0

Just back from the 39th annual UCLA Entertainment Lawyers Symposium hosted by the Law School at UCLA. The guest speaker was Morgan Freeman. Hot topics this year included piracy, the lack of pickup for films in the ‘Middle” range of the USA market; the movement away from 1st gross dollar deals for even the loftiest of stars; declining European pre-sales as a source of financing and the increasing importance of equity; use of the internet to market films not only for a theatrical release but for all potential screens (tv, computer, phones).

Films in the $12M -$40M ar not being picked up by the studios either to finance or distribute. The cost to roll out films in this budget range is far too high relative to the returns. So studios are not interested in financing or distributing. Films above this range can sustain the huge P&A spend because of the expected returns of a broad release. Films at the other end of the spectrum, don’t have the huge P&A expenditures nor are they likely to have a wide release so that marketing techniques and the attendant costs are smaller. But can anyone figure out a way to market the low budget film  utilizing the internet in a coherent manner? If so you might have an even bigger pool of clients: producers creating films in the $13m-40m range.

Another important trend is the move away from 1st gross dollar deals, the status symbol of having “made it” in Hollywood. Studios are finding it unpalatable that the talent reap a windfall from sales and the financiers of the film will not even break-even. In an attempt to redress this situation, the studios are offering “pool” deals which essentially create a pool of revenue to be split between director, producer and actors AFTER the break-even point. What goes into the pool and advances against the pool are hotly negotiated items. In general, whatever a participant’s percentage of 1st dollar gross will be doubled from the pool. If this is the trend in LA, it is bound to have repercussions in Canada.

Piracy is again at the top of the list for the studios. There are two themes in how to handle this problem: tougher enforcement and/or distribution techniques that mitigate the ability to pirate. Most speakers felt a bit of both the carrot and stick was necessary. The latter is certainly being put into place but there is still no clear way to remove the incentive to pirate. Talk invariably turns to collapsing the traditional release windows so that the market for the pirated goods no longer exist. The problem with such a strategy is no yet knows how to accomplish this and more importantly, there is a great deal of fear that a general release in all media channels simultaneously will kill the most expensive method of distribution: theatrical release. Ultimately, as one speaker contended, if there is enough “sugar” in the studio’s release of the film, the pirated version won’t be as popular. “Sugar” in this case being anything that adds to the movie watching experience from additional features that accompany DVD’s to website interaction with stars, directors etc.