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The Entertainment Industry — Points to Consider When Evaluating a Case

Expert Witness: Kathryn Arnold
Of the thousands of screenplays written every year, only 450 to 500 of these are "lucky" enough to be made into motion pictures. Of those produced, less than half are released in theatres and of those remaining, only a portion are released directly to DVD.

Those released directly to DVD and other media do not warrant the costs associated with a theatrical release and thus the producer/distributor mitigates the risk of negative cash flow. While major movie studios finance a number of these motion pictures, the range of stories they are interested in telling is limited, requiring producers to finance their movies outside the studio system and navigate the world of "independent film financing."

Whether a movie is produced by a major studio or independently, the expansion in world film revenues since 1970 has grown from $1.2 billion to over $15 billion annually.1
The MPAA further estimates that the entertainment industry generated $27.5 billion in California in 1996, compared with a U.S. Bureau of Economic Analysis estimate of $13.1 billion. The entertainment industry is big business. To put it in perspective, of the core industries that drive California’s economy by exporting goods outside the state, motion pictures are the tenth largest and the fourth most rapidly growing.2 It is a high-wage sector, with average salaries 70 percent higher than salaries in other businesses statewide. A similar study conducted by Monitor Company, found that the movie and television industries contributed over $16 billion to the State of California’s economy, directly employing 164,000 and indirectly employing another 184,000 people. This allure of riches entices many into the industry, but very few succeed.

Know Your Players
Other studies show that the number of people employed in the motion picture production in 0 to 480,000.3 There are a number of reasons for this astounding difference in numbers and the most important arise from differences of opinion about whom to count. The director, producer and leading actors are clearly counted as employed by the motion picture industry. These are referred to as "above-the-line" employees inside the industry. Much of the work of making a film, however, is done by "below- the-line" employees, such as people who build sets, design and make costumes, drive trucks and perform the legal work. Many of these people are subcontracted by various companies, making it difficult to ascertain if they are employed by a production, studio or other “entertainment” related company.

When proceeding on loss of wages claims, an attorney must realize the entertainment industry is nothing like the traditional job market. In traditional professions, the lawyer, banker, or accountant can expect their salary to constantly increase as they steadily progress up the ladder and gain vital experience and contacts. It’s a well known fact that a lawyer who makes $250,000 a year today is not going to work for $50,000 a year at her next job. This is not the case in the entertainment industry. Due to the volatile nature of the business, many outside factors affect your marketability and the fee one can charge. As a matter of fact, in some positions, particularly the producer, writer and director, there is no guarantee that you will ever get another job. The competition is stiff, buyer’s tastes shift on a dime and there are thousands of people ready to pounce on your position at a given moment. Even taking maternity leave can severely damage your worth in the marketplace.

In order to arrive at an accurate damage claim, attorneys must familiarize themselves with the inner workings of the entertainment industry and the roles that the various players undertake in getting a movie or television program made. It is a long journey from to screen and it is important to know the nuances of the industry to understand the factors that go into determining how much an individual is paid. Not everyone can command the type of money Steven Spielberg gets, or the money J.J. Abrams will be demanding for his future projects.

With that being said, one of the roles I am most often called on to define is the function of the film producer. Similar to a real estate developer, the producer is responsible for the project from A to Z. The producer finds the idea, story, script, writer, director, financing, distribution, and is also responsible for hiring the actors and the film crew. Since the producer secures the financing and distribution for the movie, he or she also works with the lawyers, bankers, advertising team, and studio heads. Unfortunately, over the years this role has seemingly been diminished by the multitude of credits that appear at the end of films that now takes two or three songs to complete.

Good producers must have the ability to think proactively, have organizational and communication skills, be aware of all variables, risks, and market conditions, and think practically, without destroying the artistic process of filmmaking. An innovative producer will be involved in all aspects of the filmmaking process, including selecting and working with the screenwriter, hiring the director, casting, editing and selecting the composer. During production, the producer is responsible for staying within the budget and spending the money, with the help of the line producer, (the "general contractor") in the best way possible to accommodate and serve the making of the picture.

The producer is an entrepreneur who recognizes how to spot a valuable product, how to put it together into a film and how to market it. Since they are in charge of putting the actors together, they must be able to find talent, and communicate the art and talent to the people involved in the financing, as well as the production. Further, a good producer is only as good as his or her network. For many reasons, it is necessary to maintain good relationships within the industry and an extensive Rolodex is an essential element in the repertoire of a successful producer.

While the producer takes a quite active role in the production of a film, an "Executive Producer" often takes a more passive one. In film, the executive producer is frequently the person who focuses primarily on the funding of the project, and is often times the person investing in the film or the person representing the financing entity. Typically an executive producer works with the producer on the business and legal issues. Rarely is the executive producer involved in any technical aspects of the filmmaking process, but is still a vital part of the overall production of the film.

Now, here is where it can get tricky. Some executive producers are very experienced "line producers" and have the clout and responsibility to take on the title of Executive Producer. So, let’s talk about this important role in the process. First, a little background on the term "line producer." A film budget is literally broken down into two sections ⎯ "Above the Line" and "Below the Line" with each section having it’s own subtotal within the budget. "Above-the-line" includes "talent-related" items such as the writer, producer, executive producer, director, and actors. "Below-the-line" comprises everything else not associated with talent, including the line producer, film crew, equipment, editing, music, film processing, and such. While the line producer may be below the line, it is safe to say the movie would not be made without them, and most times studios and financiers maintain the right to pick the line producer for the project. The line producer runs all the aspects of the day-to-day business of making the movie ⎯ hiring of the crew, ordering equipment, running the set … they are equivalent to the te development. The line producer is also charged with the heady task of making sure that the movie comes in on time and on budget. They are responsible for every penny spent on each "line item," and must report all costs, spending and overages to the producers and the financing entity.

In the television industry, things are reversed and the executive producer/show runner is responsible for delivering every element of the show, including the writing, talent and overall look, feel and production throughout the entire season. The executive producer is the final decision maker and they are often times the writer and director, as with J.J. Abrams who is the co-creator, writer, executive producer, and director of the Television series Lost. This highlights one of the major differences between the two industries — where film is a producer and director dominated business, television is a more writer/showrunner driven form of media.

ABOUT THE AUTHOR: Kathryn Arnold
Award Winning Film Producer and Executive with over 15 years professional experience, including Feature Film Production, International Sales, financing, and fund raising. One of the highlights of my life was directing the Documentary on the iconic band Earth, Wind & Fire. A perfect blend of history, soul and music.

Expert Witness/consultant for law firms with cases in the Entertainment Industry. Have worked on over a dozen cases involving "loss of wages"/"economic damages" claims ranging from $200,000 to $90 Million. My clients include Gibson, Dunn & Crutcher; Brandemeyer + Law; Morris Polich & Purdy, Procter McCarthy & Reagan, Hanger & Levine among others.

Copyright Kathryn Arnold

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.For specific technical or legal advice on the information provided and related topics, please contact the author.

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