The Importance Of A US Theatrical Release

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I was catching up on my reading and caught this from one of Anne Thomson’s blog entries she wrote from Cannes last week. Thompson wrote that “[v]ideo drives everything. I know I’m supposed to already know this, but it really drives it home when you hear the would-be buyers discussing the way they put these deals together. They do crunch the numbers and when video doesn’t crunch for a black and white or foreign title, it doesn’t make people comfortable, no matter how much they love a movie.”

While I agree that video accounts for a substantial portion of the gross on pictures and I am sure that Anne and the people she speaks with know their stuff, video is (and has been) imploding in very much the way the music business is getting whacked with CD sales though for different reasons. Video is down because there is a great deal of content out there with no distribution – lots of supply vs. demand. CD sales reportedly have gone in the toilet due to online access to tunes though I understand there are other reasons for this as well.

The best way to maximize foreign sales – and increase the likelihood of covering a picture’s budget – is with a US theatrical release. If a client is trying to sell the foreign rights for a movie about paint drying or a smart, material-driven movie and the paint drying movie has a guaranteed US theatrical release, the buyers will usually if not always take the former over the latter.

Why this is so probably has more to do with the credibility Hollywood has over the movie going public the world over than the quality of the material. Higher movie revenues in foreign territories are generated by the consumer’s preference for titles released theatrically in the US. Back in the day, a producer could four-wall his movie and call it a US theatrical release to satisfy the conditions of a foreign sale. But foreign buyers won’t accept anything less than a genuine commitment from a distributor – even with a platform deal – to theatrically release the picture in the US.

The Negotiation Culture: When Is It OK To Lie?

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A literary agent recently lied to me during a negotiation. Anyone who negotiates for a living; indeed, anyone with any meaningful time in the business might find that unremarkable. But the truth is, the entertainment business, like many businesses, is built on trust. It’s ironic then that no one would be surprised by my complaint even though everyone knows that trust is the currency of the realm.

Without trust between the parties and between their representatives “the deal won’t make.” So in every negotiation between reps in the business or kids on the playground, there is an implied agreement to negotiate in good faith regardless of the leverage you have in the deal. The law makes this assumption in many jurisdictions as well. Sure, hard ball negotiations and bluffing are fair game but even reps have a common code of conduct without which the whole idea of deal making would not be possible.

The deal closed last year and my client, let’s call him “Producer,” wanted to renegotiate some of the terms before the option lapsed. However, time was running out and, barring renegotiations, Producer needed to come up with some serious coin to pay Writer or risk losing control of the screenplay.

The agent, a young turk in his 20’s (let’s call him “Agent”), went out of his way to protect his client the “Writer.” This impressed me (my client, not so much) because even though Agent was creating greater difficulties for us, no one could blame Agent for doing right by Writer. Too many agents when faced with the choice of being loyal to the deal or to the client, pick the deal. It never occurred to me that he might not want the deal at all because AGENT WAS NEGOTIATING WITH ME; even giving me more time past the option payment deadline to renegotiate the deal.

Negotiations continued over several days and Agent agreed to the new terms subject to Writer’s approval. Agent PROMISED to get back to me no later than 5 pm. It was the last day of the extended deadline and even though I technically had until 11:59:59 that night, it was a Friday and for all practical purposes, the deadline was really “the end of business” that day. Agent was in New York so a 5 pm deadline there would still give my Producer in LA time to strategize if things went sideways; which of course, they did.

No call at 5 pm New York time (no big shock).

I followed up at 5:30 but Agent’s assistant told me Agent was in a meeting and could not come to the phone. I emphasized the importance of hearing back from Agent ASAP.

I followed up at 6:30 and got Agent’s voice mail. Apparently, Agent had left for the day without the courtesy of calling me back (how do these guys make a living on banker’s hours?) . I called Agent’s cell phone and left what can only be diplomatically described as a “terse” message on his voice mail.

I updated Producer and discussed the possibility that Agent was ACTUALLY DUCKING me. Agent was young and inexperienced so maybe he wasn’t ducking; maybe he was just flaking on me. An interesting but still unacceptable alternative. Ducking me was dumb because it exposed Agent, his agency and Writer to a possible law suit for acting in bad faith, among other things. Flaking on me on the other hand, was merely unprofessional and rude.

I called Agent’s cell phone several more times; the last time time my call went straight to voice mail without ringing at all. When a call goes to voice mail without ringing you know that the person you’re calling turned their phone off. This meant that Agent was picking up my messages or at least knew I was calling him – a lot.

After several more confidential discussions, Producer decided to pay Writer and drove over to the agency with check in hand (not an easy task during a Friday rush hour in LA).

Later that evening, Agent copied me on an email to Producer in which he acknowledged that he had, indeed, been ducking me. I responded by text message that the only thing that anyone has in this business is their integrity and Agent lost his so easily, so carelessly and so soon in his career. His response is irrelevant but predictable.

If the Agent wanted Producer to comply with the original terms of the agreement or even move on without Producer, the better course would have been for Agent to simply demand the original option payment by the end of the day or threaten to walk from the deal.

It’s hardball but at least I could trust him to do what he said he was going to do.

Cannes Do Bankers

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Yesterday’s New York Times had a great piece written by Liza Klaussmann about all the bankers attending Cannes this year. Wall Street, hedge funds and foreign investment all seem to want to jump into the movie business. However, such investments are very risky. An old saw in the movie business is that you can get a better return on your investment by throwing money in the street than putting it into movies.

All that being said, there are less risky ways to invest in movies. By financing a slate of pictures instead of one to cross-collateralize the investment; choosing a reliable producer and production company with a good track record; using reliable “ultimates” and bankable sales estimates; and off-setting the risk in each picture with other investors you can increase the odds in your favor.

The piece also profiled Halcyon Entertainment, the production and financing venture backed by private equity and Relativity Media. Halcyon recently acquired the rights to “The Terminator” franchise and Relativity is a major player behind such movies “Mr. Brooks” and “The Pursuit of Happyness,” among others. Both companies are and will continue to be players in the foreseeable future.

Twitteriffic

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Although I have had a profile on Ryze and Linkedin for a while, I have no real interest in social networks like My Space and Facebook. Linkedin and Ryze are business networking sites while My Space and Facebook tend to appeal more to the young and the single than to the older married crowd for obvious reasons. Young people generally are “early adopters” who, given their marital status, actively seek out meeting new people. Older, married people not so much. However, given the latest marketing push for my law practice and on the advice of various law blogs, I plan on signing up for profiles on these sites. Most importantly, my daughter is heading into adolescence and I want to know more about the sites she surfs on despite family prohibitions.

I have been playing with the latest incarnation of the social networking site, Twitter, for the past month or so after reading about it on Fred Wilson’s blog. As NPR describes it, Twitter “imposes a limit of 140 characters for messages. In addition to appearing on the Web, Twitter entries pop up on the instant-messaging (IM) systems and cell phones of the user’s personal contact list.” Twitter seems destined to be the next big thing; marrying the multi-zillion dollar text messaging business on cell phones with a social networking website.

After signing up, I emailed a bunch of my more Web-savvy friends and clients to join me. The narcissistic charge I get from thinking that anyone might really care about what I was doing at any given moment became quite addictive. To my dismay, most of the people I invited tended to be more old (aka traditional) media than new despite their chronological age (i.e., they were mostly young). Apparently, they were NOT as web-savvy as me. With Twitter updates like “blowing my nose” and “making pancakes with the kids” as part of my Twitter-reportage, my audience was less than thrilled. Both my 20-something assistant and intern snickered at me and my newly found web hipness. They simply didn’t get it.

I must admit here that I really don’t get it either. But with fellow Twitterers like Barack Obama and David Letterman, clearly I am on to something. I quickly added Letterman and Barack to my Twitter friends list so that I could instantly receive the latest top 10 list entry or Obama campaign bromide texted to my cell phone. With access to Redsox play by play (the Mets and Yankees next please!) and possible “Twittersodes” of the “L Word,” Twitter is at the crossroads of integrating television programming, the ‘net and text messaging (if the cell carriers are willing to reduce the costs). I am going to continue to play with the service and I’ll keep you posted – on Twitter, of course.