Tolkien Trust Sues New Line, May Kill "Hobbit"

oboreruhito writes "The AP is reporting that the Tolkien Trust and HarperCollins are suing New Line Cinema for $150 million in compensatory damages, unspecified punitive damages, and a court order revoking New Line's rights to produce any more films on Tolkien properties. The Tolkien Trust says that New Line paid them only $62,500 to make 'The Lord of the Rings' trilogy of films — instead of the agreed-upon 7.5 percent of gross receipts of all film-related revenue. The suit may set back, if not kill, a film adaptation of Lord of the Rings prequel 'The Hobbit,' which Peter Jackson had recently signed up to make after his own legal row with the studio over payment for the sequels."

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Re:When will they learn...

[cbart387]

Eastwood, and others have turned to politics as their bread and butter.

Eastwood has also put his considerable clout to directing. 'Letters from Iwo Jima', 'Flags of our Fathers', 'Million Dollar Baby', 'Mystic River' (just to name the ones in the past 5 years). It seems like his ability improves with each movie he makes.

Re:When will they learn...

[Imsdal]

Jackson himself only got paid after he sued New Line.

Not true. jackson got paid according to his contract. However, his contract did not specify that he should get a percentage of the "tie in revenues" (games, toys etc.) He sued New Line to get a piece of that as well.

Re:When will they learn...

[Anonymous Coward]

Show me studio accounting books that state the exact profit made per movie not that crap. you will find it is zero or negative. This is a KNOWN FACT of anyone that has been in Hollywood or worked there. Just because you can find some silly crap on some website does not make you and expert. I worked for 6 years on sets, I was paid far less than promised because a film "did not make as much as expected". I know their bullshit very well. Oh and go ask Stan Lee about how Spider-man 1,2, and 3 did not make any money and he had to sue them for money promised. Of course those movies were flops that nobody went to see.

Please actually learn about something before you go debunking, you look very uneducated when you do it your way.

Re:When will they learn...

[jdbo]

IIRC the issue at stake was the fact that New Line struck "sweetheart deals" on much of the "tie-in revenues" which PJ was owed a piece of according to his contract; however, because these deals were struck with subsidiaries of New Line and/or New Lines's parent company, the overall $$ "New Line" (as opposed to the subsidiaries) the $$ that could have been made on those licenses - i.e. this was a shady way for the greater company surrounding New Line to move profits from the "New Line" section of the accounts (a %of which is owed to the cast and crew) while keeping it within the overall company.

one decimal place over

[gonzoxl5]

7.5% is actually a hair over $65 million

Re:Standard corporate intimidation

[Carewolf]

False quote: http://www.snopes.com/quotes/lincoln.asp [snopes.com]

Re:When will they learn...

[Kierthos]

The last 'T' stands for Trilogy.

Re:Accounting

[Anonymous Coward]

American Certified Public Accountant speaking, posting anonymous from work.

You *can* fudge these numbers easily. A firm can report anything management wants to report - the whole field of auditing grew out of trying to weed out the BS from such reports. If you read the literature, there have been some spectacular frauds perpetrated - and long before Enron and its' ilk.

If a studio tells you "Well, our revenues were only X, so you get (.001)*X = NOT_MUCH you have to prove you are entitled to more. Many recording artists don't even have an audit clause in their contracts so they are not legally allowed any mechanism to actually verify, say, CD sales numbers. Movies would be even worse to verify given that the only physical product is a DVD - the rest of the ancillary revenue is theater showings, licensing, etc. And the licensing is all to third parties - how can the Tolkein family, in this example, verify how many LOTR lunchboxes were sold when the studio is relying on the lunchbox licensee for revenue figures, and the original licensor (Tolkein) has to get not only the production company and studio to disclose, but has to also rely on third-party vendors with long-established fiduciary relationships to the studio for licensing? They hire an auditor (expensive) assuming they have the contractual right to such an audit. If they didn't get a great lawyer to negotiate their original contract and they don't have deep pockets, they are hosed.

I say this from personal experience - auditing can be a truly nauseating place to make a living.

Re:anyone remember dragon magazine

[pdwalker]

Phil and Dixie, online at http://www.airshipentertainment.com/growf.html [airshipentertainment.com]

Re:When will they learn...

[TopShelf]

But the article says this deal was for 7.5% of gross receipts, not profits, which reduces the opportunity for creative accounting.

But you're right, studios are scumbags.

Re:When will they learn...

[Stooshie]

... not like he wrote the story or anything ...

No, but he co-wrote the screenplay, directed and co-edited all three films(at the same time) and helped set up a company specifically to do the special effects. For him, it was a 10 year project, 24/7(literally). Watch the extras and you'll see he basically lived the film for the entire project. It was only because he put so much effort into it that the film was such a great success, or even got off the ground at all.

Re:When will they learn...

[edwdig]

Not true. jackson got paid according to his contract. However, his contract did not specify that he should get a percentage of the "tie in revenues" (games, toys etc.) He sued New Line to get a piece of that as well.

I believe it went something like this (numbers made up):

Jackson gets x% of the profit from New Line Pictures.
New Line Pictures sells the DVD rights to New Line DVD for $0.50 a copy. Open market bidding would've resulted in a price of $10 a copy.
New Line Parent Company makes tons of money on the DVDs. But Jackson's contract was with New Line Pictures, who barely made any money at all off the DVDs, so Jackson gets very little money.

There were probably other similar items involved, but DVDs is the one I remember specifically.

Re:Come on, the studios are right

[pthisis]

Actually, _The Lord of the Rings_ was public domain in the United States for quite a while, due to some technical mistake. The copyright was RESTORED after Tolkien's death, and the courts ruled that taking works out of the public domain was perfectly legal.

No. Wolheim (from Ace Books) claimed they were public domain, but the courts ruled against him saying that the books had never been public domain and that the Ace paperback edition violated copyright. They did not apply copyright to something that had legally been in the public domain.

See Eisen, Durwood & Co. v. Christopher R. Tolkien et al., 794 F. Supp. 85, 23 U.S.P.Q.2d 1150 (S.D.N.Y. 1992), affirmed without opinion, 990 F.2d 623 (2nd Cir. 1993)

Re:When will they learn...

[Stooshie]

I was talking about Weta digital.

Re:When will they learn...

[AKAImBatman]

which reduces the opportunity for creative accounting.

That's what you think. By selling the distribution rights to a subsidiary below cost, New Line was able to show a loss on the movie while their subsidiary was showing gangbuster profits. Since the contract was with New Line rather than the subsidiary, the result is that they didn't have to pay out any royalties.

So sorry. Maybe the next film will do better? Just sign here on the dotted line and we promise cross our hearts that the next film will show a profit. Really.

I almost guarantee that the judge will take New Line to the cleaners for such accounting. It won't change anything, though, as the studios count on it being too costly to go through a court battle to recover the money you're owed. An occasional loss in court still brings them out ahead.

Re:When will they learn...

[Tango42]

Please look up what the word "literally" means.

Re:nice

[MightyMartian]

Well, Christopher Tolkien, as JRRT's literary heir, has done a substantial amount of work, and has basically dedicated his retirement years almost solely to bringing the vast body of his father's works into print. The History of Middle Earth series is basically an in-depth literary archaeological dig, demonstrating the origins of Tolkien's mythos and its evolution from approximately 1917 when JRRT began work on The Book of Lost Tales (the earliest version of the Silmarillion) right through to the final writings in the late 1960s when Tolkien was trying desperately to reinvision the Silmarillion.

I guess that probably doesn't count as "new" works, but if it wasn't for CJRT, pretty much everything in the Middle Earth mythos other than The Hobbit and LotR would be accesible only to a small group of people.

Re:When will they learn...

[OMNIpotusCOM]

You may be right, but another part of it was the games that were made based on his script. He wanted compensation for them using his script for the game instead of going straight from Tolkien's words. He had to sue EA over that aspect of it since the games were reinacting scenes from the movie.