The entertainment industry is no exception to the global ramifications of COVID-19.1 One particularly devastating effect on the $2.2 trillion industry has been on movie releases, as nearly all of the nation’s movie theaters have shut down indefinitely.2 Notable affected movie releases include Mulan, A Quiet Place: Part II, No Time to Die, The Love Birds, Fast and Furious, and The Artist’s Wife.3 Disruptions in the movie production and distribution chain will have an enduring ripple effect on intellectual property and contractual rights throughout the industry.4 Wherein content creators can see their rights withheld for lengthy periods, production companies could be forced to reevaluate distribution platforms, and wherein release issues could affect post-distribution, such as award cycles and bonus compensation.
Because production and release schedules for films are organized and planned well in advance, shifting release dates could bottleneck the industry and affect many individuals who have intellectual property rights tied to production timelines.5 As early as the film development stage, entertainment entities secure various contracts with content creators and artists.6 Similar to what most industries are currently experiencing, many production companies are attempting to invoke force majeure clauses to suspend contractual obligations and maintain grip on intellectual property rights.7 However, in entertainment contracts, force majeure clauses are not the sole instrument for expanding the life of a contract. Nearly all option contracts will allow production companies to purchase extensions.8 For some projects, this could be a viable route for production companies to prolong contracts without facing backlash from more leveraged content creators. In some cases where extension options are unavailable, production companies could also exercise the option itself and use the period between exercising the option and commencement of principal photography to prolong their control over the intellectual property rights and prevent reversion rights.9 While these periods vary across contracts due to differences in leverage, these periods could allow production companies to control the rights for nearly ten years longer.10 As the effects of movie release postponements trickle into other projects, production companies will be forced to not only evaluate the applicability of force majeure clauses but be prepared to utilize other instruments to maintain control over intellectual property rights. Conversely, content creators should be aware of the potential holds on their intellectual property rights and be prepared for these contentious issues now and in later contracts.
As movie postponements stand to affect legal rights and obligations well into the next decade, the focus on produced, distributable work becomes the critical point for long-term stabilization and success. Production companies with existing agreements in place to release movies in theaters, such as marketing, promotion, and distribution agreements, face major costs to adjust. 11 Some estimate that releases, such as No Time to Die, will take a $30 to $50 million hit for a seven-month postponement.12 For those production companies who could even face the reality of having to engage in last-minute streaming service contracts to halt financial hemorrhaging, the legal issues are compounding.13 Some practical legal issues production companies will face are potentially breaching distributor contracts; severely compromised leverage in bargaining with streaming services, who are in a better position to determine the material provisions of a last minute contract; promotional and marketing issues, as individuals receiving credit on billing blocks of a certain size throughout brick-and-mortar establishments may face less recognition; and likely hard hits to compensation, as box office releases generate the most revenue and traction in a movie’s release.14 Each of these issues comes with costs that will not only affect the success of the postponed movie but will additionally contribute to the control of intellectual property and contractual rights of others throughout the entertainment supply chain.
In the post-distribution stage of a movie’s life cycle, award cycles evaluate not only a movie’s creative success, but the financial success based on the distribution platform. Today, the entertainment industry is harshly divided on distribution platforms, such as streaming services versus in the box office.15 Some hostility comes from film industry insiders’ refusal to break cinematic tradition and from their inability to adequately compare movies released on streaming services versus the box office due to vastly different characteristics, such as revenue generation.16 With movies released on streaming services facing lesser prospects of winning awards, industry professionals, who had originally anticipated a box office release, may be faced with diminished award-based bonus compensation, as well as facing the reputational damage.17 As postponement continues to wrinkle distribution, movie industry personnel may see their contractual rights upended and may seek to require certain contractual obligations to be carved out for future movie release delays.
As the world increasingly relies on entertainment experiences to escape from the harsh realities of COVID-19, just a few months of movie release postponements not only affect our viewing experiences but create a lasting effect on intellectual property and contractual rights throughout the industry.