WIPOD – Page Points: Transcript of Episode 5

Intellectual Property and Filmmaking

Bertrand Moullier: Read. Read avidly, not just screenplays, but books and say "okay, I want this." Pick your projects. Make sure they're passion projects, because you're going to spill your blood on these things.

Lise McLeod: Who doesn't love watching a good movie? Whether your preference is a hearty laugh, a good old cry, or a horrific scare, we all enjoy being entertained. In January 2022, approximately 422,000 people worked in the motion picture industry in the USA alone. The second edition of the book entitled 'Rights Camera Action: Intellectual Property Rights in the Filmmaking Process' is a perfect guide for those who aspire to make an impact in the film industry. The book's author, Bertrand Moullier, joins me today and talks about the industry.

Hello Bertrand, thanks for joining me today.

Bertrand Moullier: It's a pleasure, Lise.

Lise McLeod: Concerning the second edition of your book, how about we begin with you setting the stage for the current entertainment environment, especially in relation to the impact of the recent pandemic.

Bertrand Moullier: Thank you. Yes. Well, film and entertainment globally has just been through a very, very difficult period like most other industries and areas of economic activity.

It's affected the industry in a number of ways. Of course, the chief factor has been the interruption of much of production activities during parts of 2020, and even more intensely in 2021, where many productions that were due to reach the point where they can start filming had to be put on hold, pending the development of protocols and systems to ensure the right standard of health and safety on film and television production sets.

So this interruption has meant that a lot of projects actually then fell apart because the financing, as we'll see later on, of feature films and television series and so on, is a fragile construct.

The talent may only be available for a short period of time, and if you miss your slot, as it were, then it might be very difficult indeed to actually relaunch the project. So a lot of projects were lost with, attended losses, financial losses to the producers and the talent and the crews working... that would've been working on those films.

So that's the first factor. The second factor is once the industry got its act together, sometimes with the help or in cooperation directly with national governments to roll out very detailed safety, health and safety protocols for production. Then that, of course did not come at a neutral cost. It's estimated that on average Covid safety protocols to avoid contamination on sets would've increased budgets, production budgets, what we call below the line cost, the technical cost of making a film by anything between 5 to 25%, depending on the circumstances, the size of a budget in the film. So these are two very, very important factors. What then this did is it had a knock on effect on, on the distribution of films and in particular spectacularly on the distribution of films in the cinemas because cinemas, as you know, were literally shutting down during long periods of time to avoid public contamination.

And although there were some of them in some territories, were compensated for those losses. It meant that very few films were seen by very few people. And the countervailing factor, which is probably the biggest story in journalistic terms about the Covid years for the industry, has been the ways in which it has super-charged a trend that was already existing prior to the Covid pandemic, which is the rise and rise of streaming as a key mode of consumption of film and video entertainment. We've seen extraordinary figures in most of the world, where the broadband infrastructure exists, in the number of new subscriptions that consumers took, so as to continue watching content during this period, and that has had what could be a lasting effect on the value chain for rights in films and other audiovisual products.

Lise McLeod: Who are the stakeholders in the filmmaking process? We as consumers see the actors on the screen in the final product. But who are the other stakeholders and in particular, who did you aim this book to benefit?

Bertrand Moullier: 'Rights, Camera, Action', the book and the accompanying video presentations, which I think are on the website or will be shortly, I thought that there's insufficient literature that presents the complexities of our industry from a producer's perspective. In fact, from having worked for producers’ organizations most of my professional life and know how essential clearing house and a central pivot the producer is to the whole process and in particular around the securing of IP rights that are indispensable for making a film project or a television project happen.

So it's very much on the perspective of the producer. Now, the producer is by no means the only stakeholder in the process, arguably the most important, well, equally as important are the writers. The writers of the underlying material, books, plays, journalistic stories, autobiographies or biographies and so on, on which many films and television series tend to be based.

So writers of underlying literary properties are extremely important to the process, although they may not participate directly, the interchange between them and the producers and other talent working in film is essential to the process of what we call development. And then you have, as you mention, you have actors, not just the leads, but also the character actors that populate a story. In terms of the creative process on set there is a sort of, I would argue, a sort of magical triangle, which is very important to get right, which goes from the director, to the cinematographer and from the director to the production designer and back at the director in a kind of triangle, which if it's harmonious and the three are cooperating well, tends to deliver the anticipated artistic results. This triad is extremely important.

And then of course there are the hundreds, and sometimes, the thousands of people whose names appear all too briefly in the end credits, who are the technicians, managerial grades working in production... a film is a very industrialized process, it's departmentalized, it's organized like an army or a factory, and so there is a range of specialist skills that are called on. Not all of these contributors are relevant to IP rights. Some of them are remunerated as a salary, or if you like, as fees just for the technical service they provide, but they are nonetheless essential to make a production run smoothly. And further down the chain, you have the international sales agents that help commercialize the film and the local distributors that take the film directly to the consumer. And of course, nowadays, not just the broadcasters, but also the online platforms, be they transactional video on demand or subscription video on demand, or even today, rising very fast advertising supported video on demand.

Lise McLeod: If we could now touch on the different points along the road to creating a film, perhaps taking a tour with those touchpoints throughout the book and it's very practically oriented chapters. In chapter one, you began with developing a film. So you mentioned things like searching for a perfect script, negotiating an option - which I would really like you to further expand on - commissioning a script. What are the overarching points for a producer to consider?

Bertrand Moullier: 'Rights, Camera, Action' explores in the first part, something we call development in film and television. The life cycle of a film and television project, and it's described both in the book and in the accompanying videos on the WIPO website as the immersed part of the iceberg.

It's a good metaphor because actually everybody involved in that stage of process spend weeks and months developing projects than they spend shooting them, producing them, post producing them, and so on. A project can take a year, two years, sometimes five. I was speaking to a producer the other day, a very experienced producer, who's been trying to develop one of his projects for the past 15 years. It's not unheard of. Some development projects go in what we call turnaround. So they've reached a certain level of development. There may be a shooting script ready. There may be some styles attached and maybe a director attached, but for some reason there's no impetus left. And so you will put this bundle, this project, on the market and ask if somebody else is interested in picking it up. And you will then ask them to pay back the costs you've incurred so far, sometimes with a premium payable, if the project reaches production.

So development is a very painstaking, very labor intensive, very complex process. And in terms of IP, it is either based, to categorize it very simply, on the original ideas generated, for example, by a producer or friend or a colleague, or a member of staff or someone they know who's in the creative field. Or, and increasingly this is the case, certainly in Northern Hemisphere countries, broadly speaking, or it is based on an already existing copyright, which can be a book, a play, an extended newspaper article, a feature. It can even be a podcast. It can be any form of story that raised a copyright. And so if you're trying to base your film on an underlying literary property, typically it will be a novel but not always, then you have to negotiate rights with the literary author, which we'll normally do through her agent because literary authors tend to be organized that.

Now buying out the rights immediately would be uncomfortable for both parties because the author may want to have a chance to say, 'well, actually, we're not convinced that the project reflects the nature of the work I wrote, but also the producer and her creative team may just want to have a chance to test whether this book can be adapted successfully.

So they need time. Which is why we've invented this thing called the option, which is not an outright purchase of the rights in the book, but basically you are given, when you purchase an option, an amount of time, which is typically initially 18 month to try, if you can, adapt the book into a successful screenplay or, screenplay that would be convincing to financiers, that could make a successful film.

Typically an option costs a lot less than buying the rights immediately. So that's another advantage because early development is the point where producers generally have less money, and you can renew it, there is an option to renew for another 12 months and another six months after that. The principle is: options reduce the more times you renew them so that there's more pressure to come to conclusion as to whether you want to take the project further or not.

So once you come to a decision, you've maybe during the option period, spoken to a screenwriter you want to work with whom you think is well adjusted to this particular book. You've paid them to maybe write a treatment, an episode outline, what's called sometimes a Bible in television, which contains a number of elements about the character arcs, the storylines, and the mood of the piece and so on and so forth.

Then if you are confident, you can take it further. This is the point where you will exercise the option. That means paying the writer fully for the acquisition of the rights to adapt the book into a film or television series, very often both. The tendency at this juncture is for producers to try and buy all the rights.

Which means that they will tend to buy not just the feature film rights, but also television adaptation, if there are television spinoff potentials, even the adaptation into a theater play, for example, and so on. The tendency these days from the literary agent's perspective is to tend to ask for more money and grant fewer rights so that they can exploit rights individually and perhaps maximize the financial returns for the author.

Lise McLeod: The producer has now secured the script and the rights. What would the next step be?

Bertrand Moullier: The next step would be to hire a screenwriter. And so it's a question again. A producer's skill is to identify who would be the best writer or writers, remember, in television, we now have this phenomenon called the Writer's Room, where there's one show runner, a lead writer, and then they have any number of senior writers and junior writers working on their storylines. If it's an extended series for example. You need to have one writer who leads, if it's television and in film, they tend to be less numerous.

Either way, you're going to have to also trade on the basis of intellectual property rights. A screenplay is a piece of intellectual property, and you have to acquire those rights and again, the negotiation can take many shapes and forms. Some screenwriters, some senior screenwriters will insist, for example, on also being accredited as executive producers on a project, which means they can collect an additional fee.

Some of them may also choose to reserve rights for further adaptation, though that's quite difficult to obtain if you're a screenwriter. And then there are differences between the copyright regime as it's described, which prevails in countries like the United States, Britain and Ireland, and a few African countries as well, which tends to put the producer at the center of IP ownership, which has a presumption that he who commissions and arranges the financing for the work has the presumption of ownership of the initial copyright.

That is set against the tradition of 'Droit d'Auteur', which you find in Latin countries for example in Latin America, and France, in Spain and Italy and so on, where the individual author is at the center of the system. So in France, for example, when you hire a screenwriter, she will be remunerated both on a, if you like, salary basis, on a on a fee for technical service of producing a screenplay, but she will also be owning, a share of the rights in the film, not just the screenplay itself, but the finished film. And she will then be remunerated as such, which means that she will receive a modest entitlement expressed in percentage terms, the price to the consumer. And these are of course, adjusted to what we call collective bargaining, which are complex negotiations between producers, trade associations and unions representing screenwriters.

Lise McLeod: At what point does a producer need this to secure funding?

Bertrand Moullier: The producer will be at some point thinking about securing finance for the film, and that takes place at different junctures. I wish there was a magical formula. It really all depends on the producer's credibility and reach in the marketplace. On where the screenplay or the treatment and the various development elements are at. On whether you've attracted a bankable director to the project who is prepared to come into the room to pitch the project with you. There is generally a sense that there is a grave danger in pitching a project to financiers when you are not sure it's quite ready to be shown, because if certain key financiers pass over a project, this being quite a gossipy industry, it may have the mark of death over it and then no amount of effort to try and resuscitate it at a later stage may, may bear fruit. It's not always the case, but it's something to watch for.

So this is quite an obscure alchemical area of filmmaking, but the producers will intuitively know who to go to first, and there tends to be a domino effect. For example, taking the United Kingdom, if you go to the British Film Institute with a screenplay and they say, we will pledge X amount as equity, as soft equity, which is recoupable after the commercial equity investors will have recovered their investment. And you can go to other financiers with a commitment letter that says: providing that you find the finance from other sources, we will come in as your partner. Then it becomes easier to use that lever to convince other players in the marketplace to come in because each of these organizations, be they public or private, carries a certain image and certain credibility.

So if you have, I don’t know, BBC film behind you saying ‘We will commit a license fee of X and an equity investment of Y into the project’, providing you can close the finance on the gap that remains to be financed, then that helps you get to where you're trying to get to.

Lise McLeod: In the book you state: ‘IP rights are by far the most valuable asset that a film producer is likely to hold when approaching the financing of a film project’. Can you please elaborate?

Bertrand Moullier: Indeed, the book says that IP rights are the most valuable assets in the possession of the producer at the point where she will go out to the marketplace to raise finance. Which raises a very important question, which both 'Rights, Camera, Action' and the book by my colleague Rob Aft 'From Script to Screen' cover extensively.

The very grave importance for a producer of assembling what we call chain of title. The producer acts in audiovisual works, acts as a clearing house for all the underlying rights, and he or she will have to have made sure that they've cleared all those rights with book writers, screen writers, designers, if there could be trademarks involved, it could be design rights involved and so on.

It's absolutely cardinal that the producer be the central clearing house for those rights and that she be able to demonstrate to potential buyers that they will not be facing liabilities further down the chain if they take this film on, having already spent marketing money to promote it and then being faced with a lawsuit.

In fact, the business employs a specialist form of insurance called an Errors and Omission Policy. It covers distributors for their risk of further liability, in particular under copyright or trademark law. And is only available if you can demonstrate a watertight chain of title, so I just wanted to emphasize that point.

Lise McLeod: There may be well-established producers who would know what they would need, but say for the first time filmmaker, what would be your recommendation? Where to begin ensuring that the IP rights can help leverage potential financing.

Bertrand Moullier: The young producer starting, or the new producer starting in the business, needs to take great care of assembling chain of title, meaning having watertight copyright documentation for every element that will enter in the final project.

If she or he are struggling with putting together a chain of title and are uncertain about the contracts they're signing, co-signing, they can get legal aid sometimes from the local film agency who might be willing to give them at least basic advice on how, what not to miss, and the mistakes not to make.

Unfortunately, in more developed markets, you tend to just have to factor in, and it's one of the big development costs, there's legal cost. You need a lawyer to go through the agreements with the various talent you've already hired. For example, screenwriter or director, you may have put the director on a retainer to co-develop the project with the writer, and indeed, in securing the agreements with the key talent who will appear in front of the camera.

So advice may be available for free from screen agencies. But otherwise, you're facing quite substantial, often legal cost as you get the project to the point where it's about to go into principle photography.

Lise McLeod: How about we move on now to talk about financing through IP rights?

Bertrand Moullier: The book 'Rights, Camera, Action' tends to focus mostly on the feature film model. That was an artificial choice, born of wanting to keep things focused and simple.

But a film tends to get financed through a multiplicity of sources. I mean, unless you are amongst the lucky ones, you get a single deal with a powerful international streamer who may say, here's a check for the cost of making the film, and here's a producer's fee, and here's a small premium for your pains.

Most of the time you will have to have a mixture of sources in order to close the budget. Say if you're looking at a 2.5 million dollar film, typically the size of a small US independent film, you will have to raise private sector equity. So that's just, that could be investors that are not directly linked to the industry or are linked to the industry and they're just putting money expecting commercial returns.

This doesn't involve a transaction of copyright or rights. It's purely like they would invest in any other business venture. They expect to be cut out on the revenue streams when those revenues eventually come in after the film has been distributed. Then you have public sector facilitation financing, which can be direct subsidies in forms of cash contribution to the budget, or can be Hypothecated Tax, which attracts private investors.

It can be also a tax credit, so literally another form of direct financing. There's any number of mechanisms and I would encourage readers to go and look at how these appear in wherever they're working, or where they're intending to work in. It can be through co-production with another country, which means you're combining subsidies from two national agencies rather than one, depending on the complexity of your co-production.

And then there is the all important thing, which is you have this bundle of exclusive rights, which you control as the producer on the project. And you can go and leverage this and go to a film distributor in a specific country and say, 'Will you commit to this project? It's not yet started filming, but you know me, you know the principle actors, you know how many, how much money the last five films have made. You know, the director is a reliable director, a strong director, and an award winning director. Will you take a risk on pre-buying the rights? To this film for your territory,' or could be territories. For example, if you're selling France, you are also generally selling Belgium and French speaking Switzerland sometimes, and then the fate of your project hinges on having sufficient number of distributors or platforms committing to pre-buying those rights.

So they're not going to necessarily put money on the table, but they're going to give you a contract, a paper saying when the film is completed and if it's completed to the following standard, of course there are stipulations, I will commit to paying X. And sometimes the richer national distributors will commit an amount of cash on the table right away, which is a proportion of the value of this contract.

And this contract is often called a minimum guarantee contract, which commits distributors to paying you that amount, no matter how well or badly the film does in a market. You can take that to a bank and discount it and use it as finance for the film. So this is a very profoundly important example of how you can leverage your IP rights to raise finance for the projects, not just about distribution revenue, sometimes, and very often it's about finance.

Now, you can also do that, what I just talked about, with a platform that covers several territories, like an international one that may commit to giving you a license fee for certain rights, for a certain amount of time. And that minimum guarantee contract, you can also go and try and discount with a bank. So this is very important aspect of what we do as producers. Is that pre-selling, and in order to make those pre-sales happen, you either have enough relationships across the world and you go to festivals and markets and meet the buyers directly yourself or/and you appoint what we call an international sales agent whose job it is to try, not to just commercialize a finished film, but also to pre- commercialize projects when they're at the stage where they can go and raise funds in the marketplace.

Lise McLeod: So at that stage, the producer's already negotiating the promotion side of the film?

Bertrand Moullier: That is an interesting question. Do you negotiate already for the marketing campaign of the film? If you're selling, for example, you're a British producer, or let's say you're a Danish producer and you're selling your film in France, and the distributor in France will take it to cinemas, will take it to people, will try and set it to broadcasters, will try to sell it into DVD such as there is these days and maybe a few online platforms.

Do you intervene? Do you have any say in how they will market their film? Well, that depends. Generally, you'll want to know how much commitment, how much money they're prepared to put behind the release of your film. That is a question that is often asked. What is your intention, and sometimes that is converted into solid commitment that form spots of the contract that you're signing to receive money upfront, but not always. After all, is the job of the local distributor to know their market and to know how to release a film. But you may want to at least have a guarantee they're not just going to drop it with insufficient marketing spend.

So it varies. I would say.

Lise McLeod: We witnessed some interesting formulas to that during the pandemic with releases for at home viewing and the like. As we open up and in addition to the cinema, I'm assuming that one would almost need to have a crystal ball to anticipate effective distribution.

Bertrand Moullier: Yes, the question of how a film is going to be exploited across the value chain in a specific territory is often the object of a negotiation between a producer and a local distributor. You have an Argentine film. You are trying to sell it to Chile. You will hope and wish that the Chilean distributor will agree to run it in the theaters first. Unfortunately, especially after years of Covid, fewer people are going back to the cinemas, and the cost of releasing and promoting the film are the same for an audience that may have been half what it used to be.

I had a recent case on the French market where they had half what they expected to have. And now, I expect that this will be more and more the case. So the temptation is to say, well, look, instead of going to the theaters, we're going to skip that altogether. Maybe just do a gala screening and we'll take it straight to transactional video-on-demand.

This is the stage where you have an exclusive window during which people can only see the film if they pay per unit to see the film. And then they will try and take it to a subscription video and ASVOD platform. That is problematic for many independent films because the promotional effect of taking a film to the theater first is still there and if you're missing this, then it may affect the performance of your film and the rest of the value chain. But it seems to be the way that things are moving at the moment, unfortunately.

Lise McLeod: You mentioned in the concluding portion of the book that there is a myth that online distribution is dramatically less costly than it was in a market dominated by analog technologies. Could you help us debunk that myth?

Bertrand Moullier: Yes, thank you. That's a very good question. So is online distribution cheaper than traditional analog distribution? There's been a lot of myth making around this whereby, you know, you just put it online and it flies, and people come in and they pay a couple of dollars and off you go.

In fact, it's a lot more complex than this. First of all, you have a dire lack of harmonization in the standards of on boarding a film or a TV series or any form of a content by platforms, be they transactional video-on-demand, or subscription video-on-demand, or advertiser-supported video-on- demand, or broadcaster-related catch-up video-on-demand services. There's as many standards it seems as there are brands out there in the marketplace, so you need to encode in so many different ways, which doesn't do any favors to your cost base. You have different standards in terms of what metadata, for example, the buyer is expecting to receive.

Very often there are issues around marketing elements, be it photographs, references to cast biographies, whatever else you've got that promotes the film. It goes from very, very low standard to exacting very high standard and all this, it has basically become a specialized form of distribution that requires a specialist skill set.

If you're trying to sell your film across a wide range of platforms. By the way, AVOD in particular, advertisers-supported video-on-demand, in markets like America and now increasingly other regions of the world, Asia, for example, have become great opportunities for smaller independent films to find market outlets. But you do have all these issues around encoding metadata, delivery standards in general, that have led to a specialty skill set, which is represented by a new-fangled form of distributor called the aggregator. And the job of the aggregator is to satisfy the demand of a whole range of online platforms, which generally prefer to have bulk content than have to decide on every single film, whether it fits their brand identity and how they're trying to reach the audience or not.

They're relying on these aggregators to literally aggregate a lot of content. Clear all the issues around encoding and on boarding requirements, and they do that for you, and if the producer goes down that route or the sales agent goes down that route, then of course there'll be added fees on top of the existing distribution fees, but they perform a very useful service in facilitating that transfer.

So beware those who say online distribution is a lot cheaper. It's not that significantly cheaper. Certainly anything is cheaper than the old analog system where we had 35 millimeter prints, each of which cost four figure or more with a kind of, you know, old fashioned marketing campaign. It's true that social media, for example, can cut corners in that respect, but don't be too easily seduced by the notion that online distribution is cheaper.

Lise McLeod: We should probably now talk about production risks.

Bertrand Moullier:With every production, there is a delivery risk, and this delivery risk is managed differently depending on where you are in the more advanced, more developed, sophisticated Northern hemisphere market economies, to a lesser degree in some of the Indian film output. There are specialized insurers called completion guarantors, or completion bond companies.

Completion guarantees is a specialist form of insurance, which again, if you have secured your chain of title and you have an E&O policy, it works a little bit in the same way. But it focuses on production, the delivery risk, meaning if something goes terribly wrong and you can't finish the film. And this is a specialist form of insurance whereby those companies are crude but very experienced technical producers, we call them line producers, or unit production managers. They will bring their expertise to those companies, and these are people who can arrive on a film set, spot immediately what the managerial issues are, and either turn the production around or if they can't do this, declare that the production has to shut down and everybody has to take a loss.

And normally then, they directly would cover that loss on behalf of the financiers who have insured themselves through that completion bond. What tends to happen most of the time, luckily, is that these people come in onto a movie set when there is trouble, and what they will do is troubleshoot.

They have what's called takeover rights, that are contractual rights, they can basically sack the producer and take over. They can sack anybody and take over, and replace in the name of doing what's necessary to finish the film. But most of the time, what they'll do is they'll be a lot more diplomatic and they will act as, they'll stop the production, they'll sit somewhere with a producer and the line producer and the kind of production office team, and they will redesign the schedule. They will try to address every single trouble, look at the cash flow issues on the production, try to sort it out and put things back on track. So that's their primary role in managing the risk. When it goes to the full scale of risk exposure and the film cannot be completed, as I said, they will cover that risk and compensate the financiers.

What I just described is 'calling the bond in', when the bond isn't called then the premium that was charged to the production budget as a fixed cost, a proportion of which, generally half of this, is rebated to the producers. Now there are other ways of managing risk. For example, in television series, in European public service broadcasters, the risk is generally assumed by the broadcaster to whom you are delivering the film. And there are territories indeed where risk management is the producer's own because there are no commercial products out there to ensure the production risk. So it's quite variable, but the production completion bonding system is onerous, but it's quite effective. And it's as I said, mostly a way of making sure that the production that's in trouble can be gotten back on track.

Lise McLeod: Your book is full of such practical information and it's a wealth of wisdom that you've imparted based, obviously, on years of experience in the industry. Thank you for your time today, Bertrand.

Bertrand Moullier: I hope that's helpful and thank you very much.

Lise McLeod: I hope that you enjoyed my conversation with Bertrand and learned more about the importance of intellectual property when creating a film. A digital copy of his book can be found in the knowledge repository of the WIPO Knowledge Center and can be downloaded free of charge. Until next time and the next Page Points, bye for now.