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Time Warner continues its old ways

Posted By Barry Ritholtz On June 28, 2005 @ 5:00 pm In Film,Finance | Comments Disabled

As long as today is beat up on the content industry day, let’s not forget the film studios:  Can anyone be surprised that Time Warner is accused of playing  games with the Director of the enormously successful LotR trilogy?

Peter Jackson, one of the film industry’s most powerful and popular directors, is suing New Line Cinema, the subsidiary of Time Warner that financed and distributed his Oscar-winning "Lord of the Rings" film trilogy.

In his lawsuit, Mr. Jackson claimed that New Line committed fraud in its handling of the revenues generated by 2001′s "The Fellowship of the Ring," and as a result, he was underpaid by millions.

The suit does not specify a damage award. But in an interview last week, his lawyers said that, after New Line applied its contract interpretation from "Fellowship" to the other two movies, Mr. Jackson was underpaid by as much as $100 million for the trilogy.

Lawsuits in Hollywood are as common as hobbits in Middle Earth. What makes Mr. Jackson’s suit draw such widespread interest here, other than his clout in the industry and the amount at stake, is one specific allegation about New Line’s behavior. The suit charges that the company used pre-emptive bidding (meaning a process closed to external parties) rather than open bidding for subsidiary rights to such things as "Lord of the Rings" books, DVD’s and merchandise. Therefore, New Line received far less than market value for these rights, the suit says.

Lotr_nyt_moviechart [1]

Graphic courtesy NYT [2]

The "Rings" trilogy cost $281 million to make. Worldwide, it has grossed over $4 billion: exhibition, home video, soundtracks, merchandise and television. TWX’ New Line netted more than $1 billion.

According to the NYT, escalators in Mr. Jackson’s contract  (he was director, co-writer and co-producer of the trilogy) gave him about 20 percent of the gross after tax revenue realized by New Line.

The Lawsuit of the Rings [3]
Published: June 27, 2005

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URL to article: http://www.ritholtz.com/blog/2005/06/time-warner-continues-its-old-ways/

URLs in this post:

[1] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/lotr_nyt_moviechart.jpg

[2] NYT: http://www.nytimes.com/imagepages/2005/06/27/business/27movie.chart.html

[3] The Lawsuit of the Rings: http://www.nytimes.com/2005/06/27/business/media/27movie.html?ei=5090&en=c2478a16f91a8555&ex=1277524800&adxnnl=1&partner=rssuserland&emc=rss&adxnnlx=1119870134-p74cVu3XB/oYaJXsfWPpgQ

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