Tolkein Family sues New Line over LOTR gross at DVinfo.net

Chris Hurd · February 11th, 2008, 09:08 PM

"The suit, filed Monday, claims New Line was required to pay 7.5 percent of gross receipts to Tolkien's estate and other plaintiffs, who contend they only received an upfront payment of $62,500 for the three movies before production began."

See http://news.yahoo.com/s/ap/20080211/...olkien_lawsuit

"The plaintiffs seek more than $150 million in compensatory damages, unspecified punitive damages and a court order giving the Tolkien estate the right to terminate any rights New Line may have to make films based on other works by the author, including "The Hobbit."

Such an order would scuttle plans by New Line to make a two-film prequel..."

Daniel Browning · February 11th, 2008, 09:59 PM

I wouldn't be surprised if the New Line sharks claim tremendous losses, even on six billion dollars, through Hollywood Accounting.

Mathieu Ghekiere · February 12th, 2008, 05:13 AM

After the debacle with Peter Jackson who was refused to look in the books of New Line Cinema, to see it they payed him the correct amount of gross profits, this is becoming a bit disconcerning... Something can't be right over there... or am I looking into it too much?

Tim Polster · February 12th, 2008, 08:22 AM

If this is true it is really sad.

It seems the larger the amount of money, the larger the potential for greed.

This trilogy created an obscene amount of revenue.

I hope they did the right thing and compensate the those who created it.

Bill Ravens · February 12th, 2008, 08:39 AM

This kind of behavior is rapidly becoming de riguer in the film industry.

Richard Alvarez · February 12th, 2008, 09:32 AM

For those of you who are unfamiliar with 'hollywood accounting'-
http://en.wikipedia.org/wiki/Hollywood_accounting
Gives a brief overview of how the books are juggled. For example, "Forrest Gump" showed no profit. Go figure.

For an in depth look at how fighting a hollywood studio looks, I highly reccomend "FATAL SUBTRACTION- How Hollywood Really Does Business" -The Inside Story of Buchwald V. Paramount. This will give you nightmares, but if you think there is even a REMOTE chance you might be dealing with a studio, it's imperitive you read it.

It also helps you understand WHY the Writers Guild went on strike, and how hard it is to get a solid accounting of income on anything.

Makes me glad I'm married to an IP Attorney.

Mathieu Ghekiere · February 12th, 2008, 11:44 AM

Quote:

Originally Posted by Richard Alvarez

For those of you who are unfamiliar with 'hollywood accounting'-
http://en.wikipedia.org/wiki/Hollywood_accounting
Gives a brief overview of how the books are juggled. For example, "Forrest Gump" showed no profit. Go figure.

For an in depth look at how fighting a hollywood studio looks, I highly reccomend "FATAL SUBTRACTION- How Hollywood Really Does Business" -The Inside Story of Buchwald V. Paramount. This will give you nightmares, but if you think there is even a REMOTE chance you might be dealing with a studio, it's imperitive you read it.

It also helps you understand WHY the Writers Guild went on strike, and how hard it is to get a solid accounting of income on anything.

Makes me glad I'm married to an IP Attorney.

Wow... read the wikipedia article... Maybe I'm going to look naive stating this, but I really was shocked by this... Claiming a movie that costed 35 million dollar, and earned 350 million dollar, that it was a loss? How do they even try to get away with it?
And if I read the article, most of the time they do...

Daniel Browning · February 12th, 2008, 11:52 AM

Quote:

Originally Posted by Mathieu Ghekiere

Maybe I'm going to look naive stating this, but I really was shocked

You're not alone. Many people get fooled into taking Monkey Points.

Richard Alvarez · February 12th, 2008, 12:06 PM

One of the reasons "Shakespeare in Love" was such a brilliant film, on so many levels, is that it took a real poke at the industry. There's a great moment when the money lender is talking to the theatre owner about how to make money, he says about paying the actors "We'll offer them a share of the profits!" to which the owner says "But there's never any profit... OH! I say, you might be on to something!"

Yeah, it's a real minefield negtiating any kind of payment.

Denis Danatzko · February 12th, 2008, 01:17 PM

I wonder what the AICPA has to say about H-wood's practices. I would think there are some clever attorneys and/or forensic accountants who could compare such bogus dealings to "accepted standards", "best practices", and GAAP. Then, perhaps, charges of fraud would result, which would make it a criminal offense and lend credence to the claims of those who were cheated out of what they were due.

Richard Alvarez · February 12th, 2008, 05:36 PM

Dennis,

From the Buchwald V Paramount case on Wikipedia -

"Hollywood accounting has long been derided as a cynical attempt by movie studios to cheat individual authors out of royalty payments. The accounting formulas used by the studios have allegedly been designed specifically to ensure that it is almost mathematically impossible for any movie to show a net profit. Specifically, the net profit formula in authors' contracts does not correspond to the net profit formula of generally accepted accounting principles that the movie studios use when creating their financial statements that are reported to the U.S. Securities and Exchange Commission and to the investing public. The "unconscionable" formula in the authors' contracts effectively double-counts many costs borne by the movie studio.

Some commentators have claimed this lawsuit was a watershed that would affect Hollywood's payments to anyone who enjoyed "profit participation", by forcing a change to the net profit formulas. However, another California Superior Court ruled in Batfilm Productions v. Warner Bros. in the case of the 1989 Batman movie that a similar formula was not unconscionable. To date, there has been no review of this type of claim by an appellate court, meaning that the superior courts cannot look to an appellate court's decision for guidance. The "watershed" role of this lawsuit has therefore not been demonstrated "

So - One court has ruled that a similar accounting formula was not unconscionable... as long as it's used for the writers/actors contracts. Thats why the clause you're looking for in your contract should read something like "Determined in the same manner as the producer's percentage" - Its an uphill battle, no doubt about it. If you're really curious as to how it is being fought - I really do reccomend the book "FATAL SUBTRACTION" (Remember, who went to jail In ENRON accounting?)

February 11th, 2008, 09:08 PM	#1
Chris Hurd Obstreperous Rex Join Date: Jan 2001 Location: San Marcos, TX Posts: 27,366 Images: 513	Tolkein Family sues New Line over LOTR gross "The suit, filed Monday, claims New Line was required to pay 7.5 percent of gross receipts to Tolkien's estate and other plaintiffs, who contend they only received an upfront payment of $62,500 for the three movies before production began." See http://news.yahoo.com/s/ap/20080211/...olkien_lawsuit "The plaintiffs seek more than $150 million in compensatory damages, unspecified punitive damages and a court order giving the Tolkien estate the right to terminate any rights New Line may have to make films based on other works by the author, including "The Hobbit." Such an order would scuttle plans by New Line to make a two-film prequel..." __________________ CH Search DV Info Net \| 20 years of DVi \| ...Tuesday is Soylent Green Day!

February 12th, 2008, 05:13 AM	#3
Mathieu Ghekiere Inner Circle Join Date: Jun 2004 Location: Belgium Posts: 2,195	After the debacle with Peter Jackson who was refused to look in the books of New Line Cinema, to see it they payed him the correct amount of gross profits, this is becoming a bit disconcerning... Something can't be right over there... or am I looking into it too much? __________________ http://productionsofthe3rdkind.com http://pr3k.com

February 12th, 2008, 01:17 PM	#10
Denis Danatzko Major Player Join Date: Mar 2006 Location: NYC Metro area Posts: 579	Scary indeed. I wonder what the AICPA has to say about H-wood's practices. I would think there are some clever attorneys and/or forensic accountants who could compare such bogus dealings to "accepted standards", "best practices", and GAAP. Then, perhaps, charges of fraud would result, which would make it a criminal offense and lend credence to the claims of those who were cheated out of what they were due. __________________ Denis ------------ Our actions are based on our own experience and knowledge. Thus, no one is ever totally right, nor totally wrong. We simply act from what we "know" to be true, based on that experience and knowledge. Beyond that, we pose questions to others.

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February 11th, 2008, 09:59 PM	#2
Daniel Browning Major Player Join Date: Jan 2007 Location: Portland, OR Posts: 949	I wouldn't be surprised if the New Line sharks claim tremendous losses, even on six billion dollars, through Hollywood Accounting.

February 12th, 2008, 08:22 AM	#4
Tim Polster Inner Circle Join Date: Dec 2004 Location: Arlington, TX Posts: 2,231	If this is true it is really sad. It seems the larger the amount of money, the larger the potential for greed. This trilogy created an obscene amount of revenue. I hope they did the right thing and compensate the those who created it.

February 12th, 2008, 08:39 AM	#5
Bill Ravens Join Date: Nov 2001 Location: santa fe, nm Posts: 3,264 Images: 10	This kind of behavior is rapidly becoming de riguer in the film industry.

February 12th, 2008, 09:32 AM	#6
Richard Alvarez Inner Circle Join Date: Sep 2002 Location: San Mateo, CA Posts: 3,840	For those of you who are unfamiliar with 'hollywood accounting'- http://en.wikipedia.org/wiki/Hollywood_accounting Gives a brief overview of how the books are juggled. For example, "Forrest Gump" showed no profit. Go figure. For an in depth look at how fighting a hollywood studio looks, I highly reccomend "FATAL SUBTRACTION- How Hollywood Really Does Business" -The Inside Story of Buchwald V. Paramount. This will give you nightmares, but if you think there is even a REMOTE chance you might be dealing with a studio, it's imperitive you read it. It also helps you understand WHY the Writers Guild went on strike, and how hard it is to get a solid accounting of income on anything. Makes me glad I'm married to an IP Attorney.

February 12th, 2008, 12:06 PM	#9
Richard Alvarez Inner Circle Join Date: Sep 2002 Location: San Mateo, CA Posts: 3,840	One of the reasons "Shakespeare in Love" was such a brilliant film, on so many levels, is that it took a real poke at the industry. There's a great moment when the money lender is talking to the theatre owner about how to make money, he says about paying the actors "We'll offer them a share of the profits!" to which the owner says "But there's never any profit... OH! I say, you might be on to something!" Yeah, it's a real minefield negtiating any kind of payment.

February 12th, 2008, 05:36 PM	#11
Richard Alvarez Inner Circle Join Date: Sep 2002 Location: San Mateo, CA Posts: 3,840	Dennis, From the Buchwald V Paramount case on Wikipedia - "Hollywood accounting has long been derided as a cynical attempt by movie studios to cheat individual authors out of royalty payments. The accounting formulas used by the studios have allegedly been designed specifically to ensure that it is almost mathematically impossible for any movie to show a net profit. Specifically, the net profit formula in authors' contracts does not correspond to the net profit formula of generally accepted accounting principles that the movie studios use when creating their financial statements that are reported to the U.S. Securities and Exchange Commission and to the investing public. The "unconscionable" formula in the authors' contracts effectively double-counts many costs borne by the movie studio. Some commentators have claimed this lawsuit was a watershed that would affect Hollywood's payments to anyone who enjoyed "profit participation", by forcing a change to the net profit formulas. However, another California Superior Court ruled in Batfilm Productions v. Warner Bros. in the case of the 1989 Batman movie that a similar formula was not unconscionable. To date, there has been no review of this type of claim by an appellate court, meaning that the superior courts cannot look to an appellate court's decision for guidance. The "watershed" role of this lawsuit has therefore not been demonstrated " So - One court has ruled that a similar accounting formula was not unconscionable... as long as it's used for the writers/actors contracts. Thats why the clause you're looking for in your contract should read something like "Determined in the same manner as the producer's percentage" - Its an uphill battle, no doubt about it. If you're really curious as to how it is being fought - I really do reccomend the book "FATAL SUBTRACTION" (Remember, who went to jail In ENRON accounting?)