Accounting

In celebration of Tax Day today, we here at Law Law Land offer tribute to our favorite celebrity/IRS run-ins.  Now, lest you think this is just another list airing dirty celebrity tax laundry, think again.  This is a classy publication, as you well know, so if you’re looking for dirt on which celebrities owe what, look elsewhere. . . like 


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Q: Hello, I just read the article on what “defined net profits” is/means.  I’ve just signed a deal memo and am concerned with the wording…actual proceeds, no mention of gross or net (which may be a good thing).  Please let me know what might be next steps…

A: The basic difference between gross and net is the off the top deduction of expenses and fees in calculating net.  Speaking of off the tops, I just came from a bris.  It was a particularly good one.  Have you ever been?  If not, find one on Facebook or Craigslist, grab a few friends, and attend.  You’ll enjoy it.  Mohels tend to have a great sense of humor.

Anyway, your deal is probably with a production company that will not distribute the film itself.  And the term “actual proceeds” probably refers to the revenues received by the production company.  The blog about “defined net proceeds” focused on a distributor or studio definition of back-end, which is basically distribution revenues less distribution costs.  In your case, if in fact your deal is with a production company that will not distribute the film itself, you will be participating in the production company’s revenues.

 
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Q: I am about to sign an option agreement with some of Hollywood’s best independent producers. I wrote the screenplay with a WGA writer. I own the source material. The screenplay is based on my life story. I think I should be entitled to backend profits. The producers keep the international distribution rights and sell off the domestic. I don’t think I have a chance of the domestic profits but it is the international profits that this question is addressing.

A: The good news is you should be able to get some backend. The bad news is the backend you’ll be able to get will most likely amount to bupkis. But bupkis is still better than completely nothing.
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Q: Assuming a producer, verbally only, at the time of the shoot, promised a co-producer a percentage of the film’s profits, does the co-producer have any legal rights to demand anything, since there is nothing in writing to prove it?

A: “An oral contract isn’t worth the paper it’s written on.” Goldwyn was absolutely right but also very wrong. There are few contracts that must be in writing to be enforceable. We have a beautiful blog on this, but there’s always more to say. So let’s say more.
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[Ed. Note: Today’s post opens up our week of Oscar coverage. On a Friday. Who are you to judge our calendar-related choices? Drop by next week for more posts addressing all the burning, tangentially Oscar-related questions you probably never thought to ask!]

At 14 years of age, Hailee Steinfeld is this year’s youngest Oscar nominee, receiving the nod for Best Supporting Actress for her role asMattie Ross in the Coen Brothers’ adaptation of True Grit. With her huge role and Oscar recognition, it appears as if young Hailee owns Hollywood at the moment. But who owns Hailee?

Child celebrities have long taken the world by storm, and while their personalities (and, sometimes, their egos) can seem larger than life, we often forget that they are still just children. As such, they are not masters of their own domain. Justin Bieber may be able to make young girls the world over cry on command, but just like every other child in America, the Biebster needed his mom’s permission before cutting off his iconic mop.

The age of majority in most U.S. states is 18. Until then, kiddies, mommy and daddy functionally own you. They control where you live, where you go to school, who you can hang out with and pretty much every other aspect of your life. On rare occasions, children become “emancipated minors,” meaning they break hold from parental bondage, usually by getting married, joining the armed forces, or going to court to ask for their freedom. Until you turn 18 or emancipate yourself, however, your parents control whether or not you can work, including acting and singing. And that has significant implications for child stars like Hailee Steinfeld.
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Q: So I wrote a pilot with a colleague of mine and we agreed that I would retain copyright, and therefore control of the script, and he would be a 50% profit participant on the sale of the pilot. We also designated the script credits as “Written By” me alone, and “Created By” both of us. Now I’m putting together a production company and I’m going to shoot the project. If/when it comes time to sell the show, how does that affect the deal between my co-creator and myself? How does the studio’s purchase reflect my participation as a production company? I want to keep this as simple as possible… Help.

A: When time comes to sell your show, it’s important that your agreement with your colleague (let’s call him “Jimmy” for the ease of reference) is in writing and signed. If it’s not, the buyer will insist that Jimmy also sign the agreement with the buyer — not just you, and that could lead to all kinds of “misunderstandings” and “differing recollections” about your agreement with Jimmy.
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On November 3, burdened by approximately $5 billion of debt owed to a group of lenders with interests in its most meaningful asset, its massive library of films, Metro-Goldwyn-Mayer — the venerable studio that brought you such classics as The Wizard of OzBen Hur, andSinging in the Rain — filed for bankruptcy.

For most people who weren’t interested enough to read past the headline — or who were scared away by the ceaseless puns about “the lion in winter” (appropriately, an MGM film) and “the lion’s roar” — the images that may have come to mind probably involved forcible removal of office furnishings and the iconic MGM Tower looking like a giant, glass-and-steel, boarded-up Blockbuster Video (a banner swaying in the L.A. breeze declaring “Every Unreleased Picture Must Go!”). The reality, of course, is completely different and far more mundane. [Ed. Note: Except, perhaps for one thing: this morning’s Hollywood Reporter reports that MGM is paying a “one-time fee” to break its lease and vacate the MGM Tower after all. The studio is moving to a fancy new building in Beverly Hills, which is itself currently the subject of a dispute between the landlord and William Morris Endeavor, which was to move into the building prior to the WMA/Endeavor merger.]

MGM didn’t close its doors on November 3. And no, you cannot acquire worldwide distribution rights to The Return of the Pink Panther at yard sale prices. Instead, after months of protracted negotiations, MGM filed a so-called “pre-packaged bankruptcy,” promising to be up and running within a month. And, lo and behold, on December 2, a Manhattan bankruptcy court approved MGM’s Plan of Reorganization, effectively re-releasing the lion into the wild (I made fun of puns in headlines; I made no promises about body text).

Of course, unless you’re a film-loving bankruptcy lawyer, you are probably left scratching your head about the events of the last month and a half. Luckily, you have me — a film-loving bankruptcy lawyer — to help sort this all out. In three easy questions:
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Q: My writing partner and I sold a script to a studio. We’ll share 5% of the “defined net proceeds.” Our manager says this means we’ll get a shot at making money if the movie is a big success, but he couldn’t explain the details. The contract goes on for twenty pages about it, and we understand none of it. What is “defined net proceeds?”

A: “Defined net proceeds,” for your purposes, means one thing — $0. It’s possible your movie does very well at the box office and makes a lot of money worldwide, but it’s highly unlikely you’ll ever see any “defined net proceeds.” It’s probably more likely that your movie will win the Best Picture Oscar — after all, every year one picture is guaranteed to win it; but there easily could be a year or a couple of years in which no studio picture generates “defined net proceeds.”
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The entertainment industry can be a legal minefield. And while the legal issues that face documentary filmmakers may not be unique, documentarians — who typically work on shoestring budgets, rely heavily on preexisting copyrighted materials, and often say things that moneyed and powerful interests don’t want to hear — are uniquely vulnerable. With that in mind, here’s a “top 5” list of legal issues that you, our favorite documentary filmmaker (yes, you, silly), should know about when planning, making, and selling your film.
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Somewhere in Sun Valley earlier this month (where the nation’s media moguls met to celebrate yet another corporate boondoggle), someone must be paraphrasing FDR: “July 7, 2010, a date which will live in infamy.” For that day saw two multi-million dollar jury verdicts against media companies in favor of profit participants. In the first (and biggest), Celador Productions, the creators
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