Feature
Director’s cut
by Gordon Campbell
Forget Brad and Angelina, and that wacky TomKat affair. America’s real sweethearts are Money and Power, and Peter Jackson’s lawsuit with New Line over the booty from Lord of the Rings shows how well the two go together – far more rewardingly, some would say, than all that love and marriage, horse and carriage kind of moonshine.
Reportedly, Jackson is claiming to have been underpaid by about $US100 million for his efforts on the LOTR trilogy – thanks, allegedly, to pre-emptive deals made by New Line that were not fully opened to market competition but apportioned instead to other “vertically integrated” companies within the Time Warner empire to which New Line belongs. Such deals benefited Time Warner, but reduced the gross on which payments to Jackson were calculated.
Those subsidiary deals do matter. As recently as 1980, theatrical box office provided 55% of revenues from films, but by 2003, this had shrunk to only 17.9%. Increasingly, a film’s theatrical release is merely the advertisement for the related “ancillaries” – DVDs, TV rights, soundtracks, toys and so on. Worldwide, DVDs and videos grossed $US18.9 billion in 2003, while global box-office revenues were only $US7.48 billion.
Normally, vertical-integration suits are settled out of court, to avoid top executives and studio accounts being exposed to scrutiny. The unusual thing about the Jackson lawsuit, says leading film analyst Edward Jay Epstein on line from New York, is that it is coming from a director. “Normally, any director who brought a suit like this, he would never work again in Hollywood.” In Epstein’s view, only Steven Spielberg, George Lucas – maybe – and Jackson currently have the clout to survive the potential fallout.
Epstein has not seen Jackson’s LOTR contract. Yet according to Forbes magazine (July 5, 2004) Jackson got a 7.5% cut of DVD sales from the second film and of the third film’s theatre grosses. “That’s the standard deal,” says Epstein. This ratio was worked out for the first film when the trilogy’s success was still unknown and while Jackson packed less punch in Hollywood. Reportedly, the lawsuit seeks to increase Jackson’s share of the ancillaries on films two and three.
Fair enough, perhaps. The actors have already sought and received from New Line a salary boost from the trilogy’s profits. Similarly, Jackson’s suit can be seen as designed to extract a bigger share of the multi-billion dollar bonanza that LOTR has become. (Note: Jackson’s 7.5% share of the DVD “gross” is not of the entire DVD revenues. As Epstein explains, it is only 7.5% of the one fifth of the DVD wholesale price that studios decree to be the “gross” open to other profit participants, once the costs from marketing, sale-or-return deals and other intangibles have been deducted. At 7.5% of 20%, Jackson is really getting only 1.5% of the actual wholesale earnings on DVD sales, and his dissatisfaction with that situation may explain the delays over the extended DVD of The Return of the King.)
To some critics, Jackson has already been amply rewarded – with some $US200 million – for his LOTR efforts. Also, if there were no escalator clauses in his contract for films two and three it could, arguably, be seen as being entirely his own fault. Since then, his LOTR success has enabled him to leverage a gold-plated deal on King Kong – and Arnold Schwarzenegger’s contract for Terminator 3 serves as a useful indication of just how splendid such A-list deals can be.
As Epstein has revealed, Arnie got $US29.25 million as a starter on T3, plus a perks package of $US1.5 million for private jets, round-the-clock limousines, bodyguards, etc. On top of this basic “pay for play” – and here the contrast with Jackson, pre-King Kong, kicks in – Arnie got a whopping 20% share of the adjusted gross once the film reached the “break-even” point, which he had the power to contractually define as being when the film hit $US155 million in domestic box office or $US380 million in global box office. (T3 ended up earning $US421 million.) Oh, the Governor’s contract also stipulated that 100% of DVD/video sales would count towards reaching the “break-even” point where his 20% share of the ancillaries would kick in.
Surely, very few Hollywood power players get to specify the studio’s “break- even” point? That’s right, Epstein says. Tom Cruise forged the trend-setting deal, on Mission: Impossible 2. Reportedly, Cruise skipped his upfront salary in return for a mega-share of the ancillaries, and the deal has earned him some $US92 million from that second instalment alone in the M:I franchise. So, within Jackson’s LOTR lawsuit, on which ancillaries can he realistically hope to get traction?
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