Thursday, February 19, 2009

Sony Pictures wants talent on "net" deals; no more "gross" deals?

Sony Pictures chairman Michael Lynton said in a Bloomberg TV interview today that he wants to ensure that his "partners" (actors, directors, producers) "share in the risk". His context is that DVD sales are no longer growing robustly, and he wants talent to reduce their upfront fees, and instead have a bigger share of results after the studio "breaks even".

What he's suggesting here is a move away from "gross" deals (in which the talent gets a percentage of the gross, often from the first dollar collected) toward "net" deals (in which the talent receives nothing until a carefully defined "breakeven" is reached).

Of course, the reason for the prevalence of the gross deals among star talent today is that the history of Hollywood accounting meant that there never was a "net". A movie that took in half a billion dollars in theaters could still show a negative "net" after all fees, interest, and costs were deducted. Rather than continue to wrestle with the studios' definition of "net", powerful talent was able to demand a piece of the "gross".

Now the studios want the talent to become "partners" and "share the risk" and (obviously) trust that the accounting of "breakeven" will be fair and square.

This is also an issue for the movie unions. At present, their payments for "residual" use of movies (in theaters and DVDs) are based on revenues, not profits. If the studios were to push to change this, we could see some significant labor disruptions.

Perhaps coming soon to a blog near you: a primer on "gross" and "net" and "residuals".