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  1. 1. UNIVERSAL LEGAL ATTORNEYS AT LAW “REEL BITES” Sector Focus- MEDIA & ENTERTAINMENT Media & Entertainment Vol.2, January 2010 1. Film Financing in India - Part I of the Series 2. In the News Entertainment Tax for IPL Suspension on new applications for Broadcasting TV Channels Comments to this newsletter may be addressed to: AFFILIATED TO THE CHUGH FIRM AFFILIATED TO THE CHUGH FIRM AFFILIATED TO THE CHUGH FIRM Affiliated to The Chugh Firm, USA PAGE 1
  2. 2. FINANCING OF A FILM Part I of the Film Financing in India Series Kavitha Vijay In India, the total number of admissions (people attending movies) is almost over 3 billion, which is almost double the US markets and three times that of the rest of Asia. Cinema first arrived in India in 1896 when six short films by the Lumiere Brothers were screened in Mumbai for the very first time. The Indian Film industry is the world's biggest film industry in terms of the number of movies produced and released in a year, with some Oscar nominees, considered as the highest acclaim in the entertainment industry. In the course of the years, productions of films have increasingly become more elaborate and thereby the budgets of the films are slowly inching towards those of Hollywood proportions. In the past, the financing of a film was done solely by the producer or by the production house, as the case may be on a private basis. However, with increasing budgets, the burden on a sole producer and its potential risk becomes too immense to bear. Film Finance With the Indian film industry being conferred the status of an “Industry” in the year 2000, banks have also been able to provide funding to the film producer. In India, with the entry of several corporate players, avenues of finance such as floating on stock markets, both in India and abroad, forging partnerships with regional players in India and foreign players abroad, etc are being explored. These players are steadily moving towards the Hollywood practices of slate financing, co-financing with independent producers and establishing multi-platform distribution networks. Valuation of a Film Film finance is based on determination of the potential value of a proposed film. The main factors to determine the commercial success of a film would include public taste artistic merit competition from other films released at the same time the quality of the script the quality of the cast the quality of the director and other parties Other considerations relevant to the period of release However, even if a film looks like it will be a commercial success "on paper", there is still no accurate method of determining the levels of revenue the film will generate. Legal Perspectives to the Valuation Exercise Contracts: From a legal perspective, the financiers would look at the underlying title to the script, the screenplay and the film, insurance, completion guarantee contracts and cast and crew contracts prior to extending financing. AFFILIATED TO THE CHUGH FIRM AFFILIATED TO THE CHUGH FIRM AFFILIATED TO THE CHUGH FIRM Affiliated to The Chugh Firm, USA PAGE 2
  3. 3. Title and Ownership Issues: Prior to extending finance, the financier will want to ensure that the chain of title to the script, the screenplay and the film is clearly established in favour of the producer. Where the story of the film is written by a script writer (in certain cases, the director of the film will be the script writer), the story can be bought by the producer by the execution of a purchase agreement. In certain cases where the script writer is unwilling to sell the script, a copyright license agreement can be executed for the producer to license the rights to the script. A script writer can also be employed by the Indian producer to write a script and his/her employment agreement would need to capture assignment of all intellectual property rights created in any “work product” from him/her in favour of the producer. In some cases, the script of a book can be taken and adapted into a screenplay. In such cases, publisher’s release agreement can be executed enabling the Indian producer to adapt the book into a screenplay. Such agreement would also grant a license to the producer to adapt the script into a screenplay. Similarly, a Hollywood or other foreign production can become the storyline for an Indian production. Whatever be the method adopted by the producer, the rights to the underlying storyline has to be assigned (bought out) or licensed in favour of the producer by the owner of the underlying intellectual property rights. Each of the above agreements would need to cover the following critical aspects: extent of the copyright license / copyright assignment rights; duration and territory of the copyright license / assignment rights; manner of credits to the original author/writer of the script/story; waiver of the author’s/ writer’s moral rights and right of the producer to alter/ modify the storyline; right of exploitation of the film by the producer including the right to make derivative works; consideration for the purchase/ assignment/ license and/or royalty payments as negotiated between the parties; Right to freely assign in favour of a third party (this is important for assignment in favour of a financier as security); Standard representation and warranties on the ownership of the intellectual property; and Indemnification for any damages/ losses sustained by either party. The ownership of the underlying intellectual property rights by the producer is paramount for any film financing transaction. A chain of title opinion letter is usually required by the financier as a condition precedent for the financing of a film production. Use of an experienced attorney may help parties immensely at this stage. Case in Instance The importance of securing the underlying intellectual property rights to any script was recently highlighted when author Chetan Bhagat accused the makers of "3 Idiots" of not giving him and his book enough credit. It is the contention of the writers in India that they are often relegated to the background and not given their due credit. The Film Writers Association of India is now working towards framing a "model contract" to ensure writers get a fair deal. AFFILIATED TO THE CHUGH FIRM AFFILIATED TO THE CHUGH FIRM AFFILIATED TO THE CHUGH FIRM Affiliated to The Chugh Firm, USA PAGE 3
  4. 4. IN THE NEWS: Introduction of Entertainment Tax Bar on new applications for for IPL broadcasting TV channels The Maharashtra Government has The information and broadcasting ministry, declared cricket as an entertainment sport which formulates media policy, has suspended forty-five years after it declared horse accepting applications to uplink television racing as entertainment. Besides cricket, channels from India and to downlink channels pubs, discotheques, internet protocol into the country as per a notice dated 18th television (IPTV) and permit rooms with a January, 2010 with immediate effect. The live orchestra (dance bars earlier) will also ministry was of the opinion that it was attract a similar tax. The matches played necessary to revisit the present policy for within the BMC’s jurisdiction will attract a uplinking and downlinking with respect to the 25% tax, in other civic bodies it will be approach towards grant of permission including 20% and in the rest of Maharashtra it will the eligibility criteria and the terms and be 15%. Chief minister Mr. Ashok Chavan conditions of the permission. The has said the tax will not be applicable to recommendations of Telecom Regulatory In the News: Ranji trophy and school Test matches, Authority of India (TRAI) have been sought by cricket. The tax will be applicable to all the ministry in this regard. However, it is the one-day international matches, IPL 20-20 industry’s contention that it is important for cricket matches and any similar forms of the government to deviser stricter entry norms the game in the future. rather than a suspension of applications. Disclaimer This document is intended as a news update and is not legal advice to any person or entity. Before acting on the basis of information in this document please obtain specific legal advice that may vary per the facts and circumstances presented. Universal Legal does not accept any responsibility for losses or damages arising to any person using this information in a manner not intended by the firm. Where can you contact us? Bangalore 302 REGENCY ENCLAVE, 4 MAGRATH ROAD, BANGALORE - 560 025. T +91 - (080) – 4123 3140 PARTNERS: Partha P Mandal, Ramesh Thyagarajan Chennai 9/5, PADMANABHA NAGAR, II STREET, ADYAR, CHENNAI- 600 020. T +91 - (044) – 4218 7857 PARTNERS: Aarthi Sivanandh, Kavitha Vijay New Delhi A-2, EAST OF KAILASH, NEW DELHI - 110 065 T +91 - (011) - 46581691 PARTNER : Kapil Arora Mumbai 312 TURF ESTATE, SHAKTI MILL LANE, OFF DR. MOSES RD, MAHALAXMI, MUMBAI – 400011, T + 91 – (022) 40046647 PARTNER :Sharanya G Ranga Also accessible on AFFILIATED TO THE CHUGH FIRM In India FFILIATED TO Tis restricted for regulatory reasons (as are all international/foreign registered law firms) from practicing local law. This means that if a matter A The Chugh Firm HE CHUGH FIRM needs advice on any India law issues we will arrange for this advice FFILIATED TO and issued by FIRM A to be provided THE CHUGH Universal Legal in India. AFFILIATED TO THE CHUGH FIRM Los Angeles: 15925,Carmenita Road, Cerritos, CA 90703-2206 :(562)2291220 | :(562)2291221 Silicon Valley: 4800,Great America Pkwy, # 310, Santa Clara, CA95054 | :(408)9700200 st New Jersey: 70,WoodAvenue South, 1 Floor , Iselin,NJ08830 Affiliated to The Chugh :(732)2058600 | Firm, USA :(732)2058601 PAGE 4 Atlanta: 2310 Park lake Drive,# 525,Atlanta, GA30345 :(770)2701860 | :(770)2706460