Producer's Bill of Rights By Omar Kaczmarczyk Company Objective LongTale, LLC, sells and manages motion picture rights for theatrical, broadcast television, and home entertainment releases in the world-wide international market. Background Too often, international film sales are considered one of those things “... producers can do by themselves.” It is a serious mistake to think that selling and servicing motion pictures in the international marketplace is easy. It is far more involved than simply attending AFM, CANNES, MIFED, MIPCOM, and the many other annual film and television markets. Attendance at these markets is important, but it is only a first step. A membership to sell at Film Markets and the actual staging of a market presentation is expensive, and requires a great deal of detailed preparation, generally beginning six months before each market. The basic cost of participating in just one of the major markets (AFM, Cannes Market, MIFED, MIPCOM, etc.) is between $75,000 to $250,000 US dollars and about $35,000 for each of the interim markets. This is cost which is exclusive of advertising, preparation for at-market or in-competition film screenings, and other additional marketing costs. But selling a motion picture is only the tip of the iceberg. After “making a deal,” actual motion picture delivery, account servicing, and revenue collecting begins. This is a process that is extensive, time consuming, and tedious. It obviously helps to be known as an established seller of licensing rights who can service international motion picture buyers. Negotiating favorable terms, and then collecting what is due, near to “on-time,” is much easier, when Buyers can reliably plan to receive the motion picture they want when they want it and with the format and quality which they require. The Solution LongTale, LLC, is a team of established participants in each of these markets. International sales, like so much of the entertainment industry, are based on personal relationships. It takes time to become established with reputable buyers in the international market and to gain their confidence and loyalty. One valuable service of the international film markets is the reduction of investor risk through either actual presales prior to production (as long as this can be accomplished at prices equivalent to what would be realized after completion of the film), or “pricing” of the future product through “offers” prior to film production in order. This can determine the value of cast, story and other creative elements prior to committing to them in production. It is established relationships that can make “pre-sales” positioning of a new production possible. LongTale’s major advantage is our International Entertainment Business Consultant and Managing Director, Omar Kaczmarczyk, who is an entrenched member of this community. He has been involved in international sales for over 30 years and is accredited with facilitating the world-wide sales of THE THREE MUSKETEERS, THE FOUR MUSKETEERS, SUPERMAN - THE MOVIE, SUPERMAN 2, SUPERMAN 3, SUPERGIRL, SANTA CLAUS - THE MOVIE, THE NEW ADVENTURES OF PINOCCHIO, SIR ARTHUR CONAN DOYLE’S THE LOST WORLD, and more. LongTale’s service teams process Buyer orders, manage marketing services, and administers all phases of product delivery and revenue collection. Consider the problems of accounting for the different tax treaties and tariffs for each international sale. Withholding taxes alone can chew up substantial amounts of the revenue if the transactions are not “routed” properly to reduce liabilities. LongTale manages the necessary tier of international transaction companies who hold the proper tax treaty affiliations to avoid this potentially costly pitfall. Producer Abuse But none of these things matter if the Producer never sees any “real money” from each licensed distributor. Aside from first revenue from direct licensing sales initiated by meetings at a Film Market, each license obliges the distributor to pass net revenue through to the Producer. But the motion picture industry shares many tales of the successful release of audience pleasing films, which were overcharged by distributors for unauthorized service fees, which reduce the revenue due to the Producer, resulting in the over use of the accounting term “net negative” revenue. Very briefly, the biggest problem between the Producer and infamous distributors is the “creative accounting” prevalent in the industry. The problem applies both to domestic and international distribution sales. It really does not matter what the upfront “distribution” or “sales” fee is against the Distributor’s Gross Revenue: Most distribution and sales agreements provide first for the deduction of that fee (whether or not it is 20% or 50% is immaterial), and then require the recoupment of all associated “costs and expenses of distribution services” performed by and now owed to the distributor, letting the distributor interpret exactly what costs and expenses should be recouped before paying the Producer. It is an interesting fact that there is an appearance of a direct correlation between the distributor’s “costs and expenses” and the amount of gross revenue generated through its sales: In the past, the amount of “expenses” assessed against the picture’s revenues is always “just a little more” than the amount of revenue, which might have been received by the distributor, so that virtually nothing is passed back to the producer. The Film Business Just Doesn’t Have to Be Like This LongTale has designed a unique business process to ensure the greatest possible share of the actual revenue, in any territory, is passed directly through to the Producer. LongTale has eliminated Producer Abuse through the simplest ways. First, for international sales, we charge a basic licensing sales commission fee of 20% per completed sale, and then LongTale and the Distributor are only entitled to recoup the direct, third party, expenses our client, you, the Producer, has “pre-approved.” Very simply, for LongTale, we sit down together with each Producer, and present both a marketing budget and a sales plan. We identify the specific costs of all facets of our sales activities prior to spending the money. (This includes such things as the amount of money to be spent on buying advertising at a film market.) We must agree to any overhead charge, an annual renewable retainer fee, which can range from $7,500 for low-budget titles, up to $50,000 for major titles. All market preparation services and attendance costs, such as housing, travel, Internet presence, phones, faxes, licensed rights renewal marketing, and out-of-pocket expenses will initially come out of this overhead charge, and when exhausted, against the first licensing sales fees received. Each client Producer must agree with the budget and what the sales plan is intended to accomplish. If necessary, each Producer can review the related expenses, or disapprove each cost item in the budget, line by line: THESE ARE THE ONLY CHARGES WHICH CAN BE ASSESSED AGAINST THE PICTURE BY LONGTALE. LongTale, itself, will never use hidden charges and after-the-fact expenses, which can traditionally appear on distributor revenue accounting reports, and which can prevent the Producer from seeing any return on investment for the motion picture. We must also agree to any Producer Net Revenue participation by LongTale. Producer Net Revenue participation ensures that LongTale will have sufficient resources to oversee and plan exploitation of market segments beyond first release with your motion picture. The business of motion picture exploitation is more than the initial 18-week first-run theatrical release: It literally encompasses the copyright lifetime of the finished work as it is released and then re-released in different formats and with new technologies. This is longer than most Producers are willing to wait before their next production start. In any case, to facilitate open and transparent accounting, all revenues are deposited into a Collection Account that is administered by a reputable third party, who is then appointed by contract as the Collection Account Manager or (“CAM”). LongTale itself will not receive any direct revenue from any transaction that it performs on behalf of the Producer, other than the annual retainer fee. The CAM is given an irrevocable letter of instruction that defines precisely what is to be done with each dollar received. On a pre-arranged schedule with clearly defined conditions, the CAM disburses money to the Producer and to LongTale, and provides both regular and on-demand accounting of all received revenue. Furthermore, the CAM is empowered to assist and direct audits of Distributors, if and when irregularities are detected in the revenue stream. It takes experience to select and appoint the financial firm which can service the duties of the CAM. Since this industry-wide business process was invented by Omar Kaczmarczyk, LongTale has that experience and the relationships to ensure that Distributors will honor all requests issued by the CAM. Simple, Direct, Clean, Without Abuse by Any Party LongTale’s business philosophy is designed to develop long-term relationships with quality Producers, by eliminating the abuses and conflicts which producers normally suffer at the whim of unscrupulous distributors. Also, if for whatever reason a Producer finds it necessary to do so, LongTale can be released from your service agreements, after consideration for services rendered, with a very simple written notification process. Additionally, in case of dispute, all issues can be serviced through binding arbitration in the State of California, which should result in a timely and just resolution for all parties. In closing, if you engage our services, LongTale will show each Producer’s finished film in its best light to interested licensing rights Buyers for all, or specific, market segments exploited by that Distributor. Furthermore, if you, the Producer, so approve, LongTale can be engaged to develop and service a long-term rights management plan, which will be reviewed and renewed annually, for the lifetime of the copyright of your motion picture. Our goal is to promote the business of independent motion picture producers around the world through clearly stated and transparent business processes which will allow for effective long-term management of your motion picture rights and increase the international cooperation of all parts of our entertainment community. If you need further assistance, you may contact us at info@longtale.com, or ask for Producer Services: +1.323.733.1000 or via postal service mail sent to: Producer Services, LongTale, LLC, 3699 Wilshire Blvd., Suite 850, Los Angeles, CA 90010, U.S.A.