August 25, 2008

Higher Stakes Alter Hollywood Deal-Making

By Michael Cieply

How could this happen? The question springs to mind as 20th Century Fox claims the rights to the graphic novel on which Warner Brothers is basing "Watchmen," its giant superhero movie.

Peer deeper into the murk of Hollywood's business practices, though, and the question becomes: How could it not?

The film industry was buzzing last week after a U.S. judge here allowed Fox to proceed with a lawsuit contending that Warner had filmed "Watchmen" without bothering to acquire rights that Fox says it has owned for 22 years. This eagerly anticipated movie is directed by Zack Snyder, of "300" fame, and is based on the illustrated series, republished as a graphic novel, by Alan Moore and David Gibbons.

Warner, of course, begs to differ with Fox. So the studios are squared off for battle. Fox wants an injunction blocking the movie's release, planned for March 2009. Warner wants Fox to go away.

Studios have certainly fought like this in the past. Metro- Goldwyn-Mayer and Sony Pictures Entertainment, for instance, swapped lawsuits a decade ago over Sony's plan to make a series of James Bond films to rival MGM's. MGM won, more or less, after Sony settled and dropped its films. But Sony soon wound up distributing a Bond movie, the highly successful "Casino Royale," as it became financially involved with a reorganized MGM.

That battle grew from a decades-old fight between the filmmaker Kevin McClory and the author Ian Fleming over the rights to "Thunderball." McClory had contributed to the screenplay.

The Fox-Warner tiff turns on matters potentially more nettlesome to the industry at large. Central to Fox's complaint is the mysterious matter of what is called turnaround.

On its face, turnaround is a contractual mechanism that allows a studio to release its interest in a dormant film project, while recovering costs, plus interest, from any rival that eventually adopts the project. But turnaround is a stacked deck.

The turnaround clauses in a typical contract are also insurance for studio executives who do not want to be humiliated by a competitor who makes a hit out of their castoffs.

That trick turns on a term of art: "changed elements." A producer of a movie acquired in turnaround who comes up with a new director, or star, or story line, or even a reduction in budget, must give the original studio another shot at making the movie because of changed elements, even if a new backer has entered the picture.

Thus, "Michael Clayton" was put in turnaround by Castle Rock Entertainment, which, like Warner, belongs to Time Warner. When George Clooney agreed to star in it, however, Castle Rock stood on its right to be involved as a producer of what turned out to be an Oscar-nominated film.

Fox, in its complaint filed in February with the U.S. District Court for the Central District of California, contended, among other things, that Lawrence Gordon, a producer of "Watchmen," was given a somewhat unusual perpetual turnaround right under an agreement reached in 1994. Such rights are conventionally given for a finite period, but Gordon, as a powerful producer who was once a Fox studio chief, may have had an edge.

According to the court filings, Fox had declared its willingness to part with the project under certain terms in 1991. In any case, Fox says, Gordon was supposed to resubmit "Watchmen" to Fox every time he came up with a changed element.

There certainly were changes. At one point, Terry Gilliam was supposed to direct it, at another, Darren Aronofsky, and at still another, Paul Greengrass. Several writers have also been attached to the project.

Paramount, still another party in the mix, was once close to making the film. But its new chairman, Brad Grey, backed away and created a turnaround of his own in 2005.

Tantalizingly, Fox's complaint, which does not name Paramount, said that Warner settled a dispute with an unidentified "purported rights holder" by sharing part its own claimed interest. Patricia Rockenwagner, a Paramount spokeswoman, said her studio had foreign distribution rights to the film.

Warner gave "Watchmen" the go-ahead when Zack Snyder took on the project. Yet Gordon, by Fox's account, never checked back with Fox about this.

Gordon did not respond to requests for comment. Warner, both in court and in a statement last week, said it had done everything legally necessary to make the film.

In the real world, of course, turnaround long operated with a certain degree of messy pragmatism. Elements might change. Producers would proceed on a wink and a nod.

Now, Larry Stein, a veteran Hollywood lawyer at Dreier Stein Kahan Browne Woods George, said, studios "are securing their self- interest in every way they can." After all, who wants to slip up when the fifth sequel to "Batman" can take in half a billion dollars at the U.S. box office?

Originally published by The New York Times Media Group.

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