Top 5 Misconceptions – The Hollywood Reporter
For the past month or so, the lawsuits of profit participants have been the topic of conversation in the city (or at least a corner of it). In our practice in profit-sharing litigation, we often come across talented lawyers and other negotiators who share some of the same misconceptions – and they are, in many ways, closer to problems than the average observer. It got us thinking: what are most people wrong about profit-sharing lawsuits? The following are the top five misconceptions about these cases.
Before we get to the list, we wouldn’t be lawyers if we didn’t offer at least a few caveats. First, while we deal with many of these cases and hear about others that we don’t have, we are not omniscient, and our opinions are precisely that: our opinions. Second, a word about the audience for this play. If you read Hollywood journalist, you might learn something new. If you are a corporate lawyer in the equity group of a large studio, you may not be, but hopefully you will be hired. Without delay …
Misconception # 1: The most successful TV shows are the ones with the most “claims.”
It is certainly true that some the great cases stem from the most successful shows of all time. Take, for example, the $ 200 million settlement of the long-running Frank Darabont and CAA lawsuit against AMC over profits on The walking dead. Or the record-breaking $ 319 million jury verdict tied to the ABC game show of the aughts, Who Wants to Be a Millionaire? But others, like the $ 179 million arbitral award against Fox over the long-running drama BONE, do not result from emissions at the top of the Nielsen rankings. (Disclosure: We pleaded The walking dead and BONE case.)
In fact, somewhat counterintuitively, the “sweet spot” for participant complaints is probably the long-standing workhorses. (The distinction between the biggest claims, on the one hand, and the highest grossing shows, on the other hand, will be clear in a moment.) Here’s why: A show that doesn’t last at least five seasons is unlikely to succeed. generate profits, which makes litigation less attractive. (This is changing in the era of direct streaming, where the lack of ancillary revenue streams such as domestic and foreign syndication and home video typically results in initial buyouts.)
Meanwhile, on most big hits, studio formulas (or business managers setting the terms) dampen the temptation to dramatically underestimate the series. Studios and their affiliate networks – and, to be clear, that’s hardly ever a problem when the studio and network aren’t affiliated, except in the case of co-productions – know that pigs get fat and pigs are slaughtered. . In a successful show, the submarket fees guarantee litigation.
These are the shows in the middle where the studios do not feel obligated to charge (or demand) premium license rights, recovery of deficits, etc. There are a number of reasons for this dynamic, but the most important is that networks do not cancel big hits, and the threat of cancellation is the inescapable explanation why the studio “had” to accept a right. license reduced or did not have the leverage to lobby for customary law.
Misconception n ° 2: the studios will turn around on the simple threat of litigation.
Clients (and less frequently their representatives) often assume that a letter from lawyers, which may or may not include a draft complaint, will frighten the studio directly. If only it were that easy! (It’s happened a few times in our careers, but it’s definitely not the norm.) The reality is that self-operation is usually a nuanced issue, and studios have defenses – sometimes contractual, sometimes factual, and sometimes based on “custom and practice.” Sure, we have our biases, but it’s silly to pretend otherwise. Although very few businesses go the distance, there’s a reason why lawyers advocate that “trial dates settle cases” and not “draft complaints settle cases”.
Misconception # 3: Arbitration should be avoided at all costs.
Many savvy talent lawyers believe arbitration is the devil. The reasons can be both prosaic (arbitrators can cost $ 10,000 per day, plus case management fees) and harmful (studios and their large law firms are more likely to be ‘repeat gamers’. ). But the reality is not so clear.
Yes, arbitration is expensive. But many contracts contain provisions for transfer of costs, allowing the winning party to recover these costs. While it is not always easy to determine which “prevails”, if a participant claims $ 20 million in damages but only recovers “only” $ 3 million, he “prevailed” ? – some talent agreements provide for a transfer of arbitration fees if the participant did better than the studio’s last offer. Since most pre-litigation settlement offers are two to three figures lower than what the participant claims, such provisions considerably reduce the risk of a “dominant party”. Of course, this does not alleviate the spur of costs that the plaintiff must advance, but it is litigation in general: no pain, no gain.
It is also true that the average studio arbitrates more than the average participant (although the gap is generally less pronounced between the parties’ respective lawyers). But the most requested arbitrators are reserved for more than 12 months. So the assumption that they fear being hit in the “next” case is a bit of a conspiracy – even if you accept the insinuation about retired bailiffs, which we don’t do.
Finally, it is often assumed that if the studios want it – and, let’s be clear, they do; arbitration clauses are not negotiable – so that must be bad. This is not an unfair reaction, if you assume that juries are more likely to be star-struck than referees (although this assumption is at least inconsistent with the tendency of fans to side with the owners and not players in labor disputes). But this is an empirical question that is increasingly difficult to answer. Simply put, given the prevalence of arbitration clauses, there aren’t many recent examples of jury trials.
Either way, deciding where to drop off isn’t that easy. A participant may well prefer to be in state court, but filing there does not guarantee that the case will stay there, as THREriq Gardner has pointed out in these pages. Not to mention that a surprise filing at a public hearing – and the publicity that results from it – can poison the dynamics of negotiations in progress. Generally, studios don’t like to be caught off guard – see Disney’s initial response to the Black Widow lawsuit – and it is fair to wonder if the increase in temperature is ultimately counterproductive. After all, once there is bad press, why not get your money’s worth? It may not matter to the more principled and well-off participants, but most participants do not seek to be catalysts for change. They just want to be paid fairly.
Misconception # 4: It was my agent / attorney’s fault that we got into a dispute.
When spirits heat up, it’s often tempting to pick up on the underlying affair with a yellowish eye. But no one can predict the future with perfect clarity. In 2018, it was predictable that some films would end up on the streaming services considered by the studios. A global pandemic closing cinemas? Not really. So it’s no surprise that many deals are silent on ‘day and date’ releases – a strategy that didn’t exist and that no one anticipated – at least not when the films cost $ 200 million to make and $ 100 million to make. additional million dollars in the market generated $ 1. billion at the global box office.
The other point is that even the best lawyers, representing the most prominent stars, directors and producers, cannot get everything they want in any given negotiation. There often comes a time when a lawyer or agent has a choice: accept the agreement as written or leave the project. Because customers shy away from walking and studios shy away from losing the actors and creators who enliven viewers, it’s often in the best interests of both parties to ‘let the mystery be’, to quote one of our sequences. of favorite titles (from HBO, criminally underrated Leftovers). Ironically, if a dispute ultimately succeeds, it’s usually because the project was successful. Most projects are not worth fighting for.
Misconception # 5: Scarlett Johansson’s trial will be the first of many “date and date” trials.
We’re back to where we started: the pursuit Black Widow combination. While it’s too early to describe the effect this has had on profit shareholder litigation, we have a prediction: it won’t trigger the flood of counterfeit lawsuits that were predicted. There are several reasons for our pessimism.
First, while hers was not the first of its kind (although the first publicly filed), the average studio contract gives studios a lot of leeway in determining how to distribute their films – if they choose to release them. at all. In the absence of anything else – a spate of buyouts, an email from the studio’s chief attorney promising a wide theatrical release – the average profit participant has a steep path to climb.
Second, we have never met a client who preferred to litigate when there was a case to be concluded. In that vein, it’s probably no coincidence that other stars who are rumored to be “unhappy” with their Disney Day-and-date releases are now attached to sequels.
Of course, as litigants, this is a prediction we hope to be wrong.
Dale Kinsella and Nick Soltman are attorneys at Kinsella Weitzman Iser Kump & Holley LLP, where their team focuses on profit-sharing litigation for actors, directors and producers against television and film studios. All views are theirs.