Industry Liabilities

In the entertainment industry a new contract is signed, a new deal is closed, a new license is acquired everyday. This is the reason why is it so important to know the legal terms in order to avoid costly liabilities that can impact the business negatively.  However, any company has a risk to be involved in legal controversies, despite of the experience in the market. The following are some controversies in the film industry.

To entertain the audience with a movie is the principal goal of a film production. The distribution company has the responsibility to develop the marketing campaign for the movie and to find the best screens to capture the target market. But, what happens when the message sent is not appropriate? This was the case of FilmDistrict, an independent movie distributor. In 2011, Sarah Deming, a woman from Michigan, filled a lawsuit against the company for wrong promotion of the movie Driver. After watching the trailer she was expecting a movie similar to ‘Fast and the Furious’, with a lot of racing scenes, but the story was completely different. It was more a drama thriller, so she claimed for a refund of the movie ticket. For many people this lawsuit can be absurd, but I think Sarah is right. In this case, the trailer sells an action movie, when actually it is slow, mystery and focuses on the hard relationship between the driver and his neighbor.  The trailer is the most important advertisement tool to show the public what they should expect from a film, that is why the marketing team has to be very careful with all the elements of it, including the scenes and the music. The trailer has to match the movie content so the public will receive what they are expecting.

The second case is a lawsuit from Peter Jackson to New Line Cinema, the distribution company of the ‘The Lord of the Rings’ movies. The famous director claimed that New Cinema committed fraud in handing revenues of licensing and merchandising for the trilogy. According to The New York Times, Jackson was underpaid by more than $100 million. This is not the only case reported about problems between the distributor and the director of a movie, so it is a reflection of how important is to clearly write all the rights of the parties in the contract and establish the amount limits for different sources of incomes.  The contract must be specific in terms of box office revenues and profits for books, DVDs, merchandising and the responsible for them.

The last case is related to the movie exhibition side of the industry. It is a lawsuit from a local movie theater chain in Georgia, Cobb Theaters, claiming that the big chain AMC Entertainment uses its market power to deprive other competitors to access to films from the most important film distributors. This is not fair for a competitive market and the company is creating a monopoly when they ask for exclusivity for some movies releases. AMC did not talk about the situation. Maybe it is not a case of monopoly, it would be related to the number of screens the company has that allows them to have more movies showing. The important thing is that the market establishes competition rules so all the companies have the same opportunities.  It is clear that the big organizations have more opportunities to capture more audience due to their size and budget, but they have to play fair and do not try to use dirty tricks to affect the normal behavior of the market.

All these cases show the importance of calculate the risks of any project and always have the rights and obligations clear to not be involved in situations that impact the reputation and implicate unnecessary costs.