It’s always been true that in show business, the piper must be paid. And not just the piper, but everyone involved in the making of a show.
Compensating the piper has never been more complicated than it is today, and the tools employed to allot the dollars properly are often behind the times.
Back in the day, the separation between East Coast-based bankers and West Coast-based filmmakers kept business processes opaque. Not so today. The changes that have taken place over the last 120 years have been both technological (television, cable, VHS, DVD, streaming) and legal (the busting-up of the studio/distribution marriages; the rise of stars as independent contractors), and all of them have tended to offer greater transparency.
Not to mention, greater complexity. Jason Kassin, founder and CEO of the entertainment rights management software firm FilmTrack, has been on the front lines of the revolution for over 25 years. “Buying and selling IP in film and television,” he points out, “is unlike most other markets, where you have a binary situation: You sell a car [or] you don’t sell a car.
“Entertainment is a multidimensional model. You’re not just selling or not selling a movie. You’re selling a piece of IP for a particular period of time, in a particular space or territory or market. … It’s not a simple inventory system model.”
Kassin chuckles as he proposes a producer’s hypothetical case: “I get 10% of all proceeds excluding the U.K., because I have a deal there, but not until Financier A gets his million dollars recouped, and then I have a cap, after which my 10% goes to 13%.” Clearly, this is not a job for your grandfather’s accounting system.
The challenges seem to redouble when it comes to television, where a series may be sold for X amount. But what about the actor who appears only in Episode 3? Do they get a sixteenth of the funds, or is there a different formula? That actor’s livelihood hinges on a fair answer to these questions.
“When I send information up to the accounting system, I need to understand it in discrete detail,” Kassin explains, speaking from the studio’s point of view. “Is this revenue from a video-on-demand platform in Belgium for Flemish language?”
“But on a macro cultural level, there’s this move to greater transparency in our industry. The folks involved with the creation, production and distribution of a film want to ensure that they are compensated correctly. They need a mechanism to ensure that they know that the company that’s managing those sales and collections is doing so accurately.”
A quick internet search will reveal the consequences when doubt enters that picture — landmark lawsuits involving millions of dollars, hinging on the issue of net profit versus gross profit or on actors’ participation in series syndication revenue.
Yet many studios and producers have been as slow to accept the new complexity as they have been quick to add more types of intellectual property — short form, mini episodes — all of which must be licensed and tracked.
“They built a system for the entertainment industry that existed 10 years ago, right? They’re using a system that was built for yesterday’s war,” argues Kassin.
“It wasn’t aware of video-on-demand, not to mention what deals would look like for streaming platforms or electronic sell-through, and how that would alter how someone was compensated.”
Just as important to any financials tracking system, Kassin insists, is scale.
“You have to be able to deal with massive data sets, even a small film or TV company that owns, say, 200 titles across a few hundred territories spread across multiple rights, in a few dozen languages and markets. Multiply those numbers and you’re going to be in the millions of rows of combinations.”
In any contract management tool, accuracy of the data is critical. So is its user friendliness. It has to be intuitively easy to enter the data and retrieve the results. So friendly, in fact, that a system ought to pinpoint opportunities for revenue that the client didn’t even know existed.
“Maybe you’ve got a library of content you’ve already made or you’re making now,” Kassin explains. “The system your nephew built five years ago won’t tell you that the French license on the movie you made two years ago has expired, but you can relicense it now. And this new VOD platform that covers all French-speaking Europe? Now you can license to them. The value proposition is, ‘I’m going to help you not just make your company more efficient but find pockets of availability.’”
Kassin also underlines the importance of the system’s ability to speak to other systems: notably, those used to draw and distribute the checks in the right amounts to the right people. That’s where bank-level security is an absolute must.
Verna Grayce Chao, executive VP of treasury management solutions at City National Bank, gives FilmTrack high marks. “We take our important role in the entertainment ecosystem very seriously,” she says. “FilmTrack allows clients to track their financials and intellectual property in a user-friendly and accurate way, and we have a lot of clients who overlap.”
Indeed, she confides that a marriage is anticipated between FilmTrack’s data management and the payment system of Exactuals, a City National subsidiary, to provide full-service accounting and fund distribution for clients.
“FilmTrack is serving almost like a laboratory for City National,” Chao adds. “Because of their size and scale, they can do things with technology very quickly, enabling us to assess the prospects for any given use case. They’re exploring things like machine learning and artificial intelligence, which may find their way into their product as well as our systems. For a bank like ours to have such a built-in source of research and development, it’s really perfect.”
A sophisticated software system that can accurately track contract provisions and proper distributions of cash, not to mention identify new revenue sources and assist in production scheduling, is likely to become a must-have in the entertainment industry.
FilmTrack and Exactuals are an RBC company and subsidiary of City National Bank, respectively. City National Bank is a subsidiary of Royal Bank of Canada. City National Bank Member FDIC.