A bill that passed California state senate committee could make criminals out of studio executives — which makes passage unlikely
By Alex Ben Block
HOLLYWOOD, CA (Hollywood Today) 4/10/08 – Democratic state Senator Sheila Kuehl “fair market value” bill backed by the Writers Guild and Teamsters has good intentions, and pokes into a touchy area that needs reform; but as written it is so vague that it might open up a Pandora’s box of conflicting claims; and as a result contracts could be rewritten that would make such a law backfire on the very groups that it is intended to help.
The “fair market value” bill is an attempt to force media conglomerates to offer profit participants in their TV shows and movies a guarantee that all licensing deals are made as if there were an open auction of the rights among all possible bidders. It is meant to answer concerns that these big companies sometimes license rights to divisions of their own company at lesser terms than might be available on an open market. It addresses concerns not only of individuals, but also the guilds whose contributions to health and welfare funds is based on the amount of revenue that comes in.
The WGA used some similar language in its recent contract with the AMPTP in terms of new media, but has been frustrated in attempts to insert similar language in contracts for TV shows and movies. This is an attempt to legislate what they have not been able to gain at the negotiating table.
“The bill would end the practice by some major studios of “underselling” television series or movies, “ according to the WGA, “thus shortchanging the talent community as well as production workers.”
Kuehl, who is about to be forced out by term limits, will forever be burned into memory as the pesky Zelda on the prehistoric TV series “Dobie Gillis.” She has been best known in the legislature for her initiatives on health care and gay rights, but she has also proven to be the water carrier for some entertainment industry causes. She already deserves credit for getting Senate Bill 1765 passed on a 3-1 vote by the State Senate Judiciary committee. The favorable vote came after testimony by Writers Guild West president Patric Verrone and attorney Larry Stein in favor of the bill. There was also testimony by Vans Stevenson of the Motion Picture Association of America, who opposed the legislation.
Stevenson put his finger on one of the alarming aspects of the proposed law. It would have criminal as well as civil penalties. So it would not only be a full employment law for lawyers, consultants and accountants, but would also threaten a movie or TV executive who was caught selling a show to another division within his own company for less than it might have bought at auction. However, even that is fuzzy.
It isn’t always easy to value entertainment product. This isn’t like real estate where they can do comparables that are meaningful. The price paid for a certain TV show or movie can be based on many variables from cast to genre to the drawing power of the outlet. Having consultants try to go back in time after litigation has wound through the courts for years and then compare one show to another, simply because they existed at the same time, or shared a genre, promises to be a legal nightmare.
It could also backfire. That is because the producers and networks and distributors will quickly rewrite their contracts to protect themselves against it. They will also cut out any slightly marginal profit participants such as second tier writers and actors to avoid opening themselves up to liability. Only the most powerful players will be able to cut deals meaningful under this law, and the truth is they already can and do and don’t need legislation.
Powerful actors, directors, even writers, already are able to put such “fair market value” clauses into their contracts, prohibiting self-dealing and under market sales.
There are also lots of laws already on the books to protect profit participants, who have often sued shows in the past such as “M.A.S.H.” where Twentieth Century Fox had to deal with a spate of lawsuits. Steven Bochco also sued Fox over the rerun revenues from “NYPD Blue,” which were sold to the cable outlet FX originally. Another case involved Disney, which was sued by producers of the long running show “Home Improvement.”
To date, all of the high-profile cases have been settled out of court, sometimes shortly before a trial was set to begin. This has had results. For instance, after the settlement “NYPD Blue” was no longer on FX, and soon showed up under new deals with cable networks TNT and Court TV.
In other words, that process works. Putting the rules into government cement can only complicate what should be a business relationship.
The California Chamber of Commerce was blunt in its call to quash the legislation: “The bill uses the legislative process to inappropriately attempt to rewrite an actual, recently-reached collective bargaining agreement. The bill dictates contract terms that were discussed and rejected in negotiations leading to the collective bargaining agreement that brought an end to the recent and highly publicized writer’s strike.’
The pro-business Chamber also complains the definition of “fair market value” is vaguely defined and “filled with ambiguous words and phrases, making its determination subjective and arbitrary.”
Under the proposed laws, “fair market value” is defined as “the most likely price that the assets being sold would bring in a competitive and open market under all conditions requisite to a fair sale; the buyer and seller acting prudently, knowledgably, and in their own best interest; and a reasonable time being allowed for exposure in the open market.”
This is an important subject. “Since the major media networks in the United States have come to own many cable channels, the practice of selling TV series or movies for less than the fair market value of the content has become more and more prevalent,” says the WGA in a press release. “In many cases, the product is sold or licensed from one entity to another entity within the same parent company. This creates a problem for actors, writers, and performers who
rely on the amount of a sale of material for their residuals – payments made to the creators or performers of a work for showings or screenings after an initial use.”
There are clearly abuses here, especially when conglomerates want to use shows to boost a new network or pump up an existing program service. However trying to legislate contract terms is only going to muddy these waters. And making criminals out of studio executives who are trying to get the best deal for their company is only going to clog the courts and could even add to the problem of prison overcrowding. There along with the muggers, murderers, drug dealers and thieves could be studio executives who sold an episode of a situation comedy to a cable network for less than they might have gotten elsewhere. That wouldn’t be justice. That would be insanity.
That is why it appears unlikely that even if this bill made it through the legislature, Republican Gov. Arnold Schwarzenegger would probably not sign it. Even if he did, it would likely face court challenges over the vagueness of the language and the absence of clear penalties.
The Writers Guild and Teamsters have identified a real problem but this bill is not the right solution. It will only enrich lawyers and consultants and lead studios to limit who shares in profits even more to avoid future suits. And in any case, its chances of ever becoming law remain dim.
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