Shown in 8-minute segments, “I Promise” documents the first year of the I Promise School that LeBron James opened in his hometown of Akron, Ohio in an effort to close the achievement gap by creating a new model of urban public education. Executive produced by James and CDAS client Marc Levin, among others, “I Promise” will serve as the public launch of the Quibi platform when it goes live in April. Watch the trailer.
Briana Hill, Co-Head of the Beverly Hills office of Cowan DeBaets Abrahams & Sheppard LLP, joins Fred Bimbler and Simon Pulman in leading the firm’s Entertainment group, which includes televison (traditional to broadband), streaming, film, new media, talent, theatre and podcasting. The group assists clients with their entertainment projects through early development, the solicitation of investment, production and ultimate distribution, securing all necessary rights and negotiating agreements with top-tier talent.
Ben Jaffe joins Joshua Sessler in leading the Digital Media & Technology group that represents top digital talent, including game developers and distributors, digital agencies, production houses, broadband video networks, mobile app developers, podcasters and social media ventures. The group provides counsel to a wide range of social media, transmedia and mobile plays that are using emerging software and hardware technologies to create, develop and distribute content in new ways.
One thing is clear from Sundance 2020: the current market for documentary and quality unscripted projects is extremely strong. Among several eye-catching deals, the $10m paid by Apple to acquire the documentary “Boys State” matched the sum paid by Netflix to acquire “Knock Down the House” in 2019. Concurrently, premium cable outlets and SVOD platforms ranging from HBO, Netflix, Amazon and Hulu to new players HBO Max (scheduled to launch in May 2020), Peacock (July) and Quibi (April) are commissioning a diverse range of quality documentaries, either as one-off pictures or episodic documentary series such as “Cheer,” “McMillions,” “All or Nothing” and “Making a Murderer.”
In the context of this new exciting marketplace, some of the traditional rules have changed. What do producers need to know?
- Contemplate Flexible Formats: Given the rise of episodic content, and taking into consideration the massive amount of footage that documentary filmmakers often create, it is no surprise that there have been several examples of projects that were originally planned as one-off documentary films being reformatted into two-part documentaries or even multi-episode series. Moreover, several projects that were planned as feature documentaries have been reformatted into multiple episodes of ten minutes in order to premiere on Quibi, while other documentary projects have been developed in tandem with a tie-in series of podcasts (for instance, the “McMillions” podcast promises to allow listeners to ‘go deeper inside the story’).
Accordingly, filmmakers should try to structure their deals and negotiate their paperwork in a manner that permits some flexibility with respect to the final form of the project. It is best not to be put in the position of having to determine whether a release that was signed with respect to a “documentary motion picture” would apply to an entire episodic series, especially if the subject at hand is very high level or somewhat tricky (such a subject who withdraws cooperation with the film during the course of production).
- Make Room for Buyers: Traditionally, documentary filmmakers have often adhered to the mantra that “credits are free” when according individual credits and company credits to financiers and collaborators (meaning, that filmmakers will often offer an enhanced credit in lieu of a financial entitlement). However, the new group of premium buyers strongly disfavor logos and company credits, in part because their business is predicated on keeping viewers engaged, and they don’t want people to be discouraged by long opening credits. Accordingly, it is not uncommon to see only one company logo at the top of the production – that of the platform. Filmmakers should bear this in mind, and may want to build in contractual language stipulating that all credits are “subject to network, distributor or other licensee approval” (which has been commonplace in television for some time). Likewise, most of the newer platforms do not approve of according any kind of paid advertising credit to third parties (unless it’s a very high level celebrity-like figure), so filmmakers need to be cautious when agreeing to any such obligations.
- Where’s My Backend?: Most documentary filmmakers (and many documentary financiers) would agree that nobody is in docs for the money. With that said, there have been multiple examples of extremely successful documentaries over the past twenty years that have generated profits for filmmakers and financiers. Under the new structure, whereby the conglomerates that own most of the platforms and outlets are seeking to acquire all rights and build their IP libraries, there is usually one “buyout” payment and no backend profit participation, while other forms of “upside” such as box office bonuses are also effectively rendered moot. Filmmakers need to bear this in mind, and may need to revise their financial structures to account for this (in consultation with experienced counsel, of course).
- Remakes, Remakes, Remakes: The dirty secret of documentary acquisitions is that, at least some of the time, buyers are acquiring the documentaries in order to secure the remake and other derivative rights. The right unscripted material can be fodder for a highly successful scripted series or series of scripted motion pictures – or can be used as the basis for an unscripted series spinoff format. Indeed, circumstances have sometimes arisen where potential buyers have withdrawn their interest in a documentary when it became apparent that remake rights were not available.
Accordingly, filmmakers should pay attention to remake and derivative rights when putting together their projects. They may wish to seek to acquire life rights – or an option to acquire life rights – from subjects, although this is not always possible. They may want to consider how their collaborators and financiers participate in derivatives, if at all. And when it comes time to sell the project, filmmakers should be cognizant of the potential value of derivative rights to certain types of projects. Ultimately, for documentary filmmakers the documentary should come first – but selling remake rights can be a good way to help finance the next doc!
Amid concerns over a weak market and the impact of streamers on the independent film industry, the 2020 Sundance Film Festival closed with the exhibition of several highly anticipated films, some record-breaking sales and the upsurge of important new deal makers. See below for some key trends that emerged from this year’s festival.
Slower Initial Sales
As new buyers continue to flood the Sundance Film Festival each year, including big budget-backed streamers such as Disney Plus and Amazon Studios (which purchased the 2019 Sundance hit comedy “Late Night” starring Mindy Kaling and Emma Thompson for $13 million, to little box office success), the festival has witnessed an overall resurgence of record-setting sales. Nevertheless, opening weekend sales were largely sluggish. Unlike previous years, where multiple sales might be completed during opening weekend, the first sale this year took place four days into the festival and current sales can often take days or even weeks to resolve. Perhaps due to the lackluster commercial performance of films like “Late Night,” distributors are choosing to be more selective and are waiting to view a wider variety of projects before undertaking an expensive acquisition. Slower initial sales could also be attributed to the fact that more films are entering the festival with distributors already attached, like the documentary “Mucho Mucho Amor,” which was acquired by Netflix before the festival opened, or the popular entry “Promising Young Woman” (starring Carey Mulligan and produced by Margot Robbie), which was set up at Focus Features; consequently there are fewer projects in contention.
Genre-Based Films and Documentaries Still a Hit
Initial sales notwithstanding, this year was a big hit for documentaries. Beginning with Netflix’s pre-festival purchase of “Mucho Mucho Amor,” documentaries continued to drive sales at Sundance, perhaps even more so than in previous years. Some of the most buzzed-about films included the star-studded Taylor Swift and Hillary Clinton biopics. Most notably, Apple and A24 teamed up to acquire the Concordia Studio-produced “Boys State” for a staggering $12 million, a new sales record for documentaries at Sundance.
Another standout success was the Andy Samberg-led romantic comedy “Palm Springs,” which set a new festival sales record thanks to a $22 million deal with Neon and Hulu, dethroning the record previously held by “Birth of a Nation” by a substantial amount. The deal reportedly includes an acquisition fee of approximately $17.5 million along with a guaranteed bonus compensation, the details of which have not yet been disclosed.
There are a few possible explanations as to why these record-breaking sales were feasible in the current risk-averse climate:
- First and foremost, it’s worth noting that each of “Boys State” and “Palm Springs” was jointly purchased by a traditional distributor and an OTT streaming service (with exclusive streaming rights) – a split that reduces individual financial exposure and aligns with the existing assets of each buyer. This dual arrangement presents a fruitful venture for both theatrical distributors and streamers that could in fact establish a new business model for future sales, as discussed below.
- In an era of divisive discourse where Sundance submissions have increasingly veered into controversial topics, many of the best-selling films presented a hopeful or positive message. The non-partisan political coming-of-age story “Boys State” depicts the dramatic plot twists of contemporary politics and the importance of civic engagement. “Palm Springs” is a romantic comedy that has been widely compared to the cult classic “Groundhog Day,” a feel-good movie with wide-ranging appeal. Thus, the films offer content that is inherently less risky (indeed, some of the biggest and most successful sales in past years at Sundance were similarly genre-based, such as “The Big Sick”).
Where Does Sundance Go From Here?
What does all this mean for the future of Sundance? On the one hand, the festival’s trajectory seems somewhat uncertain. Unlike Cannes or the Toronto International Film Festival, which benefit from a larger international market, Sundance focuses primarily on small-budget independent films and documentaries, which historically have not performed well at the domestic box office. Moreover, as streamers such as Netflix continue to develop and produce original content, there is less demand for third-party content. In that respect, Sundance may begin to look more like a showcase of distribution-ready films rather than a traditional marketplace.
However, there could be a few potential developments that offer reason to be optimistic about the future of festival sales:
- Streamers Dominate the Market: Digital streaming studios continue to aggressively search for binge-worthy content that will satisfy their numerous subscribers and hopefully attract new ones. As more buyers enter the independent film market every year (with Disney Plus and HBO Max considered major new players), the appetite for content could result in heightened competition in a market that is increasingly dominated by streamers. In turn, this influx could also spur more hybrid deals between streamers and traditional distributors.
- More Hybrid Theater-to-Streaming Distribution: The rise of digital streamers may encourage a symbiotic theater-to-streaming sales model similar to that between Neon and Hulu or A24 and Apple, where traditional distributors control theatrical rights and streaming services piggyback with subsequent streaming rights. Netflix and Amazon seem inclined to focus on delivering hits quickly to their subscribers, rather than in engaging in lengthy and likely non-lucrative theater releases. For instance, Netflix’s “The Irishman” and Amazon’s “The Aeronauts,” two of the respective studios’ biggest recent releases, both had fairly limited theatrical runs prior to streaming. Since streaming services don’t necessarily measure success according to box office performance or other traditional metrics, they are less likely to be willing to invest in expensive theatrical runs and are instead focused on collecting a slate that will boost their subscriber numbers. In fact, according to Jennifer Salke and Matt Newman, heads at Amazon Studios, “Late Night” is one of the top five best performing films on Prime Video and is therefore viewed as a commercial success by the company, despite its box office revenues. Distributors that are exclusively theatrical, on the other hand, would benefit from a streamlined process where streaming rights are simultaneously negotiated and the financial risk is accordingly re-distributed, with streamers fronting a majority of the acquisition cost. (As more details of this year’s biggest sales emerge, it will be interesting to see how distributors who have teamed up share profits, if any). As a result, the bifurcated sale of theater and streaming rights seems like a commercially viable approach for current buyers. Moreover, reduced costs could allow for distributors to partake in multiple sales or even larger individual sales. For all these reasons, the joint theater/streaming sales model may become a key source of growth in festival sales.
- Potential Rise of Episodic Content: Sundance has remained a festival mainly for feature length content and has resisted embracing episodic programming compared to other markets. Nevertheless, with the continued popularity of episodic content and the potential growth of short-form content, this could rapidly change. Quibi, the short-form content mobile streaming platform, made a high-profile appearance at Sundance this year and may become yet another market disrupter following its launch in April.
Regardless of sales, Sundance continues to attract droves of industry veterans and movie enthusiasts alike. Furthermore, the festival’s reputation as a prestigious launching point for rising talent supports its ongoing relevance in the contemporary market. Nonetheless, given the unpredictable trends of the past few years and the ever-evolving digital media landscape, it will be worth keeping an eye on the direction of future Sundance sales, perhaps as an indicator of larger trends in the industry.
CDAS achieved a Tier 1 ranking nationally for Entertainment Law – Motion Pictures & Television as well as Trademark Law. The firm was also ranked nationally in Tier 2 for Copyright Law. Within New York City, CDAS was ranked in Tier 1 for Entertainment Law – Motion Pictures & Television, Copyright Law and Trademark Law, and in Tier 3 for Media Law.
These competitive rankings are based on extensive client and peer review, focused on practice group expertise, responsiveness, understanding of business needs, cost-effectiveness, and other important parameters. Inclusion in “Best Law Firms” is considered a significant achievement.
1. AB5 Brings Uncertainty: The new California Assembly Bill 5 (AB5) became effective on January 1, 2020. Originally created to codify the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903 (Dynamex), and to address the increase of misclassification of workers as independent contractors, the drafting of AB5 is so broad that it greatly expands the definition of “employee” in a way that potentially reclassifies most independent contractors as employees. This has huge potential repercussions for many companies doing business in California, including those in the entertainment industry (which has traditionally been extremely reliant on independent contractors), as companies may now need to provide full employment benefits to individuals previously characterized as independent contractors.
While there are certain statutory exemptions, the exemptions do not cover traditional entertainment job categories. There is currently very little guidance as to how the law will be interpreted and enforced, and how it will interact with guild rules. It is incumbent on all studios, producers, networks, and other entertainment companies to watch developments closely, and to consult with knowledgeable counsel when in doubt.
2. Continued Evolution in Streaming: The rise of streaming platforms has dominated the film and episodic programming business over the past few years. 2020 is poised to bring the most significant year of change yet, as new platforms such as HBO Max, Quibi and Peacock will join the recently launched Apple TV+ and Disney+, and incumbents such as Netflix, Hulu, and Amazon. Each of these platforms is targeting a slightly different position in the marketplace, and the economics for content producers vary on a platform-by-platform basis based on the rights and territories that each discrete platform is presently seeking to acquire.
From a deal-making perspective, it is possible that the increased competition will put pressure on platforms to offer greater transparency into the performance of their content and potentially more meaningful participation for creators in the upside of successful series and movies. Additionally, it will be interesting to see if Netflix blinks with respect to its (to date) steadfast insistence on dropping all series on an all-at-once “binge” model, given the plaudits and positive buzz that Disney+ has received for releasing episodes of The Mandolorian on a weekly basis. Finally, Quibi is a truly interesting new entrant that is planning some fascinating creative experiments with short form and interactive content, in addition to providing producers with a business model that is arguably more favorable than some of its competitors.
3. Exclusivity Reigns in Podcasting: 2019 was a year of huge growth and continued maturation for the podcast industry. Mainstream coverage of the industry expanded significantly, many major celebrity names launched podcasts for the first time, and a number of big media conglomerates entered the space or materially increased investments in their podcast divisions. The maturing of the podcast industry has had notable effects on the business side of this burgeoning medium. Participants at all levels in the value chain have started to stake a claim to ownership of, or participation in, podcast rights and revenues. Moreover, the deal-making has become much more sophisticated. Prior to 2019, the dominant podcast distribution model was very simple – make your podcast available on as many ad-supported platforms as possible, and split revenues between stakeholders (usually the creator and the production company or network) (often in a straight 50/50 configuration). This began to change during 2019 as certain companies grew and engaged more experienced representation, and entrants such as Spotify and Luminary started to lock down exclusive rights to content.
Expect the podcast content arms race to heat up in 2020, as high-profile shows and creators commit exclusively to platforms in exchange for sizeable minimum guarantees. However, platforms that offer podcasts in combination with music (such as Spotify, Apple, iHeart, and Pandora) would appear to be best positioned in the market versus pureplay podcast subscription outlets because of their existing subscriber bases and the value proposition of bundling music with podcast (and, indeed, expect 2020 to be the year of the “music podcast”).
4. Gaming Grows: As Netflix Chairman and CEO Reed Hastings famously opined, Netflix is primarily competing with Fortnite rather than with other SVOD platforms. Expect 2020 to be a huge year for gaming, with the release of several big titles (such as Cyberpunk 2077 and The Last of Us 2) being followed by the impending launch of much-anticipated new consoles Playstation 5 and Xbox Series X in the fall.
The continued growth of gaming will fuel a corresponding growth in esports and “game-adjacent content culture” – the creation, consumption and interactive fan participation in content around the culture of videogames, via platforms such as Twitch, Mixer, YouTube and Instagram. All of the next-generation gaming platforms will include built in recording and streaming capabilities allowing gamers to easily create media and engage with other users. While this arguably implicates copyright issues for rightsholders, many of the game companies have taken a permissive stance regarding streaming (and other activities, such as creating derivative works), believing it to be helpful to their business – although distributors must also be cognizant of other issues such as right of publicity.
Additionally, as discussed in a previous blog, expect a flurry of announcements during 2020 and beyond with respect to entertainment extensions of videogame properties – most notably film and TV adaptations, but also podcasts and graphic novels. A significant portion of these will probably involve the original game developers and/or publishers in a meaningful way, as rightsholders understand the importance of maintaining a strong and consistent brand across platforms.
Other sectors of the entertainment business should ignore gaming at their peril. For more, we recommend reading “7 Reasons Why Video Gaming Will Take Over” by Matthew Ball.
The videogame industry is now the most profitable individual sector of entertainment, having experienced exponential growth over the past forty years. Great games can quickly generate a large and unusually engaged fanbase, and as a result it could be argued that games will be the single biggest source of major entertainment brands for the foreseeable future. A cursory glance at Twitch reveals tens or hundreds of thousands of viewers concurrently watching streamers playing games like Fortnite, The Witcher, Sekiro, Overwatch and Grand Theft Auto. Even indie titles like Hollow Knight, Stardew Valley and Untitled Goose Game can attract thousands of attentive viewers. The potential to grow videogame properties into multi-platform entertainment franchises is greater than ever.
Historically, television and film adaptations of videogames have been critical and commercial misfires. However, the general growth of gaming, the increased sophistication of storytelling in videogames, and the general demand for IP-based content (driven in part by the emergence of multiple new streaming platforms) has created a perfect storm. Accordingly, we are currently seeing more videogame adaptation deals than ever before, some of which are very complicated and extremely high level.
While the fundamental structure of acquisition or licensing deals for videogame properties is similar to that used when acquiring older forms of media such as books and articles, there are some specific considerations when dealing with videogame properties, some of which are listed below. It is strongly recommended that parties on both sides of the negotiation engage an attorney and/or agent who is familiar with both the film or TV (as applicable) and videogame businesses to negotiate the deal. It will be very difficult to close a deal without an understanding of the gaming world and what motivates its rightsholders.
- What is the “Property”? : Up until recently, it was relatively easy to define what a “game” was. Games came on disc, cassette, cartridge or CD sold as physical products through brick and mortar retailers for a one-time payment. Successful games yielded sequels and spinoffs (and sometimes “add ons”), but games were generally released in a fixed form. With the emergence of digital distribution and the concept of “games as a service,” that has gone out of the window. Games are now routinely and regularly patched, updated, supplemented and expanded via a combination of free and paid downloadable content (or “DLC”). For example, the game No Man’s Sky has been updated and expanded so comprehensively since its launch in 2016 that it is almost unrecognizable as an experience from the version released at launch. As a result, it is imperative that buyers understand what they are acquiring – and unless negotiated otherwise for a very specific reason, the “Property” that is granted to the buyer should include all elements, versions, expansions and content relating to a title, for as long as such title is supported. Ideally, all sequels and spinoff games would be included in the rights grant as well (but that is a more nuanced subject that may require some discussion).
- Investigate Third Party Interests: While other forms of properties (including novels and podcasts) can have complicated chain-of-title issues, videogames are particularly likely to have unforeseen ownership and/or approval issues complicating the acquisition process. Often the rights in the game may be owned and controlled by a publisher, but sometimes the actual creator or developer may have approval rights or other interests that need to be addressed. Things get even more complicated when dealing with Japanese properties, where there may be one or more intermediaries to deal with before one is able to negotiate directly with the rightsholder. It is important to ask the right questions at the very start of negotiations to be able to identify and address any specific issues.
- Discuss Controls and Approvals: While television and (particularly) film producers often view their medium as the pinnacle of artforms, it is important for producers to understand that – in many circumstances – a videogame publisher or developer does not need them. Many videogame rightsholders make millions or billions of dollars solely from videogame sales, which can then be supplemented through the sale of DLC and merchandise. Even independent developers may be able to make a good living through a combination of the right business model and smart engagement with their fanbase. As a result, rightsholders will often be extremely cautious about entering into any kind of arrangement that could tarnish or dilute their brands. No sophisticated rightsholder today would agree to the kind of agreement that yielded the likes of Super Mario Bros. (1993), Street Fighter (1994), BloodRayne (2006) or Tekken (2009), all of which were critically lambasted and bore little relation to their source material.
Indeed, many videogame rightsholders are unlikely to be prepared to enter into a traditional option purchase type arrangement where they are viewed as passive rightsholders without any kind of active involvement or approval. Producers therefore need to think carefully and walk a tightrope to ensure that they make the rightsholder feel invested and comfortable, without ceding control in a manner that could jeopardize their ability to set up and produce the project. Of course, if they can strike the right balance then the dividends – both creative and financial – could be spectacular.
Under the Writers Guild of America Theatrical and Television Basic Agreement (the “Basic Agreement”), credited writers for television motion pictures, including episodic programs, are entitled to receive compensation for the reuse of their work, also known as residuals. Television residuals were first negotiated by the Writers Guild of American (the “WGA”) in 1953, under the theory that a rerun of an existing program reduces employment for new products. Consequently, residuals are payable for the reuse of a writer’s material, as opposed to the original exhibition. Though initially limited to programs made-for-television and to five rerun payments, residuals expanded over the years not only to include home video, pay television, cable, new media, and others, but also to payments in perpetuity.
Whether or not a television writer is entitled to receive residuals is ultimately governed by the WGA’s credit determination. Per the Basic Agreement, if the guild accords a “Written by” credit to a writer, such individual is entitled to receive one hundred percent (100%) of available residuals, while a writer that is accorded a “Teleplay by” credit can claim seventy-five percent (75%) of available residuals; if the guild accords only a “Story by” credit to a writer, he or she is entitled to receive twenty-five percent (25%) of available residuals. Furthermore, for an episodic series, if a writer were entitled to Separation of Rights and “Created by” credit on the series, such writer would be entitled to a residual on the creator sequel payment minimum payable for each episode of the series produced beyond the pilot. Continue reading