As more and more questions over the future of streaming have taken over Hollywood, numerous lawsuits over who financially benefits from this transition have arisen. Most of them, including Scarlett Johansson’s suit over Black Widow, have ended in settlements. However, a new lawsuit from Hollywood mainstay Village Roadshow Pictures against WarnerMedia offers a new question in this continuing morass: Are streamers trying to box out the rest of the industry’s old guard?
Village Roadshow, an Australian financier and production company with three decades of box-office hits, filed a complaint essentially centering WarnerMedia’s highly controversial gambles in the streaming market that began in 2021 with its day-and-date release model for all major films. At the center of the complaint is the studio’s winter blockbuster The Matrix Resurrections, the fourth installment in the Keanu Reeves franchise, and allegations that the release was directedly sabotaged to help the streaming site grow while hurting Village Roadshow’s profit participations.
However, the co-producer notes a more alarming trend that signals toward the future of production: WarnerMedia is making sequels and other IP-related shows that might be technically co-owned by Village Roadshow but essentially are happening without their involvement as a co-financier. While it might seem like a small technical issue of how business associations are defined, at stake is what Village Roadshow describes as “the deliberate and consistent coordinated efforts of WB to eviscerate the significant value of Village Roadshow’s intellectual property.” The goal, particularly as Hollywood continues to consolidate through mergers and acquisitions, seems to gut a major player out from sharing in streaming profits.
Studios like Warner Bros., the subsidiary of Warner Media, only have a few in-house productions and instead rely on a number of production companies to actually make their films and shows. These can range in size, from Legendary (Godzilla vs. Kong, Dune) to Clint Eastwood’s personal production company, Malpaso. Village Roadshow has been one of Warner Bros.’s long-standing and most successful creators dating back to the 1990s. The production company has co-financed and served as a production company on major hits like Ocean’s Eleven, The Lego Movie, Happy Feet, Mad Max: Fury Road, and Joker, earning the studio $4.5 billion over the years.
Because it is a co-financier, the company has leveraged into partially owning the copyrights on these films (because of the idea of “corporate authorship,” individual creators such as writers and directors never own the copyright). That doesn’t give a company like Village Roadshow full rights—the contracts laying these agreements out usually give distributors like Warners the right to do what is best for the property—but it does mean that a sequel or other derivative property needs its permission (recent cases over the expiring copyrights of projects like Predator and Friday the 13th have demonstrated some of these issues). Warner Bros. and Village Roadshow have split copyrights to varying degrees over the years, and have been in agreement to collaborate on these sequels, prequels, and the rest.
Streaming has changed the way studios operate in so many ways, and as studios continue to concentrate their efforts toward the online market, that has meant forgoing not just old practices, but old partners. While a majority of the lawsuit looks at the detriment of HBO Max to profits for films like Joker and The Matrix Resurrections, Village Roadshow alleges how the studio is essentially locking it out of future projects entirely.
Village Roadshow alleges how the studio is essentially locking it out of future projects entirely.
One of the core properties at stake in the complaint is WarnerMedia’s upcoming film, Wonka, featuring Timothée Chalamet as the beloved Roald Dahl figure. Most would assume it to be a prequel to the 2005 Johnny Depp-starring Charlie in the Chocolate Factory adaptation. However, WarnerMedia informed Village Roadshow the film amounted to a “Qualified Derivative Work” per their agreements, meaning they could go forward without any co-production agreement. Suggesting Wonka is not truly a prequel seems absurd— the complaint includes photos demonstrating the similar looks of the Johnny Depp character and the Chalamet character, while WarnerMedia argued the two films will feature different backstories—but the project seems purposefully designed in order to cut Village Roadshow out of its typical arrangement where it would play a role in financing, producing, and profiting off the film.
Wonka is just the first of many. After discussions over an Edge of Tomorrow television show, WarnerMedia has essentially told Village Roadshow it will only go forward with projects between the two as a “co-producer” but would be “unable to proceed on any project with Village Roadshow as a co-financier.” The goal, it seems, would be to lock out the company of any decision-making regarding distribution and certainly profit sharing, only paying an upfront producer’s fee to the company to do the same work it has done for decades. In doing so, WarnerMedia can profit even further by keeping “for itself valuable Derivative Rights to tent pole films and use those films.”
It’s no secret that Hollywood has entered a phase of consolidation as it did in the 1920s, but as recent investigations have demonstrated, it is not clear if this new streaming landscape will be particularly successful. Streaming numbers do well for investors, but not so much for actually making a profit.
This is why Village Roadshow has concentrated in part on the poor performance of The Matrix Resurrections and WarnerMedia’s decision to release it on HBO Max simultaneously with theaters, as well as move the film from April 2022 to December 2021 while keeping films like The Batman off the 2021 Day-and-Date slate). Village Roadshow owes WarnerMedia because the film failed to make a profit compared to its budget, but the company alleges that the HBO Max situation amounts to a “self-dealing strategy” where the studio essentially “gutted the value of the film for the benefit of its sister company,” as Village Roadshow receives no compensation for HBO Max views. While WarnerMedia quietly made deals with talent—including most likely Keanu Reeves—co-production companies like Roadshow were left out.
But as long as studios will rely on reviving intellectual property, that means getting buy-in from those copyright holders who helped build the industry to what it is today. And for Village Roadshow, that means receiving “all earnings from the exploitation of the films’ copyrights, not just those it cannot hide.”
For WarnerMedia, Disney, and all the major streamers right now, companies like Village Roadshow present a thorn in their side. They want to mine their intellectual property, but without the rights and co-production deals that essentially produced that IP in the first place. Roadshow cannot take its co-owned IP elsewhere, so it essentially becomes trapped in a holding pattern. And until studios become honest about how exactly views are calculated and transformed into profits, studios would rather play hardball. The studio can now, according to Roadshow, “build billions in enterprise value while depriving Village Roadshow of the long-term, ongoing benefits of co-investing in and co-owning many entertainment properties.” And with WarnerMedia coming close to ending its position as an AT&T subsidiary and essentially now gaining steam as a competitor for subscribers, companies like Village Roadshow cannot let it simply dictate through financial weight.
The goal may simply be to force the studio to be acquired, essentially eliminating the company while mining its intellectual property. This kind of lockout that forces companies to center on acquisition rather than competition is not too dissimilar to practices in Silicon Valley currently receiving antitrust scrutiny from the Department of Justice or Federal Trade Commission. And in an era in which WarnerMedia has seemingly made enemies across the industry due to its HBO Max practices, maybe bringing a little antitrust scrutiny to Hollywood might not be a bad idea either.
In the end, Village Roadshow may find a way to simply settle the case. But as long as Big Hollywood looks more and more like Big Tech, these lawsuits represent the fight over creativity and compensation to come.
Peter Labuza is a legal historian who specializes in media industries. Discuss this story with Peter on Twitter (@labuzamovies) or check out more of his writing on his personal site (www.labuzamovies.com).
Continue reading...
Village Roadshow, an Australian financier and production company with three decades of box-office hits, filed a complaint essentially centering WarnerMedia’s highly controversial gambles in the streaming market that began in 2021 with its day-and-date release model for all major films. At the center of the complaint is the studio’s winter blockbuster The Matrix Resurrections, the fourth installment in the Keanu Reeves franchise, and allegations that the release was directedly sabotaged to help the streaming site grow while hurting Village Roadshow’s profit participations.
However, the co-producer notes a more alarming trend that signals toward the future of production: WarnerMedia is making sequels and other IP-related shows that might be technically co-owned by Village Roadshow but essentially are happening without their involvement as a co-financier. While it might seem like a small technical issue of how business associations are defined, at stake is what Village Roadshow describes as “the deliberate and consistent coordinated efforts of WB to eviscerate the significant value of Village Roadshow’s intellectual property.” The goal, particularly as Hollywood continues to consolidate through mergers and acquisitions, seems to gut a major player out from sharing in streaming profits.
Collaborative Pasts
Studios like Warner Bros., the subsidiary of Warner Media, only have a few in-house productions and instead rely on a number of production companies to actually make their films and shows. These can range in size, from Legendary (Godzilla vs. Kong, Dune) to Clint Eastwood’s personal production company, Malpaso. Village Roadshow has been one of Warner Bros.’s long-standing and most successful creators dating back to the 1990s. The production company has co-financed and served as a production company on major hits like Ocean’s Eleven, The Lego Movie, Happy Feet, Mad Max: Fury Road, and Joker, earning the studio $4.5 billion over the years.
Because it is a co-financier, the company has leveraged into partially owning the copyrights on these films (because of the idea of “corporate authorship,” individual creators such as writers and directors never own the copyright). That doesn’t give a company like Village Roadshow full rights—the contracts laying these agreements out usually give distributors like Warners the right to do what is best for the property—but it does mean that a sequel or other derivative property needs its permission (recent cases over the expiring copyrights of projects like Predator and Friday the 13th have demonstrated some of these issues). Warner Bros. and Village Roadshow have split copyrights to varying degrees over the years, and have been in agreement to collaborate on these sequels, prequels, and the rest.
Cutting Out the Creators
Streaming has changed the way studios operate in so many ways, and as studios continue to concentrate their efforts toward the online market, that has meant forgoing not just old practices, but old partners. While a majority of the lawsuit looks at the detriment of HBO Max to profits for films like Joker and The Matrix Resurrections, Village Roadshow alleges how the studio is essentially locking it out of future projects entirely.
Village Roadshow alleges how the studio is essentially locking it out of future projects entirely.
One of the core properties at stake in the complaint is WarnerMedia’s upcoming film, Wonka, featuring Timothée Chalamet as the beloved Roald Dahl figure. Most would assume it to be a prequel to the 2005 Johnny Depp-starring Charlie in the Chocolate Factory adaptation. However, WarnerMedia informed Village Roadshow the film amounted to a “Qualified Derivative Work” per their agreements, meaning they could go forward without any co-production agreement. Suggesting Wonka is not truly a prequel seems absurd— the complaint includes photos demonstrating the similar looks of the Johnny Depp character and the Chalamet character, while WarnerMedia argued the two films will feature different backstories—but the project seems purposefully designed in order to cut Village Roadshow out of its typical arrangement where it would play a role in financing, producing, and profiting off the film.
Wonka is just the first of many. After discussions over an Edge of Tomorrow television show, WarnerMedia has essentially told Village Roadshow it will only go forward with projects between the two as a “co-producer” but would be “unable to proceed on any project with Village Roadshow as a co-financier.” The goal, it seems, would be to lock out the company of any decision-making regarding distribution and certainly profit sharing, only paying an upfront producer’s fee to the company to do the same work it has done for decades. In doing so, WarnerMedia can profit even further by keeping “for itself valuable Derivative Rights to tent pole films and use those films.”
Consolidating Hollywood
It’s no secret that Hollywood has entered a phase of consolidation as it did in the 1920s, but as recent investigations have demonstrated, it is not clear if this new streaming landscape will be particularly successful. Streaming numbers do well for investors, but not so much for actually making a profit.
This is why Village Roadshow has concentrated in part on the poor performance of The Matrix Resurrections and WarnerMedia’s decision to release it on HBO Max simultaneously with theaters, as well as move the film from April 2022 to December 2021 while keeping films like The Batman off the 2021 Day-and-Date slate). Village Roadshow owes WarnerMedia because the film failed to make a profit compared to its budget, but the company alleges that the HBO Max situation amounts to a “self-dealing strategy” where the studio essentially “gutted the value of the film for the benefit of its sister company,” as Village Roadshow receives no compensation for HBO Max views. While WarnerMedia quietly made deals with talent—including most likely Keanu Reeves—co-production companies like Roadshow were left out.
But as long as studios will rely on reviving intellectual property, that means getting buy-in from those copyright holders who helped build the industry to what it is today. And for Village Roadshow, that means receiving “all earnings from the exploitation of the films’ copyrights, not just those it cannot hide.”
For WarnerMedia, Disney, and all the major streamers right now, companies like Village Roadshow present a thorn in their side. They want to mine their intellectual property, but without the rights and co-production deals that essentially produced that IP in the first place. Roadshow cannot take its co-owned IP elsewhere, so it essentially becomes trapped in a holding pattern. And until studios become honest about how exactly views are calculated and transformed into profits, studios would rather play hardball. The studio can now, according to Roadshow, “build billions in enterprise value while depriving Village Roadshow of the long-term, ongoing benefits of co-investing in and co-owning many entertainment properties.” And with WarnerMedia coming close to ending its position as an AT&T subsidiary and essentially now gaining steam as a competitor for subscribers, companies like Village Roadshow cannot let it simply dictate through financial weight.
The goal may simply be to force the studio to be acquired, essentially eliminating the company while mining its intellectual property. This kind of lockout that forces companies to center on acquisition rather than competition is not too dissimilar to practices in Silicon Valley currently receiving antitrust scrutiny from the Department of Justice or Federal Trade Commission. And in an era in which WarnerMedia has seemingly made enemies across the industry due to its HBO Max practices, maybe bringing a little antitrust scrutiny to Hollywood might not be a bad idea either.
In the end, Village Roadshow may find a way to simply settle the case. But as long as Big Hollywood looks more and more like Big Tech, these lawsuits represent the fight over creativity and compensation to come.
Peter Labuza is a legal historian who specializes in media industries. Discuss this story with Peter on Twitter (@labuzamovies) or check out more of his writing on his personal site (www.labuzamovies.com).
Continue reading...