An article appeared today in the Business News section of the New York Times detailing a lawsuit currently pending between Peter Jackson, director of the acclaimed Lord of the Rings trilogy, and the film's financier and distributor, New Line Cinema. Jackson claims that New Line, a subsidiary of the massive Time Warner conglomerate, essentially cheated him out of millions of dollars by selling nearly all the ancillary rights to the film to companies under the Time Warner umbrella. This practice, known as "self-dealing," allows the rights to be sold at far below market value without losing any of the bottom line income for Time Warner. As a result, Jackson, who is guaranteed a certain percentage of the gross (but not net,) income, lost out on millions of dollars in potential income.
In the article, one of New Line's lawyers calls Jackson's actions in this lawsuit a sign of "piggishness." Granted, the man has made more money than God with these films, but that doesn't mean that he shouldn't still receive the income he deserves. There is no reason to believe that the major studios wouldn't try to pull this same scam on a filmmaker with a substantially smaller income than Jackson's. This is just one of many clear dangers inherent in the consolidation of media that has been occurring with alarming frequency within the last decade. Despite this, however, I think it's a good thing that this has happened. Sure, it's a big legal mess and I don't think Jackson deserved to be cheated, but allow me a moment to explain…
By cheating someone with as much clout as Peter Jackson out of $100 million, New Line opened a giant can of worms. Had they cheated a smaller name director out of a smaller sum of money, this may have slipped by under the radar, as it most assuredly has in the past. Jackson, however, has enough power and prestige to warrant a front page story in the Business section of the Times. This issue of conglomeration is finally being brought to light in a very public fashion. Had New Line thought it best not to screw over one of their biggest money-makers, they may have continued to get away with this sort of shady accounting. Instead, this may open up further lines of litigation and public and corporate pressures to end this conglomeration. If enough attention is drawn to this issue, the markets may be forced to open up, effectively reducing the extent of the media monopolies and returning some fairness to the marketplace. More importantly, the artists doing the work that these major corporations are cashing in on will finally start to receive their fair share of the profits.
Article comments
1 - Tan The Man
Well, this might be the start of a further shift from the studio system. A la Lucas, Jackson might have enough money to finance his own films and just have the studios distribute them.
2 - Bryan McKay
Unless there is a drastic shift of public taste away from mainstream Hollywood entertainment, I'm afraid that the studio system might be a necessary evil. In order to continue producing the typical big-budget blockbuster entertainment that people have come to expect from modern American cinema, there needs to be some source of steady and reliable financing. Most filmmakers don't have the financial resources that Lucas and Jackson have access to, so if there were to be a shift away from the studio system, many talented people would be cut out of the process.
3 - theSliver
Most startup financing is no longer in the big studios and as always its the distributors that really matter. If you have a distribution deal you can kiss off the studios.
4 - Bryan McKay
I'd like to see some citations there, Sliver. I'd be willing to bet that you're wrong about that. The majority of major Hollywood pictures are still backed by studio financing.
5 - Stephen
If you recall, David Duchovny had a similar gripe against 20th Century Fox when they sold the exclusive rights to the X-Files syndication to the FX Network for far less than other stations were bidding.
6 - Bryan McKay
Yeah, that was probably another of the higher-profile instances, Stephen. You're absolutely right. There were a few other television-related incidents in recent memory as well, but they seem to be slipping away from me at this late hour...
Interesting to note, however, that Duchovny's case, like every other, was settled out of court. These deals go all the way to the higher-ups at the major conglomerates and they don't want to risk being exposed in court. If Jackson's legal team manages to drag these Time Warner assholes into a court over this, we may finally start to see some real change occur. Hopefully this won't just amount to wishful thinking on my part...
7 - Tan The Man
Long live X-Files!
8 - Victor Plenty
The tiny sums "stolen" from artists by file sharers on the Internet absolutely pale in comparison to how much the entertainment industry itself is eager to steal from the artists who provide its bread and butter.
Let's all hope Jackson cleans their clocks.
For great justice!
9 - El Bicho
Alan Alda also sued Fox over a smiliar situation.
10 - Nancy
What was the outcome?
11 - Bryan McKay
Nancy: Alda's case was settled outside of court, just like Duchovny's case against Fox. Which in turn, of course, ended just like the case brought by the creators of Will and Grace against NBC, and just like the case by Steven Bochco against Fox over NYPD Blue, and just like the case by the producers of Home Improvement against Disney...
There's an alarming trend here of out-of-court settlements which serve only to hide the issue from the public eye.
12 - Phillip Winn
The cool part is how the NY Times covered the story. By violating their own rules!
13 - Berlinoise
In Tony Curtis' memoirs there was a hint how the companies applied creative accounting so they would have to pay less residuals i.e. from net. Now here we have a method to be creative with the gross. Do they really need to do this or is this a power game and they enjoy raking in that bit of undeserved extra at someone's expense?
There is very little answer against dishonesty and scheming, but having a little from the net and a little from the gross might fight this profit shifting/snatching.
But only the big names, of course, have influence over their contracts.