwoworks:
o (1)ThetoneofSurvivorisoneofunalterableseriousness,incontrastthetoneof
Celebrityisoneofcomedy
o (2)Productionvaluesareverydifferentforthetwogivingdifferentfeel(Survivorhas
professionalhighqualitycamerashotsandCelebritylookslikehomevideo)
o (3)Audienceparticipationnoneinsurvivorvs.votinginCelebrity
o (4)Hostthehostinsurvivorisserious,hostinCelebrityiscomedic.Therefore
expressionofthisgenericelementisverydifferent
o (5)Contestants:regularpeoplevs.celebrities=differentexpressionofgenericelement

o (6)Challenges:seriousinsurvivorvs.lightheartedinCelebrity
Rationale:AdvancedtheanalysisofMetcalfeonemorenotch.Metcalfeinvolvedtwofictionalworksso
itwasastandardCRcase.CBSshowedthisanalysiscanbeimportedintorealityTV.Notionsoftheme,
dialogue,charactercanbecomparedbetweentworealityshows.i.e.startedapplyingcopyrightlaw
analysestorealtytvcaseshesaid,"let'sjustgothroughthestandardCRtest",nospecialanalysis
forrealitytv.

ZellavScripps
ThefullblownevolutionofsubstantialsimilarityafterMetcalfeinthe9thCircuit.InvolvedPsshow
CelebrityChefsandRachelRay.
AnothercasethatdistinguishedawayMetcalfe/heldthatMetcalfedidn'tapply.Underlines
tendencyinrealityTVtofindthinprotection.
ThiscasefirmlyestablishestheCBSruleinthe9thcir.
Determinedattheextrinsicpointcourtdecidedthesimilaritiesasamatteroflaw.
o Plaintifffailedtostateaclaimundertheextrinsictest
o Inthepitchtreatmentareaofscenesafair
o Generalideaofacookingshownotprotectable.
Theprotectableelementsweredissimilar
CourtdidntspendmuchtimearguingthatCBShadtobejustifieditwasassumed.
CasebookDocument47Zellav.Scripps,529F.Supp.1124(C.D.Cal.2007)
Facts:PissuingarguingthattheD'sshow,RachelRay,infringesonhershowShobizChef's.Accessis
establishedb/cPsentoutatreatmentofherscript.(Note:AfterMetfalfe)
Issues:Istheresubstantialsimilarityb/wthetwoshows?
Holding:No,motiontodismissgranted.Whiletherearesimilarities,theprotectedelementswere
sufficientlydissimilar.Thiscasestandsforthepropositionthatyougothroughthesamesubstantial
similarityapproachfromtheABCcaseapplytherulesofcopyrightlawasifthiswasanyothersortof
protectedwork(doesntmatterthatitsrealityTV).(shoulditbe?possiblepapertopic)
Reasoning:

Plaintiffmustshow:
(i)OwnershipofavalidCR;and
(ii)Copyingbyshowing(a)Accessand(b)Substantialsimilarity
DefendantsdonotchallengeownershipofCR,andaccessestablishedb/coftreatmentsentout
Re:substantialsimilaritycourtmustapplytoobjective"extrinsictest"whichfocuseson
'articulablesimilaritiesb/wtheplot,themes,dialogue,mood,setting,pace,charactersand
sequenceofeventsofthetwoworks'
o Note:substantialsimilaritygenerallyrequirestheapplicationofboththeextrinsicand
intrinsictest.Buttheintrinsictestisamatterforthejury,andisthereforenotassessed

priortoajurytrial.
Thegenericelementsofashowarenotprotectable.Thesimilaritiesb/wthetwoshowsare
limitedtoscenesafaire/stockelements,suchas:ahost,guestcelebritiesetc.
AnyprotectableelementsaredissimilartoRachelRay
Ratio:ExtrinsicTest

CasebookDocument48Milanov.Universal,CV063237GAF(C.D.Cal.2008)
Facts:Dmadeatreatmentcalledfrom"FattoPhat",Foxdeclinedtopickitup.NBCshortlythereafter
cameoutwith"TheBiggestLoser"(TBL)
Issues:Istheresubstantialsimilarity
Holding:Notsubstantiallysimilar.ThetreatmentandTBLcontainsimilaritiesbutinelementsthatare
notprotectable.Furthermore,TBLcontainsimportantelementsnotfoundinthetreatment.Thecourt
appliedthesameZelaandCBS/ABCtest.Thedifferenceinthiscaseisthatthecourtusedthepriorart
rulethereareaslewofothershowsthatusethesamesetofideas;therearebitsandpiecesthatamount
toascenesafairesubcategoryofweightlossshows.
Reasoning:

Todeterminesubstantialsimilarity,thecourtemploystheextrinsictest,whichobjectively
measuresthe'articulablesimilaritiesb/wtheplot,themes,dialogue,mood,setting,pace,
charactersandsequenceofeventsofthetwoworks'lookonlyatprotectableelements

Thetreatmentconsistsofmostlystockideas,scenesafaire,andelementsalreadyinthepublic
domain,suchas:gameshow,weightlosscompetition,diet/exerciseexperts,prizes
Theelimination/teamrivalrycomponentiscentraltoTBLandnotfoundinthetreatment

Ratio:

ReaffirmedthatthesubstantialsimilarityextrinsictestanalysismustbeappliedinrealityTV
cases.
Priorartrule:ifyoucanshowpriorusesofthesametropes,ideas,scenesafairewhichprecede
theplaintiff'swork,thenyoucannotbesaidtohavetakenthemfromtheplaintiff

CasebookDocument49CanRealityBeCopyrighted?

CBSvABCsetthestandardthatthesubstantialsimilarityanalysiscouldbeappliedtoRealityTV
WhatoftenarisesintherealityTVcasesisquestionsre:scenesafaire/genericelements
MetcalfvBochoisimportantb/the9thcir.saidaparticularsequencecanitselfbeaprotectable
element.Asequenceofunprotectableideascouldconceivablyrisetothelevelofaprotectable
sequence.
CBSvs.ABC2themainreasonhepostedthiscasewastoshowhowharditistoproceedwith
copyrightclaimsinrealitytvcases(glasshousev.bigbrother)

CasebookDocument50RealityTVParticipantAgreement:

Paragraph1:Grantofrightsrighttofilm,interview,usefilmetc24/7.
Paragraph4:Participationifselectedcontestantagreestoparticipate
Paragraph6:Agreetofollowprogramrules
Paragraph11:Acknowledgeandagreetolimitedfreedom,noprivacyandthatparticipationmaylead
tophysical,psychologicalandemotionalstrainsandpressuresonselfandon
family
Paragraph12:Agree/releasethattheirprivacymaybeinvadedanddistributedtothepublic
Paragraph13:Agreetootherpartiesdivulgingprivateinfoaboutthem
Paragraph21:Authorizeproducertoconductmedicalandpsychologicalevals
Paragraph22:Authorizeproducertoinvestigate/collectinfoaboutstatementsIhavemade
Paragraph28:Amnotacandidateforpublicofficeandwillnotbecomeonebeforeinitialbroadcast
Paragraph29:disclosureofanyarrests
Paragraph30:disclosureofanycriminal/civilcourtproceedings
Paragraph31:Excuseproducerfromobtaininghealth/accidenceinsuranceandacknowledgethatIam
responsibleforgettingmyown
Paragraph41:Shallnotmention/pluganycommercialproduct
Paragraph49:Confidentiality/nondisclosure
Paragraph50:Release/grantofrightstoproducerinperpetuitytouseme/myfootage
Paragraph51:AgreetoobtainreleasesfromallfamilymembersIdiscuss/makereferenceto
Paragraph69:Arbitrationclause

Lecture 27 Right of Publicity

Intro:

Thereisaninherentrightofeveryhumanbeingtocontrolthecommercialuseoftheiridentity
Coveredsomehistoricalbackground
o Therewasthelongstandinglawofdefamationsayingsomethinguntrue
o Thenlawofprivacyarosethingsthatweretrue
Thecommonlawelementsoftherightofpublicityare:
o (1)Defendanthastobeshowntohaveusedtheplaintiff'sidentity(nameandlikeness
aremostcommon);
o (2)Appropriationofnameorlikenesstothedefendant'sadvantagewithoutconsent(i.e.
therewassomesortofcommercialusedoesnotrequireprofit,RedCrosscanbesued
too);and
o (3)Injurytotheplaintiff.
Injuriesfromviolatingtherightofpublicity:
o Dilutesthemarketplaceforthemsellingtheirpersonality(counter:makesyoumore
popular)

Removescontrolovertheirpersonalityrights
Celebritiestrafficintheirnameandlikeness(counter:doesntapplytonormalpeople)
Everyonehasarighttoprivacy,andthisispartoftherightofpublicity(counter:today
peopleplastertheirlivesallovertheinternet,defusestherighttoprivacyargument)
o Everyonehassomevaluerightcourtsnolongertroublew/injuryclaim
Californiahasstatutoryprotection(Section3344CivilCode):
o (i)Knowinguseofanother'sname,voice,signatureorlikenessinanymanner
o (ii)onorinproducts,merchandiseorgoods,orforthepurposesofadvertisingorselling
orsolicitingpurchasesofproducts,merchandiseorgoods(seemstoexemptRedCross);
o (iii)withoutpriorconsent;
o (iv)suchuseshallgiverisetodamagessustainedbythepersoninterest
o (v)injuredpartiesarerequiredtopresentproofonlyofthegrosserevenueandthe
defendanthastheburdenofprovinghisexpenses
Note:notallstatesrecognizeapostmortemright
Therearealsodifferencesinthelengthoftimetherightexists
Thereisroomhoweverforsufficientlytransformativeuseswherethetakingismakinga
commentaryonthesubjectparty/puttingwhatistakentoatransformativeuse.Exclusionof
liabilityfortheseuses.
Notaffirmativedefense?
o Deminimus
o Disclaimers(i.e.celebrityvoiceimpersonator)
o Claimthatthepersonisnotacelebrity
Inthepast,therightofpublicitywaslimitedtocelebrities.However,themodern
viewoftherightofpublicityisthateveryonehasitthoughcelebritiesmay
haveamorevaluableright.
Lawofpublicitycasestendtobeinfederalcourtsbecausetheyoftengohandinhandwith
copyrightclaims,andalsotheytendtobediversityjurisdictionclaims
o Muchofrightofpublicitylawhasbeenhandledbystatelaw;shoulditbehandledby
federallaw?
o Manystateshavetherightofpublicitylastforlife+70years
o InIndianaitslife+100years
o Ginsburgthinksfederallawisoneway
CasebookDocument52CelebrityLicensing
o
o
o

Intro

Rightofpublicityarosefrom(i)implementationofrightofpublicitylaws;(ii)manufacturersseeking
recognizablepersonalities;and(iii)advertiserswantingthemagneticdrawofstarpower
Notfullyrecognizedinternationally,thuscelebritiesrelyontrademarkaswellinternationally
Californiapublicitylawsareforlife+70years(mirrorCR)
Distinctionb/wrightofpublicityandrightofprivacy:

Rightofprivacy:protectsemotionalinterests;personalright;damagesmeasuredbyemotional
distress;nontransferableright;extinguishedbydeath
Rightofpublicity:protectseconomicinterests;propertyright;damagesbasedoncommercialinjury
tothebusinessvalueofpersonalidentity;transferableright;continuesafterdeath
Licensing:

Verysimilartootherlicensingarrangements
Mustspecifythescope/purposeofthelicenseb/cofvarietyoflicensablecharacteristics
Watchoverhowcelebrity'simageisusedtonotdamagetheirreputation
Merchandisecampaignvs.Advertisingcampaign
o Merchandisecampaign:royaltiesagainstminimumguarantee(advancepayment)
o Advertisingcampaign:flatfee
Premiumforexclusivity
Risksinvolved:celebritiescandounpredictablethingsthatcantarnishyourbrand.Thatisthebenefit
oflicensingdeceasedcelebrities"deadmendon'tscrewupadcampaigns"

CasebookDocument53BoundariesoftheRightofPublicity
Sameaschapter18,below

MooreChapter18RightofPublicity
Intro:

Basically,puttingasidedefenses,thereisaprimafaciecaseanytimeanybodyusesanyone'sname,
likeness,orvoice(orimitationthereof)foranyreason
PotentialDefenses:

Incidentaluse:forexamplepeopleintheaudiencewhoarenotsingledout
Coincidentaluse:noliabilitywheretheuseoftheP'snameismerelycoincidental
Indirectuse:caseshavepermittedliabilityforallkindsofindirectuse(Here'sJohnnytoilets)
FirstAmendment:
o Mattersofpublicinterestprotected
o Parodiesareprotected(butnotparodicaladvertisements)
o Expressiveworks:
Threeapproaches:
(i)manycasesprovidefirstamendmentprotectionagainstarightofpublicityclaim
forallexpressiveworks,w/outqualification
(ii)California:9thcir.hasheldthat1stamendmentprotectsonlytransformative
worksthatreflectsignificanttransformativeelementsoftheP'spersona
(iii)Missouricourthasheldthatexpressiveworksareprotectedagainstarightof
publicityclaimonlyifthepredominantpurposeoftheuseistomakeanexpressive

commentabouttheplaintiffnotmerelyexploitingtheirpersona'scommercialvalue
o Advertising:iftheunderlyingworkisprotectedbythe1stamendment,thenadvertisingforit
willbeprotected.Butnotstandaloneadvertising
Expressorimpliedconsent
FairUse:courtshaverejectedthisdefense
Death:inCaliforniathereisnorightofpublicityfordeceasedpersons
Defensesthatshouldnotwork

CopyrightActpreemption
Disclaimers
Noncelebrities
Deminimus

Lecture 28 Law of Ideas and Conclusion

Note:Montzcaseistheuptodatepositionofthe9thcir.
Lawofideasisaboutprotectingthepurporteddisclosureoftelevisionelementswhichcannotbe
madeoutacopyrightclaim.Can'tuseCRsoturntolawofideas.
CasewherePissaying"IdisclosedmyideatotheDundertheunderstandingthatifitweretobe
usedIwouldbepaidforit"
o Pseekstoprotectsomethingthatseekstobecomethesourceofsomeotherworkbutitis
inherentlynotsomethingthatcanbeprotectedbycopyright
IfaCRclaimcanbemade,plaintiffwillnotturntolawofideas
Thelawofideasprotect,forexample,apersonwhoreceivesapitch(Davidsexamplewherean
agentfromCAAcalledhimandpitchedanideaandheusedthelawofideaasashieldbecausehe
couldanticipateclaims),andapersongivingapitch

DifferentCausesofActionthatProtectIdeas

#1Expresscontract:partyAandpartyBmadeanexpresscontract,thesubjectofwhichwasthe
disclosureofideas
#2Misappropriation/unfaircompetition:misappropriationisanamorphoustortthatispartofstate
unfaircompetitionlawreallymeansunjustenrichment.Takinganothersproductandrepresenting
itasyourown.Requirements:(i)wasthedefendantenriched;(ii)wastheenrichmentattheexpense
oftheplaintiff;(iii)wastheenrichmentunjust;(iv)doesthedefendanthavesomekindofdefence;
and(v)whatremediesareavailabletotheplaintiff
o MisrepresentationPassingoffofonesproductasthatofanother

#3Conversion:civiltheft.Conversionappliestobothtangibleandintangibleproperty

#4Fraud:involvestheactofintentionallymakingafalserepresentationofamaterialfactwith
intentiontodeceiveanda3rdpartyreliesonthisandisdeceived

#5Contractimpliedinfact:youcan'tpointtoanagreementinwordsbuttheactsofthepartiesare
consonantwithanagreement.Thefactspointtoanagreementeventhoughthewordswereneverused
#6Contractimpliedinlaw/Quasicontract:contractthatacourtdeemsshouldhavebeenformed,
eventhoughinactualityitwasnotinexpressterms.Createdbylawforreasonsofjusticeand
fairness.Courtlooksatwhatonesidedidandtheothersidegotandthenimposesacontract.
#7Fiduciaryduty:thedefendantowedaduty/trustrelationshiptotheplaintiff(generalnote:
agreementsoftenhaveadisclaimeroffiduciarydutyclauses)
#8Unjustenrichment
o PgaveDsomethingofvalue
o Dbenefitted
o Pmustshowthatitwouldbeinequitabletoenjoythebenefitwithoutpaying

MooreChapter16LawofIdeas
Skipped

CasebookDocument54TheIdeaSubmissionCase

Thegistofanideasubmissionclaimisthat"something"(anideaorexpression)wasdisclosedtothe
defendantbyoronbehalfoftheplaintiff;thedefendantagreed/wasobligatedto(i)keepthat
somethinginconfidenceand/orpaytheplaintiffthereasonablevalueforusingit.Thatsomethingwas
eitherimproperlydisclosed/usedortherewasafailuretopay.Therehasbeendamageandtheuse
wasnotconsentedtoornotpaidfor.
Before1978,federalCRlawprovidednoprotectionforunpublishedworks,wasthedomainof
"plagiarism"orcommonlawcopyrightunderstatelaw
Issueoffederalvs.statejurisdiction.TheCRApreemptsstateCRlaw.Therefore,anyclaimthatis
CRsubjectmatterjurisdictionmustbepresentedunderthefederallaw.
However,Section301(b)providesanexemptionforrightsorremediesunderstatelawwhich
arenotequivalenttoanyoftheexclusiverightsofcopyright,generallythoughttoincludeclaims
forbreachofcontract,breachoffiduciaryduty,fraud
Thedeterminativeissueisthereforewhetherastatelawisattemptingtoenforcerights
"equivalent"tocopyrightrights.Typically,courtslooktoseeifstatecausesofactionincludean
"extraelement"andwhethersuchelementmakesaqualitativedifference.
Suchelementsinclude:

BreachofExpressContract:partiesagreedtocompensatePforthedisclosureofsomeidea,basedon
KNOTcopyright

Misappropriationandunfaircompetition,derivedfromanequitabledoctrine
o TWOcomponentsofunfaircompetition:(1)weareusingitmorenarrowly,source
confusion/passingoff,actionsthatconfuseconsumerstothesourceofproduct;[weusethis
idea];(2)otherideamorerelatedtounfairtradepractices,[NOTwhatweareconcernedwith]
UnjustenrichmentNOTunjusttousepublicdomainmaterialBUTmaybeunjustwhensomeone
forafeeagreestoinformyouoftopmovieseachmonth,evenmoviesinthepublicdomain
Conversionciviltheft
FraudNOTjusttakingit,takingitbysomefalserepresentation
BreachofQuasiKimpliedinfact(actsofparty);byvirtueofwhatshouldbethecase,createdfor
fairnessandjustice,impliedinlawisUSUALLYOK,becausepreemptedbycopyrightlaw
BreachofFiduciarydutyobligationtoactinbestinterestofanotherparty(e.g.Dhadfiduciary
obligationasiftherewereaKe.g.jointventurers,agent,partners)

DesnyvWilder:

Factorstobeconsidered
o Therewasdisclosurebytheplaintiff
o Therewas,atleastallegedly,areductionoftheideaintoawriting/fixedtangibleexpression
o Therewasexpressexpectationofpayment.TestimonywasthatDesnysaid"I'mtellingyou
aboutthis,butifyouuseitI'mgettingpaid)
o Thereisanimportantnotionofconfidentiality.Mustask'butfor'theplaintiffsharingthis
idea,wouldtheyhaveknownit?Ex:can'tsay'wellIsaidweshouldmakeadocumentary
aboutoccupywallstreet',becausetheywouldhavethoughtofit
o Wasthecontextabusinessdiscussion,orwasita"blurtout"businesscontextmustbe
consideredasafactor
o Bilateralvs.unilateral
Point:somecombinationoftheabovefactorswillbeheldtobeacognizableclaim

CasebookDocument55Desnyv.Wilder,46Cal.2d715(1956)
Facts:Psuesfilmproducertorecoverforuseofplaintiff'sstory,whichheallegeshesoldtotheD.P
calledDsofficetopitchthestoryandtalkedtosecretary,givingasynopsisofhisidea.Thisstorywas
basedonanewsevent,butPallegestherewerespecificaddedelementshehadthatwerentinthenews.
Issues:
Holding:NoveltyandoriginalityIdeadidnthavetobethenewestormostoriginaltobeprotectedby
lawofideas
Reasoning:

Hasbecomestandardincopyrightandsubstantialsimilaritypleading
o Untilyear2000togetaroundgenerality(e.g.TalkShowsimilarities),NYrequiredPto

allegenoveltytothebuyer,partytowhomyoudiscloseditdidNOTknowaboutCarson,
Letterman,bettershotofprevailing(subjectivenovelty)ontalkshowidea
ElementsofWilder:(relativeofpromissoryestoppelmorelikeunilateralK)

(1)DisclosurebyP
(2)Reasonablyconcretesynopsisjudgedbycourtthatitwasmorethanmereabstract
ideas,sufficientlyconcrete
o (3)AllegedtobeOriginalbyP,likeNYthing
o (4)RespondentSuperiorwasNOTpitchedtoBullyWilder,giventosecretarysecretary
actingashisagentinfact
o (5)Expectationsexpectationthatitwasgoingtobeinabusinessenvironment
Pitchee,thelistener,hastovoluntaryacceptitpreventsblurtoutcases,hastobe
inbusinessenvironmentNOTatparties,socialeventsetc.
Ratio:Thecourtrecognizesanimpliedcontractualrighttocompensationwhenawritersubmits
materialtoaproducerwiththeunderstanding(onthepartofbothparties)thatthewriterwillbe
paidiftheproducerusestheconcept
o
o

Blaustein(extendedandclarifiedtheDesneyrule)

Resultofthiscaseisthatnowpartiesenterintodisclosureagreements

CasebookDocument56Blausteinv.Burton,9Cal.App.3d161(2dDist.1970)
Facts:WantedtomakeafilmbasedonTamingoftheShrewbutwithaseriesofcreativeelementsand
modifications.AddedelementslikeFrancoZapharrelli,anItalianmusicaldirectorwhichnoonenew
about.
Issues:Protectedbythelawofideas?
Holding:Yes,thereisanimpliedinlawcontract.Therewasabusinessdiscussion,clearlyasolicitation
oftheBurtonstoparticipate,businesscontext,theconcretenesswasthere,buttherewasnothingwritten
(thusmakingitanidea).Blausteinwins
Reasoning:

AlloftheelementswhichBlausteinbroughttothetablewereactuallyincludedinthefinalfilm,
especially2particularscenes
Wehavedisclosure,businesscontext(multiplebusinessmeetings),expectation,didnothavea
writtenoutreasonablesynopsis

Ratio:
Outline:

Lookedlikesuchanideacase,makemovieontamingofshrew,hadcast,hadoperadirectordirectit,

beginfilmwithmainbodyofstoryasifnoframeexisted,addweddingnightscene,filmpicturein
Italysoundsveryconcrete,pitchedinbusinessenvironmentthusfindsforrelief
CasebookDocument57Montzv.Pilgrim,98U.S.P.Q.2d1569(9thCir.2011)(maincase)
Facts:Screenplaywriterssuedfilmproducers/tvnetworkforproducing/broadcastingacabletvseriesthat
allegedlyviolatedfederalcopyrightlawbyunauthorizeduseofthewriters'materialsandviolatedstate
lawbybreachinganimpliedcontractandbreachingthewriters'confidence.
Issues:Isthestatelawclaimfor(i)breachofimpliedcontractand(ii)breachofconfidencepreempted
bycopyrightlaw?
Holding:No,bothclaimsmaygoforward
Reasoning:
HistoricalLegalBasis

InDesnytheSupremeCourtofCaliforniarecognizedanimpliedcontractualrighttocompensation
whenawritersubmitsmaterialtoaproducerwiththeunderstandingthatthewriterwillbepaidifthe
producerusestheconcept;
InGrossovMiramax,thiscourtappliedDesnytoholdthatsuchanimpliedcontractualclaimisnot
preemptedbyfederalCRlaw.Thecontractualclaimrequiresthattherebeanexpectationonboth
sidesthatuseoftheidearequirescompensation,andthatsuchbilateralunderstandingofpayment
constitutesanadditionalelementthattransformsaclaimfromoneassertingarightexclusively
protectedbyfederalCRlaw,toacontractualclaimthatisnotpreemptedbyCRlaw.
WerecentlyfollowedDesnyandsaidthat"contractlaw,whetherthroughexpressorimpliedinfact
contracts,isthemostsignificantremainingstatelawprotectionforliteraryorartisticideas.
Inthiscase

WeagainholdthatCRlawdoesnotpreemptacontractclaimwhereplaintiffallegesabilateral
expectationthathewouldbecompensatedforuseoftheidea,theessentialelementofaDesny
claimthatseparatesitfrompreemptedclaimsfortheuseofcopyrightedmaterial.

Itmakesnodifferencewhetherthatcompensationwouldbecash(Desny)orsharesinapartnership
interest,asinthiscase
Theplaintiffrevealedhisconcepttodefendantsreasonablyexpectingtobecompensatedifthe
conceptwasused,thustheessentialelementissatisfied.
Pdisclosedhisideaunderstandardindustrycustom:(i)thatdisclosureofideas/conceptswas
confidential,(ii)thatdefendantswouldnotdiscloseorusetheP'sconceptw/outcompensating
plaintiff;and(iii)thatbyacceptingtheP'sdisclosure,theDacceptedtoabidebytheforegoing
Courtsays:thisisacontractcase,don'tfocusontherealityTVaspectfocusinsteadontheidea
disclosureaspectofthecase.ReassertstheruleofDesny.

Casewentenbancandcourtreversed/remandedWhatthisiscaseisaboutiswhetheranon
copyrightclaimcansurvivetheclaimthatthewrittenmaterialwasnotthesubjectofprotection,

buttheideawasseverable.TherewasanaddedelementofMontztobeaproducernomatter
whatthesubjectmatterwas,thattheyhadapartnershipagreementwasadifferenceinthiscases

Note:inNYthereusedtobearequirementthattheideahadtobenovel,andthenin2000NYchangedits
rule.Nolongerrequiredthatitbenovel,onlythatitwasnoveltothedefendant.(modifiednoveltyrule)
Noveltytothebuyermightnotbeeasiertoshow,butstilldonthavetoshowthatitwas
completelynewidea