An Interesting (and Largely Irrelevant) History of Filmmaking 4
The Business of Movie-Making 4
Movies & Big Business 5
Division of Labour 5
Movies and the Law 5
Creating the Product 6
The Producer’s “Movie Box” 7
The Guilds 10
Selling the Product 14
Distributors & Sales Agents 14
Role of the Distributor 15
The Distributors Agreement 15
Insuring the Product 19
Completion Guarantees 19
Completion Agreement 20
Errors and Omissions Insurance 21
Entertainment Asset Based Banking Transactions 22
Asset Based Banking Transaction Overview 22
The Bank’s Interests 23
The Inter-Party Agreement 24
Inter-Creditor Agreement 27
Laboratory Pledge-holder Agreement 27
Hypothec & Copyright Mortgage 28
Unsecured Creditors 28
Canadian Content and Culture Regulations 29
Culture and Trade Agreements 29
Free Trade Agreement 30
Domestic Legislation 30
Canadian Content Rules and Regulations 33
Canadian Television Fund 36
Quebec Content Rules and Credits 37
Ontario Content Rules and Credits 37
Treaty Co-Productions 37
Avoiding Litigation 39
Docudramas & Documentaries 39
The Claims 39
The Release 45
An Interesting (and Largely Irrelevant) History of Filmmaking
Thomas Edison invented the phonograph in the late eighteen hundreds. Edison thought it would be useful if there were “motion pictures” to watch while listening to the sounds from his invention. William Dickson, an Edison employee, created the “kinetograph”, a large, immobile camera that took motion pictures, but was otherwise useless. Europeans created the “cinematograph”, which was much smaller, portable and the added advantage of being able to project, or play back what it recorded. Great minds created great machines, but produced lousy films.
The first attempt to tell a story on film was “Voyage dans la Lune”, a thirteen minute short. From there, the Radio Corporation of America (RCA) led the way in turning radio recordings and transmissions into news and entertainment. RCA was called upon to develop content for film. The early nineteen-hundreds witnessed the emergence of the “Nickleodeon”, the small movie houses that showed the short films and new reels of the day. Opportunity was born and a needed a business machine to govern it.
Edison and his team of inventors formed The Motion Picture Patent Company (“MPPC”) to control the film industryin America. To display, distribute, produce or use movie-making equipment, a producer needed a license from the MPPC. The independent distributors competed with the MPPC using a multiple reel system instead of the single reel peddled by the MPPC to some success. In 1912, the American government intervened and broke up the MPPC under anti-combines legislation.
The real money in the film industry was in owning the movie theatres. Unfortunately, to run a successful theatre, one needed films to show in the theatres, and it was the distributors who held all the films. The theatres bought up the distributors to assure more product for their screens and eventually bought or formed their own production companies too. Paramount productions and distributions through other subsidiaries began with the “Famous Players” theatre company, but was broken up by the American government for breaches of anti-combines legislation. The Canadian subsidiary of Paramount Studios still owns Famous Players in Canada.
Music for the movies was played by a live orchestra in the movie theatre. This was expensive, however, so the inventors returned and developed the soundtrack. Two or three systems were developed, culminating in the ability to record sound on film. Whatever process was used, it was expensive, which attracted a need for complex financing arrangements.
Movies & Big Business
With sound and other factors escalating budgets, the studio system emerged, with actors, directors, writers and tradesmen all working under one roof in order to control cost and maximize production. Banks and other financiers demanded bettering financial controls and cost cutting measures before their money hit the table. The result was a system that produced feature films at a fantastic rate and an increasingly dissatisfied workforce.
Division of Labour
Actors were hired as contractors, but treated like employees. The studios received the benefit of control of each actor’s career without the burden of conforming to labour laws. This arrangement eventually dissatisfied many in the filmmaking community, resulting in the creation of labour associations like the Screen Actors Guild of America and United Artists, a production company run by artists (now owned by Metro Goldwyn Mayer (“MGM”). Today, actors have agents, production companies are small outfits specializing in niche markets and the lot of them come together in a complex knot of agreements that are the subject of this course.
Movies and the Law
Think of the movie industry in real-estate terms (and we will throughout this summary). In real estate, you have land, bricks and mortar and all the interests people have in those things. In movies, you have something else. “Intellectual property” isn’t quite broad enough, because some of it is tangible: film, sets, props, theatres and so on. On the other hand, there is the creativity and knowledge that is worth far more than the tangible things. For these, we protect them, describe them and tie them up in reams and reams of ink and paper. The entertainment industry, and movies in particular, are the vanguard of the knowledge economy.