Our Ugly Past

August 20th, 2004 · No Comments
by Booksquare

Once upon a time, we had a job. We rose every morning, drove long distances, and sat in our office, staring at the Matisse print on the wall opposite us. Yes, we were searching for the meaning of life. No, we never figured it out. In between deep thoughts, we performed our duties — those duties make us particularly qualified to comment on the “they’re missing the real story” aspect of this story.

We realize this has nothing to do with writing, per se. But it does. It speaks to our frequently repeated (ad inifinitum comes to mind) mantra about understanding your agreements. If you sign a contract, know what it means. Or hire a really smart lawyer who can explain it to you over and over until you get it. Incidentally, we clarify a small difference between motion picture agreement language and publishing language. If you’re ever in a position to negotiate for a piece of the motion picture pie, you’ll thank us for making you look well-educated.

First, of course, is the rather odd terminology. The article states that Saul Zaentz is suing for unpaid royalties. More likely, he’s suing for unpaid proceeds. There is a difference — proceeds aggregate all (contractual) activity for a film, of which certain royalties (video, merchandising, novelization) may be a component. We say contractual because it is not a calculation of profits being done. What is reported is clearly defined in an agreement carefully negotiated (and given Zaentz’s stature in the industry, negotiated by highly experienced professionals) over an extended period of time. There is little left to chance. That the terminology is off is an interesting, but rather pedantic (meaning: interesting only if you spent your misbegotten career doing this particular type of work), point when compared to the basis for the lawsuit:

In his claim, based on a partial audit of the first film, 2001’s “The Lord of the Rings: The Fellowship of the Ring,” Zaentz said he was owed a percentage of adjusted gross receipts, but New Line’s calculations have been based on a net figure.

Seriously, it took a partial audit to figure this out? New Line’s statements, if we recall correctly (and we’ve tried to forget our past), offer sufficient detail to indicate whether or not they are calculating net proceeds versus adjusted gross receipts. If Zaentz (or more likely his representatives) had any question, a quick glance at whether or not distribution fees were deducted would have cleared things up in, oh, about two seconds. We’re giving extra time for math.

Of course, if New Line had made such an egregious error (these things happen — maybe the wrong language was inserted in the final agreement or the wrong definition was attached to the contract and the zillion or so people who review this stuff, including Zaentz’s reps, missed the discrepancy), it should have been easily resolved. When an error is so glaring — and this fits our definition — it doesn’t require contracting outside auditors to resolve. Usually the resolution is swiftly accomplished lawyero a lawyero or agento a agento.

So, in our mind, the story is not the apparently underpaid proceeds. The story is why does Zaentz feel he’s entitled to an AGR deal when the studio thinks it’s a net deal? As noted above, there is much negotiation on these things. Rights holders (the article states this is what Zaentz is) usually get net deals. Oscar® winners have more negotiating leverage, of course, but do they have enough to change a paradigm? And, of course, why is a lawsuit required to resolve this issue? And why is that entertainment reporting is still so starstruck that they can’t understand basic Hollywood practices (that have been going on for decades?)

File Under: Square Pegs