1、Rights,Camera,Action!Intellectual property rights and the filmmaking processRights,Camera,Action!Intellectual property rights and the filmmaking process2nd EditionCreative IndustriesSeriesCreativeIndustriesSeriesRights,Camera,Action!Intellectual property rights and the filmmaking process2nd Edition2

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3、 accompanied by an acknowledgement that WIPO is the source and that it is clearly indicated if changes were made to the original content.Suggested citation:World Intellectual Property Organization(WIPO)(2022)Rights,Camera,Action!Intellectual property rights and the filmaking process,second edition.G

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9、rs does not imply that they are endorsed or recommended by WIPO in preference to others of a similar nature that are not mentioned.WIPO,2022World Intellectual Property Organization34,chemin des Colombettes,P.O.Box 18CH-1211 Geneva 20,SwitzerlandDOI:10.34667/tind.46316ISBN:978-92-805-3430-6(print)ISB

10、N:978-92-805-3431-3(online)ISSN:2789-5432(print)ISSN:2789-5440(online)Attribution 4.0 IGO (CC BY 4.0)Cover images from left to right:ponsulak/iStock/Getty Images Plus;Jake Hills/Unsplash;brightstars/E+/Getty Images;JulyProkopiv/iStock/Getty Images Plus;bjones27/E+/Getty Images;bjones27/E+/Getty Imag

11、es;Artal85/iStock/Getty Images Plus3Preface 5About the author 10Acknowledgments 11Glossary 12Chapter 1Eye of the Needle the Disciplines of Development 18Digging for gold the search for the perfect script 18Passion and eloquence attracting funds for development 19Buying time how to negotiate an optio

12、n 21The big jump purchasing underlying rights 24Nothing like real life films based on real-life people or“true stories”27Into the void commissioning a script 29The art of war producers,writers and their agents 33Development the real stories 34Chapter 2Financing Films On the Merry-Go-Round of Debt,Eq

13、uity and Distribution Rights 44Sink or swim the trials of debt financing 45Participation/deferred payments 48Cutting the cake the basics of equity financing 49Message in a bottle the rise of film crowdfunding 52IP rights as the most strategic source of financing 54Into the rights jungle the film dis

14、tribution agreement 62The rights jungle thickens a strategic look at television rights 73The role of IP rights in film/television financing the real stories 83Chapter 3The Talent Maze Rights and Engagement Terms 87Actors rights an uneven patchwork 87Hollywood stars,their agents and inflationary effe

15、cts 91In the directors chair author vs.technician-for-hire 95Licensing by numbers collective management and talent rights 98Talent maze the real stories 101Table of contentsChapter 4Managing the Risk of Production 104Types of risk 104Completion guarantees 105Chapter 5Crossing Borders the Art of Pre-

16、Selling and Co-Producing 109The patchwork of international pre-sales 109The world is not enough the role of the sales company 111The producer/sales agent agreement 114Through the pain barrier international co-productions 115A closer look at official co-productions 118Pre-sales and co-production the

17、real stories 120Conclusion 122TablesTable 1:Film exploitation cycle:the“windows”system 60Table 2:Distribution of revenues in the theatrical market pre-2000s 64Table 3:Financing sources for a low-budget Telugu or Tamil film (India)in 2010(illustrative only)67Table 4:Breakdown of the pre-acquisition o

18、f the television rights to GriGris by broadcasters(2012)84Table 5:Film talent contracts:the legal infrastructure 90BoxesThe Lord of the Rings long journey to the screen 35The gestation of Gemma Bovery 38Oh l l!an original script 41GriGris a Chadian film made possible by television financing 83The Co

19、llection an Anglo-French television series 84A real actors contract story Girl with a Pearl Earring(2003)92A French lead actor contract with remuneration scale 101A rights and remuneration structure for a mid-range Anglo-American star 102Russian Dolls a case study in European co-production 12045Pref

20、aceThis book is written principally from the perspective of a small-size film producer or entrepreneur.Their economic success depends on matching ideas with talent,obtaining relevant intellectual property(IP)rights and using those rights to attract finance from commercial film distributors.That succ

21、ess also depends on consumers in their living rooms,on public transport or in movie theaters receiving the end product with a heartfelt laugh or a tear in their eye.This perspective reflects the dominant reality of the film industry worldwide.Most readers will have some anecdotal acquaintance with H

22、ollywood,and those who know about its remarkable business model will probably agree that,rather than representing a worldwide norm,it is an almost entirely singular phenomenon.Its business model is intimately connected to the specific industrial history of the United States and is not reflective of

23、filmmaking traditions elsewhere:nearly 20 years into the new century,most films worldwide are made by driven,dynamic cultural entrepreneurs with a strong creative vision,an appetite for stories,dreams of critical and commercial success,and almost no money of their own.This book is primarily written

24、to educate those who aspire to join this spirited community,whose efforts do so much for IP-based economic growth and cultural diversity all over the world.The decision to adopt the producers perspective is also to provide an effective educational resource on the intricacies of rights and the film p

25、roduction process within a short publication.Of all those who contribute to the making of a film,the producer is closest to the heart of the process.They do their best to direct traffic at the crowded intersection where talent,rights,money and dreams meet and,in an ideal scenario,they move them all

26、in the same direction.In this unique position,the producer must have a thorough understanding of how IP rights can be used strategically to obtain production funding and attract the best authors,actors and other talent to a project.Their insights into the process should reflect a genuine interest in

27、 understanding how films come to be made,and the dynamic role IP rights play in their creative and economic genesis.6Rights,Camera,Action!Intellectual property rights and the filmmaking process When this book was first published in 2008,the audiovisual rights value chain was on the verge of unpreced

28、ented change.A few years earlier,Apple had spearheaded the online revolution with the 2001 launch of iTunes,but the initial offer was restricted to music;by 2007,film and television content had become a substantial part of the offer.Netflix was still a DVD-to-your-doorstep physical rental service an

29、d the vast Blockbuster physical video retail stores were still a familiar sight on the high streets of the United States and elsewhere.Two years later,in 2010,Netflix launched its online streaming service.Just 12 years later,by March 2022 Netflix boasted over 221.8 million subscribers to its online

30、platform worldwide,and its global expenditure on content acquisition and commissioning was estimated to have reached a staggering USD 17 billion in 2021 against Amazons USD 13 billion:however,demand for films and shows premiering on the service has made Prime Video a leading driver for Amazon Prime

31、membership around the world.Apple was reported to be spending a roughly equivalent amount on new original film and video content,to accompany the reorganization of its range of online video content through Apple TV+.Like Amazon,the Cupertino firm could afford to take the long view as it began to com

32、pete in this space:at the start of 2019,the cash reserves held by Apple stood at USD 245 billion,only USD 5 billion short of the GDP of Bangladesh,a country with a population of 160 million.The over-the-top(OTT)direct-to-consumer phenomenon is not restricted to a small clutch of global brands with o

33、utsize market power and reach.In 2019,the French broadcasting group Canal+bought IROKOTV,a global OTT platform offering a vast selection of Nigerian“Nollywood”films and low-cost television episodes to a vast African market at home and in the global diaspora.The Canal+investment signaled growing conf

34、idence in the prospects of specialized platforms able to optimize content and prices to the purchasing power of emergent consumer economies.In India,video on demand(VOD)revenue is forecast to reach USD 1.85 billion in 2022 and to sustain a CAGR growth rate of 10.8 percent in the period 2022 to 2026.

35、17PrefaceThe decade from 2008 also saw audiovisual content consumption released from the restricted options of the cinema and the living room:in 2008,the number of smartphones sold worldwide stood at just under 140 million.By 2018,manufacturers were selling 1.56 billion devices globally and the tota

36、l number of users reached 15 billion in 2021.In countries and regions(e.g.,Africa)where physical broadband infrastructure deployment is still in development,the smartphone has now become one of the leading media for consuming all forms of filmed entertainment,driving demand for a wide range of conte

37、nt,from amateur films to tuition and music videos,and from webisodes to features and television series.The global explosion in online consumption and business models has sent shockwaves through the traditional audiovisual chain,giving rise to new pressure points and fresh conflicts about long-establ

38、ished practices.In many mature national markets,cinema exhibitors have been pushing back against pressure from distributors to reduce the duration of the theatrical release and get films to other platforms earlier.In the United States,traditional pay-TV has been challenged by the growing practice of

39、“cord cutting,”with consumers opting out of traditional cable and satellite offers and subscribing instead to legal services directly available on the open internet,often at more competitive rates.And traditional free broadcast television has seen its value proposition threatened by competition from

40、 cash-rich VOD operators.More recently,the impact of the COVID-19 pandemic and the original lockdown measures adopted in many countries around the world in 2020 resulted in the temporary closures of cinemas and the consequent explosion in broadcast and online consumption of filmed entertainment.At t

41、he time of writing,the audiovisual industry worldwide is grappling with the potential implications of this in the longer term.To describe these seismic changes as mere disruption does not do justice to the sheer scale and depth of the revolution in technology and business models still underway today

42、,and its impact on the patterns of transactions based 8Rights,Camera,Action!Intellectual property rights and the filmmaking process on copyright and related rights that are the focus of this book.The power shift away from the traditional film studios and legacy broadcasters to algorithm-driven,direc

43、t-to-consumer OTT services delivered principally through the open internet is an unprecedented realignment in the history of the audiovisual medium.In preparing the second edition of this book,I have sought to integrate as much information as possible on the practical knowledge gained by working pro

44、ducers as they deal with this revolution in production and distribution models,and the expansion in the range of rights transactions and licensing opportunities that it presents.This book describes the forms of copyright-based transactions and contractual practices that together form what could loos

45、ely be described as an international standard.It can be observed in countries where film and audiovisual production industries have reached a certain level of maturity in terms of legal,financing and distribution infrastructures.Some countries where such industries are still emergent face challenges

46、 in delivering a supportive infrastructure for creators,producers,performers and other right holders to access the national copyright framework and ensure they are appropriately protected and incentivized by it.Experience also shows that over a certain budget level no matter where a producer lives a

47、nd works,they will need to reach out to the international community of film financiers and distributors,and so become familiar with the global market for film rights and the legal standard required to establish the necessary copyright documentation.As far as possible,I have tried to illustrate our a

48、nalyses of how rights are optioned,bought,sold or licensed by summarizing real-life case studies.These required the consent of the film producers,authors and artists who were involved in those contractual arrangements,and I am deeply grateful to those who freely gave their time(a precious commodity

49、for a film producer)to help us breathe life into this publication.In some cases,I was given permission to use specific figures,taken from real contracts.Often I chose not to use those figures,partly out of consideration for the sources,but also because such figures relate to the value of specific ri

50、ghts at specific times,are mostly reflective of a particular film,and are therefore unreliable indicators of the average value of those rights across the board.9PrefaceInitially,this publication was conceived to focus exclusively on the copyright-related issues as they relate to the making of featur

51、e-length“cinema”films.Our omission of other forms of audiovisual expression,such as the vast sector of programming now made for streaming video platforms and traditional broadcasters,is a choice dictated by our desire to convey a sense of the complexity of rights-based transactions in an audiovisual

52、 medium which engages the full range of rights across the entire value chain.The story of how feature films come to be made is rich and intricate enough to merit a stand-alone publication.However,this exclusive editorial focus does not imply any lack of interest in the rest of the audiovisual enterp

53、rise sector,whose IP rights challenges and opportunities deserve to be explored in just as much detail.This publication is part of the World Intellectual Property Organization(WIPO)Creative Industries series,and is one of two books about the audiovisual sector.From Script to Screen:Copyright for Aud

54、iovisual Professionals provides detailed information on many of the practical issues that makers of both films and television programs face in relation to copyright law and practice.2Film,perhaps more so than any other form of cultural expression,is a collaborative phenomenon.While I have described

55、the role of the film producer as pivotal,their efforts are futile without the engagement and motivation of the talent working on the film,especially its authors and performing artists,on terms which will secure their enthusiasm and commitment.Bringing about this creative chemistry requires the intui

56、tive skills necessary to inspire others.It also requires a willingness to strive for balance and fairness in the negotiation of the rights and remuneration of the authors,performers and other contributors.I hope this book will act,in its own modest way,as a helpful guide for the novice producer will

57、ing to walk this ethical path.Bertrand MoullierLondon,20221010Bertrand Moullier is an independent audiovisual industry consultant based in London.His company,NARVAL Media Ltd,provides advisory and advocacy services to international trade associations representing the different components of the audi

58、ovisual value chain.Prior to his consultancy career,he was an executive in trade associations representing the audiovisual production industries in the United Kingdom(the Producers Alliance for Cinema and Television)and globally(the International Federation of Film Producers Associations).He is an h

59、onorary research fellow of Exeter University in the United Kingdom,where he has taught on regulatory and business issues in the film/television industry.He is also a contributing lecturer at the National Film and Television Schools annual Atelier program,teaching students from all over the world.He

60、is the author of two studies on the Indian(2006)and Egyptian(2007)film industries commissioned by the Creative and Innovative Economy Center at Georgetown University(Washington,D.C.).He is also the author of The CISAC Story(2016),a history of the first 90 years of the International Confederation of

61、Societies of Authors and Composers,and co-author with Benot Muller of a WIPO scoping study on Strengthening and Development of the Audiovisual Sector in Burkina Faso and Certain African Countries presented to the WIPO Committee on Intellectual Property and Development at its 12th session in November

62、 2013.About the author1111The following individuals and organizations gave valuable help and support in the preparation of this publication,which is gratefully acknowledged:Kunle Afolayan,Golden Effects Pictures,Lagos;Rob Aft,Compliance Consulting,Los Angeles;Raphal Benoist,France.tv Studio,Paris;Ph

63、ilippe Carcassonne,Cin B,Paris;Independent Film and Television Alliance(IFTA),Los Angeles;Valrie Lpine,Union des Producteurs de Cinma,Paris;Charlotte Lund Thomsen,International Video Federation;Paul Raleigh,Hollard Film Guarantors,Johannesburg;Mark Schwinges,Underdog Productions,Johannesburg;Paul We

64、bster,Shoebox Films,London.Acknowledgments1212Above-the-line Line items in the films budget that refer to sums paid to key talent and right holders who are often also profit participants.Advance A sum paid in cash for the rights to distribute a film in a territory and/or a particular medium.A-list A

65、 director or star whose presence in the film ensures that the film will attract finance and/or distribution opportunities.Below-the-line Line items in the films budget that refer to sums paid to contributors who are engaged on a work-for-hire basis.Cap Usually a limit to sales or distribution expens

66、es that cannot be exceeded without the producers permission.Chain of title The documents and contracts that demonstrate exactly how the rights in a project are controlled by the producer.CGI Computer-generated imagery.Charge A legal charge over the rights of the film that ensures contractual obligat

67、ions are fulfilled.Collection agency An agency set up to administer the collection of revenue from the films exploitation and the distribution of that revenue to the financiers of the film.The collection agent also distributes the net profits.Common law rights In the context of filmed IP,the convent

68、ion in coun-tries such as the United Kingdom and the United States is that the pro-ducer is the author of the work and they control its final shape and form.Completion bond/guarantee Specialized production insurance that guarantees the timely delivery of the film according to an agreed budget.Co-pro

69、duction A film that combines the creative,production and/or financial input from more than one territory.Glossary1313GlossaryCo-production treaty A cross-national governmental agreement that enshrines how a co-production must be structured to benefit from national incentives.Cottage industry Any sma

70、ll,low-profit,national-based industry with little capital that relies on local markets to survive.Crossover film A modestly budgeted film(perhaps with a quirky edge)that manages to attract a much broader audience than originally envisaged.Day-and-date A simultaneous release of a film across multiple

71、 territories and,more recently,multiple distribution platforms.Debt financing Finance lent to the production and recoverable in first position.Deferrals/Deferments Delayed payments or remuneration paid to a supplier or contributor as and when the producer has revenue from the film.Delivery The techn

72、ical delivery of the elements of the film to distributors and/or financiers to allow it to be sold and/or distributed.Development The time and actions necessary to move from an idea to a completed script(or screenplay)that is ready to be filmed.Dialoguiste The writer of dialogue only.Directors cut T

73、he early form of the film that is in the direct control of the director.Droit dauteur The right of the author to assert paternity and moral rights over the works they create;prevalent in certain countries including France and Italy.Equity An investment that attracts a significant share of the profit

74、s of a film but is recovered after debt.14Rights,Camera,Action!Intellectual property rights and the filmmaking process 14Escalator Bonus payment made to the producer or participants if performance thresholds are exceeded or awards are received.Executive producer Usually a producer whose principal ta

75、sk is the financing of the film.Final cut The right of a director,producer or financier(or a combination of all three)to approve the final shape and form of the edited film.First negotiation and last refusal The right of a person or company to have the first opportunity to bid for rights and the las

76、t opportunity to match the bid of a third party.First position The financing that comes out first as revenue is accrued.Gap financing Finance(usually debt)against unsold territories.Gross deals/Adjusted gross Direct participation by a major financier or talent participant in first revenues.Letter of

77、 credit A banking instrument often issued by distributors that allows a producer to access cash flow subject to a minimum guarantee via a bank.License A time-limited grant of rights.Life rights The right to make into fiction the real-life experiences of a living person.Line producer Non-creative,wor

78、k-for-hire producer responsible for ensuring that the production is managed properly on a day-to-day basis.Long tail In commercial terms,an expression coined by Chris Anderson to describe products that are in low demand or have a low sales volume but which can collectively make up a market share tha

79、t rivals or exceeds the relatively few current bestsellers and blockbusters.Minimum guarantee Finance promised against exploitation of a film in a territory and/or medium.1515GlossaryMoral rights The right of the author of a work(usually the director)to control its final shape and form.Net profits T

80、he profits that return to the producer of the film.Option The instrument by which a producer controls a property for a limited amount of time before making the decision to purchase the rights.Output deal A pre-negotiated deal,usually between studios or major producers and local distributors and/or b

81、roadcasters,ensuring certainty of distribution.Package Consisting of things such as expressions of interest from one or more lead actors and the attachment of a director to a project.Participation The share of net profits owned by a creative or financial contributor to the film.Polishes Short writin

82、g engagements to improve sections or themes within a script shortly before financing or production.Pre-production The preparation and organization of the film prior to principal photography.Primary,secondary and ancillary rights Rights windows usually defined,in order,as theatrical,video/DVD/televis

83、ion,and other(airlines,publishing,merchandising,etc.).Principal photography The period during which the principal action and the principal actors are filmed.Prints and advertising(P&A)Investment into the release of a film in terms of the physical prints and the costs associated with marketing the fi

84、lm.Producer The person or company responsible for the making of the film,usually controlling the rights.Production bonus A further sum paid to a writer or right owner on the first day of principal photography.16Rights,Camera,Action!Intellectual property rights and the filmmaking process 16Production

85、 budget The cost of making and completing a film.Production insurances Standard film production insurances required to be in place by the completion bond that cover all risks associated with production,such as illness,fire,theft,etc.Property The script,story or other material a producer options or p

86、urchases to make a film.Rebuttable Rights granted by moral law to a right holder,allowing them to retain their moral rights.Re-format rights The rights of a producer to convert the script to another format than originally envisaged,e.g.,to television instead of film.Reserved rights The rights that a

87、 writer of a spec script or a right owner might reserve for themselves when granting an option or license often the radio or stage rights.Residuals Payments to a contributor to a film from the exploitation of the film,usually imposed and controlled by union agreements.Rights The underlying rights to

88、 the content of a film.Rough assembly The early cut of a film in post-production.Royalty The payment to a right holder of a share of a films exploitation in certain media.Sales agent Corporation set up to sell rights on behalf of the producer to distributors around the world.Sell-through DVD/Blu-ray

89、 distribution through which the purchaser owns the unit.Electronic sell-through(EST)refers to transactional VOD in which the consumer purchases the video of a file for permanent ownership.Separated rights Similar to reserved rights but granted to a writer or right owner in a work-for-hire context.17

90、17GlossarySingle-purpose vehicle A UK limited company responsible for producing and delivering the film.Spec script A non-commissioned script owned and controlled by the author until its purchase or option by a producer.Supplementary remuneration Similar to a royalty and used mainly in droit dauteur

91、 countries to refer to a share of cinema revenue.Syndication Licensing of usually very successful films to local United States television broadcast networks.Ten-percenters Slang term referring to talent and literary agents.Tent pole films The half-dozen pictures per year on which the success of the

92、United States studios depends.Treatment A short document that outlines the shape and form of a planned feature-length script.Turnaround A pre-negotiated process for the reversion of rights to the author at the expiry of the option or license.Underlying work or underlying material The material or sto

93、ry that forms the basis of the script.Window The time period in which a distributor or broadcaster is given the exclusive right to exploit a film.Work-for-hire The contributors to a film whose rights are purchased with their employment contract.1.Statista India Video On Demand Report.Available at ht

94、tps:/ to Make a Living in the Creative Industries.Available at https:/www.wipo.int/publications/en/details.jsp?id=4166.Notes1818Digging for gold the search for the perfect scriptIn filmmaking,“development”refers to the time and actions necessary to move from an idea to a completed script(or screenpl

95、ay)ready to be filmed and a“package”consisting of elements such as expressions of interest from one or more lead actors and the commitment of a director to the project.1The script is the most important part of the development process.Very few films are made each year without a completed script,and t

96、hose that are tend to have very low budgets and are produced by fledgling filmmakers keen to experiment with form and performance.A relatively small number of films are also made using partial improvisation,though these tend to be done within a solidly scripted story structure.In The One I Love,a lo

97、w-budget,independent US film released in 2014,the actors improvised all of their dialogue.However,producer Mark Duplass specified in interviews that every scene had been carefully written,with specific directions regarding the movement of the plot and charting what the characters were meant to do an

98、d feel at any particular time.Such films are extremely rare.Most critics would agree that generally only a masterful director such as Mike Leigh can make films that successfully incorporate improvisation.Therefore,most films have a detailed script,without which they stand little chance of attracting

99、 money from financiers to make the film.The basis for a script can include an original story,a novel,a non-fiction book,an existing script for another film,a theater play,a magazine article or a real-life story.The script itself is always an original creation to which IP rights are attached(i.e.,rig

100、hts must be purchased from or licensed by the author of the script or screenplay).However,if it is not an original story but an adaptation of an existing creation,other IP rights will be involved.These other creations are generally referred to as the“underlying work”or“underlying material.”Chapter 1

101、Eye of the Needle the Disciplines of Development1919Chapter 1 Eye of the NeedleA large part of the development process consists of the producer ensuring that all of the rights on all the underlying material used to produce a completed script are acquired or licensed,including the rights of the write

102、r(or writers)commissioned to write the film script.The producer also needs to be able to produce written evidence that they are in control of all those rights.This paperwork is known as“chain of title,”and it is important because no bank or other source of funding in the mature film industries will

103、financially support a film without assurance that the production will not be halted by the court injunction of a disgruntled author or other right holder whose work has been used without due permission and financial compensation.As noted in the introduction,in some other parts of the world developme

104、nt may have less of a formal legal structure,and the process can vary.For example,UK or US producers often initiate the original idea,commission a professional script writer and then proceed to attract a director to the project.Meanwhile,in France and Italy a director is more likely to write their o

105、wn script and seek a producer to raise the necessary funding.In India,until recently,the script simply did not have the same status as it does in the United States and European contexts:film stars and the promise of spectacular set pieces choreographed and directed by experienced artists were deemed

106、 more important.Projects are most often sold to film stars by the director acting out each scene,without necessarily having reference to a printed script.For all the differences in approaches to script writing,there are common characteristics and standards which are increasingly adopted by the inter

107、national independent film sector worldwide.This chapter focuses on these,as they are likely to be most useful to fledgling filmmakers in an industry that is fast becoming interconnected on a global scale.Passion and eloquence attracting funds for development At first glance,passion and eloquence may

108、 not seem especially relevant to films and IP rights.20Rights,Camera,Action!Intellectual property rights and the filmmaking process 20However,they are crucial.Negotiating for the licensing or acquisition of underlying rights and getting the best possible standard of work out of a commissioned script

109、 writer require interpersonal skills just as much as a good working knowledge of IP transactions.Authors of such works will often want to see evidence of the producers passion for the project and connection with their work before considering a deal.Development also requires money often quite a subst

110、antial amount.Most production companies worldwide simply do not generate enough income to sustain their own development.As a result,producers spend significant time convincing third parties(banks,broadcasters,larger distribution companies,private investors,public funds)to finance the development cos

111、ts of their projects.In such communications,passion and eloquence are essential.There are multiple sources of development funding in Europe and the United States.Public sector loans are available on reasonably soft terms from national public funds set up to sustain local film development.The Europea

112、n Commission in Brussels offers to support production companies over a group(or“slate”)of film projects,by providing up to 50 percent of the budgeted development costs.It does this through the MEDIA strand of its Creative Europe program.In terms of development skills,the producer looking for develop

113、ment funds on a project needs a good general knowledge of the local and global marketplace for film,but also must have considered the commercial prospects specific to the project.For most producers around the world,public funding for development is a limited or non-existent option.Development loans

114、from the private sector are a more likely prospect,and the terms tend to revolve around comparable principles worldwide:Reimbursement Funds are loaned generally based on the presentation of an itemized development budget,i.e.,a budget in which every main item of planned expenditure is detailed.Reimb

115、ursement is most often required if the film reaches 2121Chapter 1 Eye of the Needleproduction,on the first day of the shoot,also referred to as“principal photography.”Premium and profit participation The financier will normally charge a premium on the money loaned,also collectible at the start of pr

116、oduction.Percentages vary depending on the nature of the risk,the budget of the film and the term of the loan.Many lenders will additionally negotiate for a percentage of net profit from the exploitation of the finished film,typically 25 to 50 percent.Turnaround This refers to the terms of a contrac

117、t under which a financier may be entitled to let go of a project,either at their own request or at the request of the producer.The financier will normally have negotiated a deal which ensures that a third party taking over the further development of the project would have to repay development expend

118、iture to date,generally with a premium and/or interest charge,if the film is eventually made.Security In order to minimize their risk,the financier may take assignment of all the rights secured by the producer in the project over time and prevent them from selling those rights on to a third party wi

119、thout consent.Buying time how to negotiate an optionIn an“option,”the producer pays money to a right holder to be given an exclusive period of time during which they are the sole person/company that can acquire the rights relevant to the work.In effect,the option contract ensures that its beneficiar

120、y is the only individual or person legally empowered to arrange to adapt the work into a potential new film.The option takes the“property,”i.e.,the book,screenplay or other source material,out of the market and gives the producer a competitive advantage over anyone else who may be interested in it.T

121、he object of the option can be any kind of underlying work,such as a book or a pre-existing script.The option also gives the producer the exclusive choice of whether or not to buy the rights to the underlying work at a later stage.Paying money for an option is much cheaper than having to purchase th

122、e rights to the work straight away.It would be 22Rights,Camera,Action!Intellectual property rights and the filmmaking process 22inadvisable for the producer to pay the full price for rights acquisition immediately,without having first ascertained:whether or not the underlying work can be successfull

123、y adapted into an audiovisual work(e.g.,there are many good books that would not necessarily make a successful film);and if there are reasonable expectations for raising funds to bring the adaptation to fruition.Consequently,the option limits the initial development risk for the producer.On average,

124、only around 30 percent of film projects developed in Hollywood make it into production,and this ratio is similar in other mature film and television industries around the world.Typically,most small-to medium-sized independent production companies will be developing several projects at once,knowing t

125、hat a high proportion possibly as many as two out of three will never make it into production.Therefore,any money channeled into development is entirely at risk,with millions of dollars written off worldwide each year.Considering this risk,the option gives the producer time to raise further funds an

126、d attract key talent and financiers to the project without having to spend too much at an early stage.There is no standard duration for an option agreement.In Hollywood,option agreements tend to be over an initial 18 months,renewable after that for an equal period,given that a long time is spent bot

127、h developing a script and negotiating with talent agents.European option agreements tend to be shorter:around one year initially,with possible renewal for another six months or a year(or two additional six-month terms).Before granting a renewal,the right holder may sometimes ask to see evidence that

128、 progress has been made by the producer during the preceding option period.In such cases,it is important to ensure that the option agreement does not give the right holder,as author of the underlying work,the power to decide arbitrarily what constitutes progress.Defining specific,realistic targets m

129、ay help to avoid misunderstandings about this aspect of the negotiation.The payment of the first option period is generally treated as an advance on what will become the rights acquisition payment,if the producer eventually chooses to exercise their option.The fee will 2323Chapter 1 Eye of the Needl

130、enot be refunded by the right holder if the producer chooses not to exercise the option.In the anglophone film industries,the fee is typically about 5 to 10 percent of the price of the rights purchase,and the figure is comparable elsewhere in the world where options are used.A second option payment

131、is not treated as an advance on the value of the rights purchase,but rather as a one-off,non-refundable and non-deductible payment.Some option agreements include a clause to ensure that a share of net profit will be paid to the right holder in the underlying work if the film gets made(and if it is e

132、ver successful enough to return net profits).The percentage is between 2 and 5 percent depending on whether the work is a book or a script and,if it is a script,on whether there is a sole writer or multiple writers.In the film industry,net profit is generally defined as the profit to the producer fr

133、om the commercial exploitation of the film.The net profit consists of whatever money is left after the bank has recovered its loan(s)and interest,the international sales company has collected its fees and deducted its marketing costs,and the financiers have recouped their investments,along with any

134、deferred fees which were not paid fully to the cast,crew,director or producer during production.However,most films worldwide do not have sufficient success to recover their full production costs and to pay back deferred salaries of fees,let alone to make a net profit.Some right holders may also choo

135、se either to waive the option fees or reduce them considerably,in exchange for a commitment by the producer to secure their active participation in the production,should the project be successful in raising finance.This is an approach that all but the most experienced and established film producers

136、try to avoid:financiers may not look favorably on the underlying right holder taking a credit on the film for anything other than the authorship of the underlying work itself,especially if the author has little or no prior experience of working in film,or if the intention is only to base the film ve

137、ry loosely on the underlying work.There are no quoted market rates for options anywhere.Depending on the degree of fame of the right holder and the work optioned,the seniority of the production company or the caliber of the star expressing an interest,these rates vary wildly.24Rights,Camera,Action!I

138、ntellectual property rights and the filmmaking process 24In the Anglo-American film industry,some producers manage to get an initial commitment from the author of an underlying work without having to sign an option agreement.The producer expresses a written interest in the work and commits to lookin

139、g at it more closely to determine if it could be made into a successful film.This type of pre-option agreement is based mostly on trust and is more suitable for established producers with existing connections in the authors world.Before signing an option,one of the most important tasks for the produ

140、cer is to run a thorough check on the status of all the rights involved and obtain the legal assurances(warranties)from the author that there are no known obstacles to prevent them from selling the rights to the producer at a later stage.An entertainment lawyer may be helpful to the independent prod

141、ucer at this stage,or there are specialized firms that offer a tracking and checking service,providing reports on individual copyright works.The big jump purchasing underlying rightsThe ink on the option agreement is dry,and the producer now faces the prospect of recruiting and commissioning a write

142、r to write a good script and attract the interest of film financiers to the project.While the script is going through its various drafts,the producer will also need to start estimating what the film will cost.This budgeting evaluation exercise will prove useful if the producer finally chooses to exe

143、rcise the option and purchase the rights to the underlying work.Once the producer has completed these stages they are ready to exercise the option,meaning that they will make an offer to buy out the underlying rights.In many cases,the rights acquisition price is expressed as a percentage of the esti

144、mated budget of the film to be made from the work,typically between 1 and 3.5 percent for smaller films.The purchase price is usually set when the option is negotiated,because the option is expressed as a percentage of the purchase price.There are often pre-agreed“floors”and“ceilings.”2525Chapter 1

145、Eye of the NeedleRights purchase agreements require a good deal of detail if the producer is to avoid unresolved issues and legal problems later in the development and production process.Below are some strategic points to address.Rights acquired With the growth of new digital media,including VOD,the

146、 range of rights is changing and expanding all the time.Therefore,many holders of rights to underlying material will not accept a catch-all clause covering“all rights in the universe,etc.”It is important to be specific and exhaustive about the set of rights covered by the agreement to avoid conflict

147、s of interpretation later.In some cases,the producer may only want to acquire a limited set of rights,or some rights may have already been acquired by another person or company.Assignment or license?The advantage of an assignment over a license is very clear from a producers point of view:a license

148、only grants rights for a limited time,whereas an assignment is most often a full-period-of-copyright term,where legally permitted.The choices available to the producer in this part of the negotiation can vary according to what their needs are(a limited license may be cheaper than an assignment),and

149、the legal regime under which the negotiation is taking place.In the three leading“common law”countries the United States,the United Kingdom and Ireland the legal presumption is favorable to a full transfer of ownership from,say,the published author to the producer as a person or a company.The legal

150、presumption simply means that,unless the individual contract says otherwise,the rights will be presumed to have been assigned.This is not the case in the droit dauteur countries(i.e.,most of Europe,francophone Africa and Latin America),where authorship of the work is vested in the individual and it

151、may be more difficult to negotiate an in-perpetuity assignment.French writers,for instance,use this presumption to impose license-based agreements for more limited periods of time.26Rights,Camera,Action!Intellectual property rights and the filmmaking process 26Moral rightsMoral rights allow an autho

152、r to protect the integrity of their work and assert their paternity over it.Integrity refers to an authors right to protect the work as they made it and to oppose,by legal means,any attempt to change the work without their prior consent,in a manner that would make it unrecognizable or radically alte

153、r its style,content or message.Paternity refers to the right of the author to assert that they are indeed the author of the work.It is vital to get absolute clarity over the application of moral rights in any rights purchase agreement.That said,the room for maneuver will vary according to the legal

154、regime:in droit dauteur countries moral rights are assimilated to human rights and cannot be assigned to,or waived in favor of,the producer or anybody else.The United States holds the reverse philosophical position:where moral rights are asserted,they may be waived.A waiver is a written undertaking

155、by the author not to prevent,in any way,the commercial exploitation of the work derived from the underlying source(book,script,theater play,etc.)whose rights are the object of the purchase.In Europe,the United Kingdom and Ireland adopted moral rights into their copyright acts in 1996 and 1998,to bri

156、ng themselves in line with European law.However,those two countries also permit waivers for moral rights.At this stage,producers in all three countries consider waivers essential to avoid creating a sense of insecurity for film financiers,who may perceive a risk from an author asserting their moral

157、rights if they take objection to the screen adaptation of it(or subsequent re-edited versions).However,the uncompromising approach to moral rights in droit dauteur countries has not resulted in a climate of uncertainty over the exploitation of films.Contracts for authors in those countries include d

158、etailed and specific information on the context in which moral rights may be asserted,and ensure that this can only happen in cases when the integrity of the work has been blatantly breached or if the producer has chosen to ignore the authors assertion of their paternity through an end credit in the

159、 film.Conversely,although it is not described as an assertion of the paternity right,most authors of underlying works dealing with film producers in the United States will find that there are standard clauses to ensure that a screen credit is granted.2727Chapter 1 Eye of the NeedleReserved rights Au

160、thors of underlying works will normally want to exclude some sets of rights from the purchase agreement.The most obvious one is book publishing,especially if as is generally the case the book on which the film is to be based is already on sale.Radio and stage versions of the work are also a standard

161、 exclusion.Reserved rights cannot be exploited by the author of the underlying work without constraints,however:in most agreements the author will agree not to exploit those rights for a set period of time(holdback),to permit the full exploitation of the rights purchased by the producer without comp

162、etitive threats.In general,the producer will insist on a“right of first negotiation,”which means if the author later wishes to sell the reserved rights,these must be offered to the contracting producer first.Equally,the producer may be granted a“last refusal”right,meaning the author is obliged to of

163、fer the producer a sale of their reserved rights on terms equal to those offered by another bidder.Nothing like real life films based on real-life people or“true stories”Joel and Ethan Cohen,two of Hollywoods most respected writers and directors,are known for their provocative use of the“based on a

164、true story”byline in the opening credits of some of their films,including their 1996 critical and commercial hit comedy-thriller Fargo.When confronted in interviews,the brothers revealed that the claim of a fact-based source was in fact part of their make-believe,perhaps attributable to their keen s

165、ense of the absurd,and a wry cultural comment on the dubious authority of the“true story.”Many filmmakers,however,actually do make films based on real lives,and must navigate choppy legal waters in the process.In addition to the decision that filmmakers may make to acquire rights to any factual or b

166、iographical book or magazine article,or any other work portraying living characters and their life stories,careful consideration must also be given to avoiding any infringement on the individual rights of the living people whose lives the film intends to portray and/or dramatize.28Rights,Camera,Acti

167、on!Intellectual property rights and the filmmaking process 28The degree of care and legal precautions required will vary according to which national jurisdiction applies in the event that a real-life person portrayed in a film decides to sue for libel,defamation or breach of their right to privacy.F

168、or instance,up until very recently,UK libel laws were considered advantageous to the plaintiff.Meanwhile,the US legal standard,with its strong emphasis on freedom of speech(guaranteed by the First Amendment),has a long tradition of making it more difficult for people who are(or believe themselves to

169、 be)the subject of a film to sue filmmakers successfully.US jurisprudence,for instance,separates out content such as advertising,which is categorized as“commercial speech,”and books,films or television fiction,which normally fall under“expressive speech,”for which First Amendment protection is more

170、robust.As a general trend,film producers have found strong support in US courts in their defenses against defamation,breach of privacy or“false light”lawsuits.First Amendment case law has effectively given filmmakers considerable creative leeway when portraying real-life people as part of a dramatiz

171、ed form meant for entertainment.In 2000,surviving family members of the East Coast fishermen who drowned during a devastating storm in 1991 sued Time Warner after the release of The Perfect Storm,a star-studded film based on a bestselling factual book about the tragedy.Their case alleged“unauthorize

172、d commercial misappropriation and invasion of privacy.”The court ruled in favor of the film studio,having concluded that the likeness of those individuals had been used as part of expressive speech.The right to privacy extends to different areas and includes protection against unwanted scrutiny of t

173、he nature of intimate family bonds or a persons sexual preferences and their private space.However,this principle is not absolute:a court will always balance it against the principle of public interest.In particular,if a persons life happens to be in the public eye,the plaintiffs right-to-privacy ar

174、gument will be more difficult to assert because,as a public figure or celebrity,their actions may have public interest implications.In assessing libel risks when developing a film based on or inspired by one or several living people,producers should factor in the 2929Chapter 1 Eye of the Needlepossi

175、bility that potential plaintiffs may shop around for a country where defamation and libel laws put the burden of proof on the defendant.In a notorious 2008 case involving a factual book on the financing of international terrorism,a wealthy Saudi citizen sued American journalist and author Rachel Ehr

176、enfeld through a British court for alleging that he had financial links with Al-Qaeda.Although the book had not yet been published in the United Kingdom,the fact that a small number of copies had been sold online to UK residents provided the legal hook.The maneuver led to a countersuit in a New York

177、 court by the author and the passing of a New York State act to protect local authors from the effect of what Ehrenfeld and her supporters had denounced as“libel tourism.”Into the void commissioning a script The producer has exercised their option and purchased or licensed the rights to the underlyi

178、ng work;by that stage,the script for the project may be fully in development,or even completed and ready to shoot.Of course,this is not the only possible scenario.Books and other underlying works such as plays,musicals,magazine articles and real-life stories are not the only sources for scripts.A si

179、gnificant number of films are based on original scripts commissioned directly by a producer,a commissioning source such as a television or VOD platform executive,or a screenwriter.There are also many instances of“spec”scripts for example,screenplays authored directly by a writer without a prior comm

180、ission and sent to producers in the hope of eliciting interest and an eventual purchase.Alternatively,a script may be pre-existing.For instance,it might have been commissioned in the past by a producer who later decided not to go ahead with the project and instead put the script in“turnaround,”a pra

181、ctice that gives the author,or their successor in terms of right ownership,a window of time within which to set up the project with another producer.Whatever the provenance of the script,in most jurisdictions writers of scripts are considered authors.Their script may be seen by the filmmaker as a te

182、mplate for a director to take and turn into an 30Rights,Camera,Action!Intellectual property rights and the filmmaking process 30audiovisual narrative,but most national IP laws recognize the script as a work of authorship in its own right.As a result,an agreement between a producer and a writer is ge

183、nerally both an employment contract and a rights acquisition agreement.The producer typically hires the script writer to produce a“treatment”(a short narrative canvas for the film)and a first draft script.The agreement may also specify any further drafts,rewrites or“polishes”that the producer expect

184、s as part of the agreed fees.The legal status of the writers contract varies according to prevalent copyright and related rights legislation.In the United States,unless a script is written and submitted by the writer themselves,the contracting producer is presumed to be the sole author of the work a

185、nd is therefore entitled to the copyright and all rights in the script that they have commissioned.Under this“work-for-hire”arrangement the writer merely fulfills a service contract and has employee status but owns none of the initial IP for the work.In the United Kingdom,the writer of any script,wh

186、ether commissioned or unsolicited,is deemed the author of the screenplay itself,but not of the resulting film.Therefore,in this context a writers contract is both an employment contract and a rights acquisition contract,with remuneration specified for the various stages(treatment,first draft,first d

187、raft rewrites,second draft,second draft rewrites,etc.).The rights held by the writer in their screenplay are listed and assigned separately to the producer.The different rates paid constitute both remuneration for a service and a purchase of the rights pertaining to the material generated by the wri

188、ter.Typically,when the rights pertaining to feature film scripts are acquired for use on television,the initial remuneration for the script writer will cover only a limited number of transmissions on“free-to-air”television,which generally also includes a limited airing on a VOD platform closely rela

189、ted to the initial broadcast(this type of non-linear television is sometimes referred to in Europe as“catch-up”television).Any further transmission thereafter is covered by collective bargaining between the local writers guild and the producers trade body,with“residual”payments corresponding to spec

190、ific forms of exploitation after a certain number of runs,for subsequent use.The script writers entitlement to authorship may seem weak at 3131Chapter 1 Eye of the Needlefirst glance,because their rights are almost always assigned to the producer as a matter of course.However,an authors power to ass

191、ert their rights is useful on at least two counts:If there are issues over late payment(or non-payment)by the producer of the agreed fees,the writer may withhold the assignment of their rights to the producer,and make other parties to the financing of the film aware of it,until the money has been re

192、ceived.Some established writers may use their authorship status to negotiate a limited license over certain rights to their work,rather than a straight assignment,and to retain or reserve certain rights.Equally,although the US work-for-hire approach suggests that no rights are retained by the script

193、 writer,influential writers can successfully negotiate the retention of some sets of rights.These“separated rights”are granted only when the script is an entirely original work,not based on previous works.They are also only granted to writers who do not share a screen credit with other writers broug

194、ht in by the producer to polish or“doctor”the script.The rights secured by these more powerful writers may include the right to publish a book derived from the script,or to produce a live theatrical performance.Another important right allows the writer to buy the script back from the production comp

195、any after a certain time(normally three or five years)if production of the film has not started.Unlike the more limited turnaround provisions,which may allow a writer to try to get the film made once the producer has given it up,this right is not limited in time.Rather,it is an outright repurchase w

196、hich allows the writer to enjoy full and ongoing ownership of their work.In droit dauteur countries in Europe,the writer of the screenplay,whether it is original or a screen adaptation based on underlying material,has a presumption of authorship of the script as a distinct work.Interestingly,they ar

197、e also deemed to be an author of the finished film,regardless of how much of the script ends up being shot by the director.As such,all transactions with the producer entail a negotiation for the full or partial assignment of those author rights.The writers upfront remuneration for writing the script

198、 is also legally treated as an advance due to the writer as the author of the 32Rights,Camera,Action!Intellectual property rights and the filmmaking process 32work.The advance is against a proportion of all net receipts directly from the commercial exploitation of the film in all relevant media.In p

199、ractice,the advance will represent most of the writers remuneration,as most films fail to generate sufficient net revenue,and this revenue must be shared proportionately with other creative contributors who share in the authorship of the work.In France,for example,there is separate authorship status

200、 for the script writer,the writer of the films dialogue(the“dialoguiste”is sometimes separate from the writer of the overall script),the writer of the adaptation of an underlying work,the films director and the composer of the films score.Each shares in the authorship of the work and their contracts

201、 have equivalent clauses,based on the principle that any assignment of their rights to the producer may only be legally valid if their contracts stipulate a percentage of commercial exploitation specific to each form of exploitation.Other regions of the world have adopted a variety of legal traditio

202、ns with regard to the treatment of authors,many of which initially at least can be seen as historical legacies from colonial eras.For instance,national copyright laws in Africa have been broadly divided between the Continental European droit dauteur approach(e.g.,from Portugal and France)and the Bri

203、tish copyright regime.The 10 francophone African countries are signatories to the Bangui Agreement of March 2,1977,on the creation of an African Intellectual Property Organization(revised in 1999 and again in 2015).2 Article 32(1)of the 1999 revision,for instance,establishes that“in the case of an a

204、udiovisual work,the first owners of the moral and economic rights shall be the joint authors of the work,such as the director,the script writer,and the composer of the music.”In the real world,in countries where copyright contractual practices and audiovisual infrastructures are less established,and

205、 where working capital for financing projects is scarce,authors of screenplays are often presented with“buyout”deals by producers.These contracts stipulate an all-in,upfront payment against full assignment of all rights in the script,with no residual entitlement by the author to a share of future re

206、venues.The issues surrounding such practices are complex,and this book cannot comment on their fairness.However,regardless of an authors status in their 3333Chapter 1 Eye of the Needleindustry,the baseline principle is that it is important for the author of the script to insist on a written contract

207、 and to be fully aware of the rights being given away and retained.A written contract protects the producer as well as the writer,as it is a component of the copyright documentation the chain of title which will prove to potential distributors and/or financiers of the project that the rights have be

208、en acquired or licensed legally.The art of war producers,writers and their agentsLike actors,directors,composers and other creative people,many script writers use a talent agent to represent them with the producer and ensure the best possible terms for their work engagement and/or assignment of righ

209、ts.Agents also humorously described as“ten-percenters”in Hollywood and elsewhere,in reference to their commission have been a growing force in the worldwide film industry,from Hollywood to Bollywood.In Hollywood,film studios regularly complain that agents,as exclusive gatekeepers to the best talent,

210、have far too much power.According to disgruntled film executives,the big agencies are making a major contribution to driving movie production costs upward,by negotiating high fees and revenue shares for the stars,directors and writers.In recent years,some observers say this trend has become more acc

211、entuated,with the larger talent agencies not only extending their reach to the global market outside of the United States but also integrating vertically into film/television content financing and international sales,leading to concerns about potential conflicts of interest.3Agent representation can

212、 be a major asset in a script writers approach to the film industry.Writers are vulnerable because their work,despite being considered vital to a films success,is often treated as disposable by the producers and film financiers during the development process.Acting out of their own sense of necessit

213、y,producers often decide to replace the writer or bring in an additional writer to get the final shooting script that satisfies their own expectations,as well as those of the financiers and the director.The 34Rights,Camera,Action!Intellectual property rights and the filmmaking process 34role of the

214、agent is therefore not limited to making sure their client gets paid well,but also extends to doing everything in their power to ensure that the writer is kept creatively involved by the producer throughout the life of the project,from conception to filming.However,such terms are not always easy to

215、secure.Historically,writers in mature film industries in North America and Europe have not always enjoyed the security of guaranteed payments.Over time,through a process known as“collective bargaining,”their unions have negotiated standard clauses whereby a producer may not withhold payment on a com

216、missioned script if they happen to be disappointed by its content.In return,producers have approached writers contracts in such a way as to limit their risk after the first draft stage:they will sometimes insist that the contract be flexible.In this“step-deal”approach,the writer can count on a guara

217、nteed“flat fee”for the initial work,regardless of the producers intentions thereafter,but the producer has the power not to exercise their contractual option to use the writers services for further rewrites and/or drafts.The standard deal structure will then be to negotiate a set fee payable in full

218、 to the writer if and when the film goes into production.The original flat fee(for the first draft of the script)and any further payment made to the writer for further drafts will then be treated as an advance on this production fee and deducted from the final amount payable once the shooting of the

219、 film is underway.This deal only works well if the writer does not have to share credit with another writer brought in by the producer after the first draft stage.An established writer with a good agent can insist on terms that do not allow a second writer to be brought in to rewrite their first dra

220、ft,or terms that ensure the initial draft is dispensed of before a second writer is brought in.Development the real storiesThis section presents three case studies borrowed from real development situations.Each typifies a specific set of development issues,and ways of structuring the development pro

221、cess in response to them.3535Chapter 1 Eye of the NeedleThe Lord of the Rings long journey to the screen Already a hugely popular book since its first publication by the literary scholar J.R.R.Tolkien in 1954,The Lord of the Rings went on to become a success story of phenomenal proportions in the hi

222、story of cinema.By the time the third film in Peter Jacksons celebrated trilogy had finished its initial worldwide theatrical run,the films had garnered a staggering USD 2.9 billion at the box office.And,as often happens,success in this opening market heralded a franchise that went on to break all p

223、rior established records in video,television license and merchandizing revenues.However,the road to making this commercial and critical behemoth had been long and tortuous.From negotiations on the initial purchase of audiovisual rights from J.R.R.Tolkien and his publisher to the completion of Jackso

224、ns first film,almost 45 years elapsed.The adaptation of The Lord of the Rings from the page to the screen is one of the most spectacular illustrations of the difficulties of development in the film industry,and of the potential for a complex chain of transfer of rights between a succession of film p

225、roducers and studios.Below is a timeline for The Lord of the Rings epic journey from the page to the big screen:4 19541955:Publication of The Lord of the Rings by J.R.R.Tolkien.The three books are an immediate success in the United Kingdom and go on to become a hit in bookstores worldwide.1957:The l

226、iterary agent Forrest J.Ackerman presents the author with graphic sketches and a treatment for an animated film based on the trilogy.Tolkien dislikes the synopsis and turns down this first opportunity to license the film/television rights.19581966:Tolkien and Allen&Unwin,his publishing house,set a s

227、trategy for dealing with requests for audiovisual rights from film producers,which the author summarizes as:“Art or cash.Either very profitable terms indeed;or absolute authors veto on objectionable features or alterations.”36Rights,Camera,Action!Intellectual property rights and the filmmaking proce

228、ss 3619671969:Independent producers Gabriel Katzka and Samuel Gelfman pitch a film concept based on the three books.After two years of negotiations,a contract is finally signed;the producers pay a substantial sum upfront for the rights purchase.Unusually,the rights are assigned in perpetuity.However

229、,the contract is said to be so complex and ambiguous that it allegedly continues to raise issues with the Tolkien estate to this day.19691975:With the rights now with United Artists,the studio explores options for the adaptation of the work.The project is briefly envisaged as a partnership with Appl

230、e Films,the firm representing The Beatles film interests:the intention is for the four members of the legendary band to be cast in the lead roles.The project does not go ahead.1976:The successful independent music industry mogul Saul Zaentz buys out the rights to Tolkiens books from United Artists.A

231、t this point,Zaentz has significant prestige and access to talent,as his film One Flew Over the Cuckoos Nest won a raft of Academy Awards in the same year.Zaentz also acquires the trademarks linked to the characters and places in the books.This would prove strategic in due course,when the release of

232、 the film triggered an explosion in merchandizing sales.1978:Zaentz sets up Tolkien Enterprises as a vehicle to license a range of cultural products from musicals to merchandizing based on the IP secured from the Tolkien estate and the publisher.After an unsuccessful single feature-length cartoon ba

233、sed on the books,the rights remain dormant in the ensuing two decades.1995:The young New Zealander filmmaker Peter Jackson pursues the project.Jackson has just made his first film in Hollywood(The Frighteners),after a career in New Zealand making low-budget genre films.By this time,Zaentz has a“firs

234、t look”deal with leading US independent studio Miramax,which rescued his multi-award winner and commercial hit The English Patient when financing for the film collapsed shortly before filming was due to commence.5 Jackson discusses the project with Zaentz and Miramax.3737Chapter 1 Eye of the Needle1

235、997:In January,Miramax completes the acquisition of all rights to The Lord of the Rings from Saul Zaentz and launches development on the project.Jackson and his colleagues begin work on the script,based on a two-film concept with a notional combined budget of USD 70 million.Jacksons Wellington-based

236、 film company Weta also begins work on production and creature designs,including cutting-edge new computer-generated visual effects.1998:In June,with two scripts now close to completion,Miramax is concerned about cost forecasts rising to nearly USD 140 million.By this time,Miramax is owned by Disney

237、 and bound by an agreement not to put any project budgeted above USD 75 million into production without the studios consent.Disney decides to pass on the project.Miramax gave Peter Jackson a short window of time to try to set the project up with another studio.This practice,known as“turnaround,”invo

238、lves one company making a package of rights and pre-production assets available to other bidders,for a project it no longer wishes to pursue.Reportedly,Miramax set especially stringent turnaround terms:the company taking over the development package on The Lord of the Rings would pay Miramax USD 12

239、million upfront to buy back the USD 10 million pre-production costs already incurred and USD 2 million in New Zealand currency pre-bought by the company.Note that it is unusual in turnaround scenarios for the entire sum to be demanded upfront;the usual practice is to request a percentage as deposit

240、and the balance at a later stage,generally upon commencement of principal photography on the project.Miramax would receive 5 percent of the gross receipts from worldwide cinema box office takings and the two chief executive officers of Miramax would receive an executive producer credit on any finish

241、ed film or films.As the original producer attached to Miramax,Saul Zaentz also received a substantial percentage of the box office gross.New Line,a former New York independent distributor acquired by Time Warner,expressed an interest.After presenting New Line executives with a hastily concocted“docu

242、mentary”on the pre-production of The Lord of the Rings in New Zealand,Peter Jackson was able to rescue the project.New Line met Miramaxs demanding 38Rights,Camera,Action!Intellectual property rights and the filmmaking process 38terms,with New Lines chief executive officer having made the decision to

243、 divide the saga into three films rather than the two originally envisaged.The first film in the trilogy was released in 2001.For a film conceived initially as heroic fantasy aimed squarely at the 16-to 24-year-old market,it managed the rare feat of achieving both blockbuster status and almost unive

244、rsal critical praise.The gestation of Gemma BoveryGemma Bovery was made in 2013 for a budget of EUR 9.7 million.It was based on a bestselling British comic novel which ferociously satirized the microcosm of English middle-class people buying properties in rural France,in pursuit of a bucolic lifesty

245、le that proved elusive to many and disastrous to the books eponymous heroine.Not only did the book become a popular title in the UK market,but it also did well in France and many other markets,where translated versions met with critical and commercial success.By the time producers started discussing

246、 the project,Gemma Bovery and the author were considered“hot property.”As a development case study,Gemma Bovery is complex.It entailed the acquisition of the film adaptation rights from the books author,Posy Simmonds,and the commissioning of a script from three different contributors.These included

247、two professional French screenwriters and the director of the film,Anne Fontaine,herself an experienced screenwriter.Gemma Bovery was set up as a Franco-British co-production.The lead producers were the Paris-based Cin-and the London-based Ruby Films,both of which had considerable prior experience o

248、f such co-productions.The co-producers first secured an exclusive option to adapt Posy Simmonds book in 2011.On the strength of this agreement,and in view of the books high status,they were then successful in securing an investment from the British Film Institute(BFI).Among other functions,the BFI i

249、s the body responsible for channeling state 3939Chapter 1 Eye of the Needlefunding into original British film productions against a guarantee from the producers that they will secure the balance of an agreed overall initial development budget.The BFI contribution represented just over 26 percent of

250、the initial development budget,with the balance coming from the producers.In a feature typical of this type of funding agreement,the public body became a pro-rata co-owner of the rights in the option on the book(the underlying work)as well as the future screenplay to result from the development work

251、 schedule and other related development material.This customary share-out of IP is a temporary arrangement;it is negotiated as security against the public bodys development investment,and would normally be contractually reassigned to the producers at the point at which the BFI had recovered its inve

252、stment,as was the case for this project.Note that such a recovery would normally be expected upon commencement of the production of the film.The BFI investment,combined with other sources contributed by the two lead producers,enabled them eventually to exercise the option and to then draw up contrac

253、ts with three writers for the adaptation of the novel.The option agreement contract was first drawn up in July 2011.It was extended by letter in April 2013,the author of Gemma Bovery and her agent having been satisfied that the co-producers were making good progress with the adaptation.The parties l

254、atterly agreed a license price for the rights,granting the producers a 17-year exclusivity period within which to exploit defined resale rights,with an additional right of“first negotiation last refusal”after the period had elapsed,in case they wished to prolong the license.Note that not all of the

255、rights were included in the license.The rights that the author did not license included sequel rights and stage rights.However,the author also agreed to a seven-year moratorium period for the exploitation of such rights,to avoid interfering with the film project and its commercial exploitation cycle

256、.Conversely,the producers agreed that if they had failed to bring the project into production within 10 years from the signature date,all rights in the license agreement would revert to the author.In addition to the license purchase price,the producers agreed to the following terms in favor of the b

257、ooks author:a one-off payment of GBP 12,500 no later than the first day of the film going into production(“first day of 40Rights,Camera,Action!Intellectual property rights and the filmmaking process 40principal photography”);a guaranteed payment equivalent to 3.5 percent of the films approved budget

258、,after deduction of the license price,with an overall cap at a maximum of GBP 500,000;a commitment to paying 5 percent of future net profits;a set of additional“escalator”payments,linked to the commercial performance of the film and starting at EUR 10,000 after the film reached over USD 8 million in

259、 gross revenue at the box office in US cinemas;further escalator payments of EUR 10,000 each time the film grossed an additional USD 1 million in the United States;similar escalator payments for the UK cinema box office and upon winning certain awards(BAFTA and Academy Awards).Note that as far as in

260、dependent films are concerned,such contractually pledged escalator payments rarely materialize,as the box office threshold required to trigger them is not usually reached.Under the non-pecuniary terms(described as“approval and consultation rights”)included in the agreement,the producers agreed to th

261、e writers demand that“the Work be kept in the same geographical setting;secondly,the story line will remain substantially the same;and thirdly no major characters which do not appear in the work may be introduced into the Film,and no major changes may be made to existing characters.”The producers al

262、so undertook that the title of the finished film would not differ from the books title,unless there was prior agreement with the books author or unless legal,censorship or other regulatory reasons compelled them to change it.Finally,the producers agreed that the author should be able to approve any

263、further choice of screenwriter,director or lead actors other than those initially approved.The rights acquisition terms summarized above are fairly typical of the general structure of such agreements;however,as the source graphic novel for the film was such a high-profile publishing success,the adva

264、ntages secured by the writer are not necessarily the norm 4141Chapter 1 Eye of the Needlefor authors of less successful underlying works.This is not only the case in terms of the size of the financial package but also in terms of the parts of the rights purchase pre-agreement that set the degree to

265、which the author of the source work may have control over the adaptation into a film or television production.In this instance,the writer leveraged the proven attractiveness of her published work to secure a relatively high level of shared control.For the remainder of its two-year development histor

266、y,Gemma Bovery demanded the input of two writers credited for the screenplay(the films director,Anne Fontaine,and the seasoned French screenwriter Pascal Bonitzer),both of whose contracts were signed in the late spring of 2011.Also involved in the projects genesis were a French treatment writer(Nico

267、las Mercier)and a British script consultant(Declan May).Upon its release in 2013,the film received mixed reviews but went on to be reasonably successful,grossing over USD 4.5 million in cinemas worldwide and achieving territorial rights sales in many countries.Oh l l!an original scriptIn this case s

268、tudy,a French film director had an original idea and approached a producer.The film Oh l l!(French title:Seconde Chance),produced in 2006,was to be based on an original screenplay inspired by the private correspondence of Madame du Deffand,an influential 18th-century female aristocrat who hosted a f

269、ashionable literary salon,which attracted some of the most eminent French philosophers of the era.The film charts Madame du Deffands relationship with Julie de Lespinasse,a poor orphan adopted by the Lady who,as she blossoms into a woman,becomes her rival,opening her own popular high society salon.T

270、he letters,being historical archive documents,were in the public domain;consequently,no clearance of underlying work was required.The approach to the development required hiring the director and a co-writer at the same time,to develop the script together.Both writers assigned all commercial exploita

271、tion rights to the producer.Although each writer was contracted independently,each agreement 42Rights,Camera,Action!Intellectual property rights and the filmmaking process 42acknowledged that the writing of the script was to be a collaborative effort between the two.Both the directors contract and h

272、er co-writers contract also acknowledged that she was the designated director for the film to be made.In droit dauteur regimes such as France,both the screenwriter and the director are deemed to be the authors of the resulting film(very often,the director is also the sole author of the script).In th

273、at system,the way in which authorship translates into financial terms is that any payment the producer makes to the authors before and during production,as a remuneration for writing and/or directing,is treated as an advance against a share of all commercial revenues from the film,which they are ent

274、itled to by law.Some of the sum paid upfront may also be treated as salary.Therefore,in the case of Oh l l!the two writers contracts set out the precise list of rights purchased through the contract and meticulously laid out the percentage they were to receive from the separate revenue streams deriv

275、ed from the commercial exploitation of the film(cinema,video,foreign revenues,free television,paid television,etc.).Another way in which the presumption of original authorship is expressed is through the fact that the purchase of the rights is a limited license,not a full assignment.In this case,bot

276、h writers agreed to a license period of 32 years,a standard in the French industry.However,a subclause ensured that all rights would automatically revert to the writers after four years from the signing of the contract,should the producer be unsuccessful in making the film within that period.This ty

277、pe of turnaround clause is common in the film industry.While development is taking place,the producer is already engaged in the difficult business of testing the interest of key talent(directors,lead actors)in the concept of the film(or draft script)and approaching potential financiers.The next chap

278、ter covers the means of financing a feature film today,and looks in detail at the“value chain,”which any producer must understand if they are to embark successfully on the uncertain journey of trading IP rights against financing for the film.4343Chapter 1 Eye of the NeedleNotes1 Rachel Ehrenfeld(200

279、5).Funding Evil:How Terrorism is Financed and How to Stop It.Lanham,MD:Taylor Trade Publishing.2 Annex VII Bangui Accord,Cotonou Act 2015.Available at https:/mali.eregulations.org/media/Accord%20OAPI.pdf.3 David Ng(2018).Talent agencies are reshaping their roles in Hollywood.Not everyone is happy ab

280、out that.LA Times.Available at https:/ The principal source for this case study is the book The Frodo Franchise,a remarkably insightful study of The Lord of the Rings journey to the screen by the respected film scholar Kristin Thompson,published by University of California Press in 2007.Trade magazi

281、ne articles and other sources were also consulted.5 A first-look deal is a legally binding agreement whereby a producer consents to present all of their projects in development to a specific financier/distributor on an exclusive basis;the financier thus has first call on the project before any compe

282、titor can come in and bid for the rights.4444Chapter 2Financing Films On the Merry-Go-Round of Debt,Equity and Distribution RightsWhen distilling private sector film financing to its most basic essence,a combination of some or all of the following ingredients will be present:debt,equity and rights.A

283、dditionally,public funds including tax credits,rebates and other forms of public sector incentives are available in a growing number of countries.How public funding interacts contractually with private sources is a complex subject beyond the scope of this publication.This chapter is primarily concer

284、ned with the use of IP rights as they relate to the discipline of creating and financing films from original idea to screen.However,it is important for all newcomers to film production to understand the broad principles of forms of private sector film financing which do not directly involve rights t

285、ransactions,and to appreciate how they interlock with each other in the making of a film.The aim here is to help readers develop a strategic approach to combining sources of finance to control the revenues and/or rights to the greatest extent possible.Each investor approaches a project from a differ

286、ent perspective and with different objectives in mind.The tactical advantages for investors coming early into the project include being able to negotiate a strong position in the sharing out of eventual revenues and minimizing their risk through whatever tax incentives may be available.Investors com

287、ing late into a project may also be in a strong negotiating position in that the project parameters may be better defined by then(e.g.,lead actors),enabling them to benefit from the need for the producers to cover a final gap in the budget,which gives them a strong hand in negotiating return on inve

288、stment.Individual investors tend to have very different relationships to risks.For instance,while some may be focused on the direct advantage 45Chapter 2 Financing Filmsof a specific tax shelter vehicle,others may be more interested in securing a strong position for potential revenues,with a high pr

289、emium against their investment(note that these two considerations are not mutually exclusive).In this respect,it is important for producers to have researched and considered the investment culture of all of the private sector financiers they are considering as suitable partners for their project.Sin

290、k or swim the trials of debt financing“Debt financing”is a general term which encompasses a complex set of realities.In its crudest form,debt financing is distinguishable from equity or rights in that the lender is not entitled to a share of the revenues from the exploitation of the finished film,no

291、r to a share of its profit,nor to any part of the IP in the film.The debt financier typically provides a loan repayable before the film is completed,and/or“in first position”in the exploitation revenues of the film,i.e.,before any equity investor begins to recover their money.This type of loan is in

292、 theory no different from a standard bank loan,and the lender is merely looking to make money out of the interest and fees charged on the loan.In practice,debt financing for film is often more complex.Below are three standard examples borrowed from different practices around the world.Pre-production

293、 loansPre-production loans are offered to producers who have already covered their entire production budget through contracts with investors but are unable to start production because they cannot receive the cash from those investors until after the start of principal photography on the film,i.e.,th

294、e start of filming(typically because the legal paperwork demanded by the investors has not yet been completed).Pre-production loans are seen by financial institutions and banks as high risk,because when the producer applies for the loan they often have no way of guaranteeing the film will effectivel

295、y start production or be completed.Consequently,lenders often insist on taking a charge on some or all of the asset value constituted by 46Rights,Camera,Action!Intellectual property rights and the filmmaking process the IP of the film,as collateral for their risk.Collateral is anything of value that

296、 the bank may be given the right to sell in the event that the borrower is unable to reimburse the loan.Gap financingSome institutions in the West specialize in“gap financing.”Contrary to straight debt financing or pre-production loans,the lending is against the gap in the budget which has yet to be

297、 covered by financiers.In todays market,the gap covered by such lenders will typically not exceed 10 to 15 percent of the overall budget.Gap financiers will also insist on an assessment of the value of the gap by a credible international film exporter,known in the business as a sales agent(see Chapt

298、er 5).In this analytical exercise,the sales company estimates the sale value they believe the film could fetch in the countries where the rights have yet to be sold,and makes several pre-sales to demonstrate the films appeal.The lender will rarely agree to cover the gap if the sales agents estimates

299、 do not cover up to 150 to 200 percent of the value of the gap.For example,imagine that the films budget is USD 4 million(a mean average for a low-budget independent North American or European film with no stars)and the producer needs to cover a gap of USD 600,000.The sales agent handling the film h

300、as not yet pre-sold or sold to much of Eastern Europe,as well as valuable territories such as Japan,Germany,Korea,Russia and Spain.Its total estimated sales figures for those territories come in at USD 920,000.Unless the gap lender disagrees with the estimate,the figure meets their loan security req

301、uirement and they may choose to go ahead with the transaction,covering the USD 600,000.Laboratory debtLaboratory debt refers to the practice whereby the producer asks the laboratory responsible for processing the film stock and/or producing material such as digital intermediates(digital masters)to d

302、efer their invoicing until the film is almost complete and ready to deliver to distributors.The deal may also include elaborate post-production services such as editing,dubbing,color grading and 47Chapter 2 Financing Filmscomputer-generated imagery(CGI).This practice is still current among some low-

303、budget filmmakers in the West.It is,however,much more common elsewhere in the world:up until a few years ago,most low-budget Indian films financed themselves in part using this deferred payment facility.Film laboratories in India are often powerful monopolistic businesses in their respective languag

304、e markets.They are also strong cash businesses that depend on high-volume low-value work,rather than the reverse.Loaning to producers in the form of deferred services does not threaten their strong cash flow and is one way in which they can secure a competitive advantage.As a result,low-budget filmm

305、akers all over India can expect to defer between 20 and 25 percent of the cost of the film through this form of debt,though the practice has been declining as the industry has professionalized and developed other modes of financing.However,there is a downside to laboratory debt from a producers poin

306、t of view.In India,laboratories expect repayment in full before post-production of the film is completed.Because the laboratory is generally in possession of the films negative and the producer must agree to a charge on it until repayment,the laboratory can easily sequester the negative until paymen

307、t is forthcoming,preventing the film being released.Until recently,this undesirable outcome still occurred frequently,and the vaults of most of Indias leading studios and laboratories were overflowing with films(finished or unfinished)that were awaiting settlement.Debt financing is also connected wi

308、th IP rights management.In all three cases of debt financing described above,the lender will normally take over rights in the project as collateral.In acquiescing to this,the producer accepts the risk that failure to repay on the lenders terms may result in a shift in the control of IP assets locked

309、 into the film.Therefore,debt financing is not only very onerous for the producer(rates are high because of the perceived nature of film as a high-risk enterprise),but potentially disastrous in enabling a confiscation of the rights by a third party with no interest in the film reaching an audience.T

310、his does not mean that producers should avoid debt finance:they may have no other option,as is often the case with the use of laboratory debt in the low-budget film industry in India.Provided that the film is completed,debt financing is advantageous as,unlike 48Rights,Camera,Action!Intellectual prop

311、erty rights and the filmmaking process equity,the lender does not share in the profits of the finished film.Debt is normally the final piece in the puzzle of film financing.As the principal source of debt financing,a bank will not normally take a risk on a film that is only partly financed and will

312、loan against existing contracts from other sources of financing.Participation/deferred paymentsThis form of film financing is part of the toolkit of independent film financing around the world.Very often,a project budgeted at a certain level may struggle to close its financing.In negotiations with f

313、unding sources,the producer(s)and director may find themselves under pressure to take part or all of their fees out of the budget and into the back end.This practice reduces the budget to be covered out of upfront investment,but puts these participants in a significant risk position,because the film

314、 may not make enough money for them to ever recover their deferrals.To accommodate this,they may be able to negotiate an improved position in the films“revenue waterfall”the complex legal and financial infrastructure determining the split of a films exploitation income.For instance,they may be able

315、to negotiate an agreement that allows them to recover fees up to a certain amount,alongside the equity investors in the film.Whether such accommodations are obtainable or not depends largely on the bargaining power of the individuals or the production company itself.Participation deals are also comm

316、on for the main cast.Independent films the world over can struggle to sign up significant stars owing to the size of their fees.Some commercially and artistically ambitious films are therefore in a quandary:on the one hand,the filmmakers have certain creative ambitions which may not be compatible wi

317、th attracting a mass audience;the presence of stars might make the project more commercial.On the other hand,having stars tends to push the budget beyond the point at which investors would be confident about covering their risk,owing to the nature of the project.Offering the star the option of takin

318、g less upfront as salary,and more from the revenues generated latterly by the finished film,offers one way out of this dilemma.However,the stars then effectively become co-owners of the IP in the film,and their bargaining power means 49Chapter 2 Financing Filmsthey are in a position to take a signif

319、icant part of the films revenues(not just the deferred element of their salary,but also an additional reward for their risk).Cutting the cake the basics of equity financingUnlike debt financing,equity financing involves an investment being made with an expectation of returns through an ongoing share

320、 in the revenues generated by the film(s),with investors charging a premium against their risk exposure.A fledgling filmmaker needs to start with the basic understanding that equity investment falls into two broad categories:investment in an individual film,and investment in a companys film activiti

321、es.The second category equity investment in companies is still a relatively rare occurrence in the cinema sector almost everywhere in the world.For the first edition of this book,in 2008,a number of senior corporate financiers in India were approached to summarize the key factors they consider to be

322、 keeping equity investors away from film companies.They all agreed on the following:Poor track record in financial performance A wave of film and media sector initial public offerings(IPOs)(companies raising finance in the capital markets through issuing public shares)began in 2001,initially attract

323、ing record numbers.However,most of these companies have since had disappointing commercial results.Lack of stable cash earnings The predominant company model in the film industry remains that of a“cottage industry”the single producer with a small company,only able to develop and make one film at a t

324、ime and therefore unable to share their risk across a number of films.Lack of integrated film companies Film revenues are split between many smaller companies instead of being concentrated through fewer companies able to integrate development,production,distribution and exhibition.Deficiencies in ma

325、nagement Equity investors consider the 50Rights,Camera,Action!Intellectual property rights and the filmmaking process management culture of film companies to be largely lacking in core skills and limited in its ability to turn business plans into reality.What is striking about this survey of Indian

326、equity investors is how their analyses of the core weaknesses of the film industry converge with those of similar experts in the film industries in Europe or North America.Although the Indian film industry has matured considerably,these factors remain today.They also apply all over the world:with a

327、few exceptions,film companies are considered too small scale and too asset poor to entice most investors.Anyone looking for an equity investor to support their film company business plan first needs to be aware of this universal perception,because it is a considerable barrier.Film entrepreneurs may

328、argue that the reluctance of the investment community to get behind them leaves the sector in a double bind.They need capital to finance their overheads,become able to develop entire slates of films,own IP and control revenues.But at the same time,the equity markets are waiting for bigger companies

329、with larger throughput and steady cash flow,and are loath to take risks on the small-scale and underpowered companies that make up most of the sector.For the filmmaker/entrepreneur hoping to raise equity to support the mid-or long-term strategy of their company,it is important to be realistic about

330、investment prospects:the newer the film company,the less chance it has of obtaining this type of financing.The business plan will need to be of outstanding quality,with considerable clarity on the companys objectives and the genres of films it wishes to make,and a detailed strategy for project finan

331、cing,distribution and revenue sharing.In broad terms,it can be argued that as the film industry becomes more capable of attracting a critical mass of equity investment,the greater its bargaining power will become in negotiations over rights with distributors,television broadcasters,video licensors,t

332、elecom operators and other categories of film buyers.Conversely,a chronic lack of self-financing capacity makes the independent producer less able to own or control rights to a film after it is completed,as most of the strategic rights will have been licensed away to the private 51Chapter 2 Financin

333、g Filmssector financiers.For most producers,rights are disposed of early,when the project is vulnerable to being turned down.In this way,the IP value becomes either diluted between a variety of buyers or concentrated in one commissioning entity(e.g.,a public broadcaster or VOD platform),and little of it remains with the producer,leaving their company without assets and reliant on a precarious hand