KHIKS partner Chad Fitzgerald was quoted in Variety in Ted Johnson’s article on the lopsided division of profits between studios and talent. Traditionally, the studios have divided up home video profits from a universe of only 20% of the total profits made by the film.
That’s because when contracts governing home video profits came into existence, the method of distribution was through VHS tapes, which were expensive to produce and distribute. So the studios said they could only afford to consider 20% of what a film had earned when calculating profit participation shares.
However, now that home video distribution is done primarily through digital download rather than physical media, the studios’ high-expense argument no longer holds water. And some even argue that the home video model isn’t valid now since downloads are more like television. After all, Netflix, the largest digital download provider, doesn’t even keep track of the number of downloads, which means royalties earned on a film are more like syndication than number of units sold off a store shelf.
Chad sees it as a major change and feels like the whole contract structure needs revamping when he says, “On the dealmaking side this is a big issue and it’s a big issue on the litigation side as well.”
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