On Feb. 20, 2016, California based entertainment lawyer David Albert Pierce, Managing Member of Pierce Law Group LLP, appeared in Columbia, South Carolina, courtesy of the South Carolina Film Commission. To try and give a “play-by-play” breakdown of the entire workshop would be tedious as well as unfair, as I am certain to do Mr. Pierce’s presentation an injustice as he has infinite more command of the material than I. Rather, I hope this brief overview of topics and a few items that stood out to me will encourage others to continue to explore the oft-overlooked legal aspect of filmmaking, and to seek out the services of those like Mr. Pierce. If there was one theme that resonated to me throughout the day, it was simply that there is no substitute for having a good entertainment lawyer in your corner. For a new filmmaker, it is very difficult to possess all the knowledge and experience needed to make sure you clear all the hurdles of production, not to mention all the potential legal obligations. And once you venture into the world of using Union talent, those issues become much bigger and with higher cost of failure. Keeping in the spirit of the workshop, I’d like to add that any statement I make here is not to be considered legal council and is purely based on my frantic note writing and may be susceptible to errors and omissions.
Mr. Pierce first started off discussing the continual evolution of recorded entertainment. As people devise new and innovative ways to enjoy entertainment, each of them bring about a new aspect of entertainment law, which was previously unheard of. For instance, at the height of network television in the 1950’s and 60’s, no one thought about contracts that would include the future advent of reruns and the eventual emergence of the home theatre and use of VCR, DVD and now streaming content.
The constant evolution of copyright law and the changing faces of Union affiliations are also difficult to stay abreast of if your main focus is generating creative content. However, as Mr. Pierce noted, as a Producer, “you’ve got to know every aspect of how films are made and how money is made in the industry.” He made several references to an analogy of a producer as a football team who works so hard to get the ball to the 5-yard line and then just let’s someone else try to take it in for the score. Too frequently an inexperienced producer will sign any deal they get without understanding all the ramifications. He went on to stress knowing the value of rights to a piece of intellectual property and to completely understand what you are signing. He also reiterated that the idea of an “independent film” is a misnomer- we are all very dependent on others. In truth, the only real “independent film” is one that is purely funded out of a very rich pocketbook. The rest of us are dependent on other methods of funding. Mr. Pierce stated several times that a film has several “pieces of pie” that can be tapped for financing, rather than just one or two avenues.
He also made the very poignant statement that, “there is zero correlation between how good a movie is and how much money it makes.” It seems that the bulk of the fiscal success of a film lies in good management of the many financial issues involved with the process. Because of the unique way films are done, small business loans from a typical bank, usually will not work. They require collateral, and at the time you need the loan, the film is purely conceptual. There are options for studio financing if the production is helmed by a bigger company, but for most of us, we aren’t in that realm yet. This brought up the current trend in small budget film financing, crowd source funding. Mr. Pierce advocated setting a smaller goal for a very clear, specific purpose, such as development money. Funds to set up the legal paperwork, hire the writer, etc. It was noted that in reality, no one is surfing the Internet just looking to fund small budget films. The only people that will support your crowd source financing venture are friends and family. The somewhat exception to this is if a particular person or a piece of intellectual property already has a strong fan base or a niche market. By specifically targeting this niche market, the fans feel a sense of camaraderie to the production and, if they feel the film correctly represents their tribe, they will be more likely to open the wallets. Another similar source lies in advocacy or religious groups if your subject matter embraces their focus. Mr. Pierce also voiced a heavy caution against using Equity Based Funding; or in other words, some sort of stock in the film. The movie financing business is a very high-risk, low reward venture and the odds of failing vastly out weigh the odds of fiscal success. Given the volatile nature of films, there is just too big a risk that your “equity investors” are there purely on the chance that you will fail and they will have an opportunity to sue. It’s just not worth it to open up those odds to the Internet “trolls” and scammers.
Mr. Pierce went on to address the use of Bridge Loans, use of pre-sales and foreign sales agents to secure distribution rights in the worldwide market, product placement, government incentives and the use of state tax incentives. An important distinction was noted in the difference between a tax credit and a tax rebate. A tax credit is an IOU. The state will send you a coupon for a credit to use on your taxes. For a film that might be a little cash poor and need more liquid funding for production, this might not help as much. A tax rebate or a grant, is typically a check or cash given to the production. Regardless, filmmakers need to make sure they are aware of the turnaround time and when they actually get the money in any of these instances.
From there, Mr. Pierce switched tracks to the subject of Clearance Issues. Basically this all boils down to the idea of avoiding any kind of liability. He stressed several times that these issues, and specifically, getting the important Errors & Omissions Insurance, had nothing to do with the actual law, but the comfort level of the insurance company, that you wont be sued. The idea being that ANY legal involvement, even one that you are clearly in the right, is to be avoided. Legal corporations, such as Mr. Pierce’s firm are very good at analyzing a production and identifying any potential issues. Many of these issues include but are not limited to use of proper names, logos, artwork, music, product clearances, copyrights, etc. In our current age of rampant “borrowing” or “sampling” due to unparalleled Internet access, the nature of copyright laws and what is considered “fair use” is constantly in flux and frequently will change from case to case. Increasingly, the low-to-no budget filmmaker’s claim of “not for profit” will not work in court. Another common mistake is that many people feel that if you purchase a piece of property, you then have the right to use it in a production without gaining a copyright release. This is not the case and correct legal council and adherence to copyright laws will prevent any willful or mistaken violations. If a production does not adhere to these rules, or does not resolve them, there is a good chance that they will not receive their E & O Insurance and thus be unable to distribute the picture.
Mr. Pierce wrapped up with an overview of preparations for negotiation. He emphasized the importance of knowing the state of the industry, knowing the opponent and their background, as well as having a firm grasp on what you want from the deal and what you are willing to compromise on. For truly, film is nothing, if not compromise.
I hope that this has been fair and informative and if nothing else, reinforced the notion of having legal council in the filmmaking business has never been more important. In our age of more and more laws appearing every day, people suing each other like it’s some kind of sport, and unfortunately, the growing trend of filmmakers not respecting the process and cutting corners to try and save a few dollars, it’s vitally important to set a higher standard by elevating the industry through proper use, rather than trying to get away with as much as possible. So go forth, create, experiment, challenge, but be good to yourselves and the other artists you share the creative realm with. Now… Back to One!