Getting Down to Business

July 1, 2015

“Like any industry, motion picture and television production is its own world with its own methods of doing business and its own complexities,” says Andrew Velcoff, a shareholder in the Entertainment Group at law firm Greenberg Traurig, LLP, which has offices in Atlanta and worldwide. 

Georgia-based attorneys who represent production clients deal with an array of issues regarding intellectual property, talent, locations, vendor services, clearances and tax credit qualifications.Productions also require insurance for general liability, equipment, automobiles, workers’ comp and more. Increasingly, they’re consulting Georgia insurance agents when they come to town.

 

Legal Services Span Production Life Cycle

 

Velcoff was senior VP and general counsel/legal with Turner Entertainment before joining Greenberg Traurig. His client roster has included major studios, networks, independent producers, awards shows and musical artists.

 

“We operate not only as lawyers for our clients but often work with them to shape business models and business strategies,” he says. “It’s extremely rewarding to play a role in helping them to bring a concert special, a film production, a TV series or an awards show to the market – sometimes from just the beginnings of an idea to a reality. Of course, that’s what this industry is ultimately about.”

 

Velcoff’s work typically encompasses representation of producers who are acquiring intellectual property, raising financing, engaging talent and securing distribution and exhibition. “Although there are generally accepted norms for how business is done, projects often depart from the norms in one way or another because each project is unique,” he says. “Sometimes we have to be creative and flexible to make things work.”

 

Stephen Weizenecker, a partner in the Atlanta office of Barnes and Thornburg, LLP, works exclusively in film, television, technology and the video games industry. 

 

His involvement spans “creating content to distributing content and maximizing production incentives generated as a result of the production of that content,” he explains. “Clients come to us with an idea and walk out with a finished product – we help with all stages in between.”

 

At least half of Matthew Schwartz’s practice at the Schwartz Law Group in Atlanta is devoted to representing motion picture and television producers, writers and actors.

 

He does a lot of work for reality programming, a genre that has generated its own set of legal issues. “Reality TV has presented a lot of issues people did not foresee but which they’re adjusting to now,” Schwartz says. “Producers are often dealing with many people they don’t know a lot about, so we do much more extensive background checks on these participants to make sure they’re not hiring people with undisclosed moral turpitude concerns. Their employment is subject to the results of these checks.”

 

Some reality unknowns become celebrities and forge new careers on the basis of their programming success. “Since they’re making money off their new found fame, networks regularly insist on having a 10-25 percent interest, for a specific period or sometimes indefinitely, in any business venture the celebrity creates within a certain number of years to their last show,” Schwartz explains.

 

The evolving media landscape also poses new legal challenges for producers. “The traditional issues haven’t changed: who will be owning what content, under what circumstances can a deal be terminated, what kinds of controls will there be on merchandising, trademarks, names and likenesses. What’s changing is the model of how to make the business more profitable and how to structure deals to exploit those opportunities,” Schwartz reports.

 

“There are some transactions where only five percent of the economic worth is in some new media yet you spend 95 percent of your time negotiating the new media provisions because the marketplace is still evolving,” says Velcoff. “The parties to a deal may have a completely different perspective of what rights are worth, or they just don’t know because the market has not yet become established. Even when you think you’ve figured it out and established some norms, something new pops up on the horizon.”

 

Georgia’s generous production tax credits are key to attracting productions to the state, but qualifying for them may not be a cut-and-dried process. “There’s always some thorny issue to get through,” says Schwartz. He recently dealt with the eligibility threshold that requires the applicant to spend a minimum of $500,000 on qualified Georgia vendors. His client was structured as two entities, whose total expenditures easily exceeded the required threshold. But each entity alone did not meet the benchmark. The Department of Revenue denied his client’s eligibility until Schwartz was able to show that the two entities “essentially functioned as one-and-the-same as one entity was actually liable for the expenses of the other pursuant to an indemnity agreement.”

 

According to Velcoff, a new legally-intensive process involves securing financing against the anticipated Georgia tax credit. “Rather than waiting until the end of a film to monetize the credit producers are doing it upfront; it can be, however, a complicated transaction,” he notes.

 

Weizenecker and his firm have been instrumental in developing production incentives for the Dominican Republic, the City of Qingdao, China and the US Virgin Islands. “We help create programs for governments that want to attract production,” he says. “We draft and revise programs and lobby to improve existing programs.”

 

Georgia has been so successful in enticing production to the state that it now has to “focus on delivering the infrastructure” to support the boom in business, Weizenecker says. “Warehouses alone are not going to suffice for some productions. Producers are looking for dedicated sound stages and support services and talented crews to staff the production.”

 

Weizenecker’s firm was involved in bringing UK-based Pinewood Studios to town and is working on the majority of physical infrastructure being developed in the area, including Eagle Rock Studios in Stone Mountain and Atlanta, Atlanta Metro Studios in Union City, and others. Velcoff represents the Atlanta Media Campus developer, Jacoby Development, which is converting the former Lucent Technology facility in Norcross into sound stages. “Georgia is building really significant brick-and-mortar assets in geographically diverse locations,” he reports.

 

Although motion pictures and television currently lead the production pack, Weizenecker believes the video game industry, which also benefits from the tax credit, will be the next big thing. “It’s our next growth area. We have the education infrastructure for the business here, and graduates now know they can stay and create jobs in Georgia. I expect we will see great things from that sector over the next year.”

 

 L to R: Stephen Weizenecker, Matthew Schwartz, Lynn Matthis, Bob Barrow, Andrew Velcoff

 

 

Ensuring Insurance Coverage

 

Bob Barrow, who heads Atlanta’s Barrow Group, LLC, insurance agency sees new film and television clients every day now. “The majority need guidance on coverage, or they’re told by a third party or vendor what they need,” he says. “Two-thirds require short-term coverage, from prepro to post on a specific project. The rest, such as commercial production companies, rental houses or studios, purchase annual policies and are covered for a number of projects within the year.”

 

Lynn Mathis, president and COO of Williams, Turner & Mathis, Inc. in Atlanta, concentrates on insurance for the film and TV industry – something she’s been doing for 30 years. “They need some of the same lines of coverage as other businesses, but not that many insurance companies are comfortable with this industry. We contract with carriers who write coverage for independent producers, DICE (documentary, industrial, commercial, educational) production companies and many other film-related support companies.” Compared to other business niches, production “doesn’t think far enough ahead” about insurance needs, Barrow finds. “I’ll get a call on Friday from a production in California that’s picking up equipment for a weekend shoot and suddenly realizes they need coverage. Sure, we can turn that around and they can pay by credit card, but if you need something in 20 minutes you’re not going to get the lowest cost. We have to use web-based quoting, and that won’t be the cheapest.”

 

Mathis also notes that producers may not budget enough to cover all the insurance they should carry – something especially true of first-time filmmakers.

 

They need general liability to cover property damage and bodily injury to third parties not involved in the production; a separate category insures third-party locations against damages. Every rental house requires that customers have equipment insurance; a policy can also cover props and wardrobe, especially if a production is a period piece. Auto insurance covers cars used on the production, PAs running errands for the show and even talent.

Union shoots require workers’ comp but most non-union productions and student films opt out of coverage. “We suggest workers’ comp for every production, but the lower the budget the more producers want to skip it,” says Barrow. “They’re rolling the dice. If someone is injured and isn’t covered by general liability the production will have to pay.”

 

Negative and faulty equipment coverage may be something to think about, too, says Mathis. It grew out of risks during the film lab process and in the digital age now covers reshoots due to equipment malfunctions or hard drive crashes.

 

Activities with a high degree of hazard or risk, stunts, aerial cinematography, topside and underwater shoots, pyrotechnics and big animals, need to be declared and added to general liability if possible.

 

“The whole area of equipment drones is new and raises liability concerns,” adds Barrow. Mathis has insured several clients using drones. “They got into drones at the very beginning and know what they’re doing: They always have a camera operator, a drone pilot and someone watching the crowd. But drones are so inexpensive that a lot of people buy them and don’t know what they’re doing,” she notes. “We’re waiting for the FAA to issue guidelines and for policies to be amended or changed. General liability excludes aviation but some companies don’t consider drones aviation since they are unmanned.”

 

Errors and omissions coverage is unique to the industry. Mathis likens it to medical malpractice insurance. “Most distribution contracts require it,” she says. “If you’ve made a mistake and neglected to get a release from every location, extra, cast member and crew this protects you.”

 

Errors and omissions coverage often isn’t considered in budgets, but it can be added later on. “Frankly, until the production gets a distribution contract it’s a waste of money – if nobody is going to see this independent film they don’t need,” Mathis explains. “The distribution contract has specific requirements for coverage, so we’ll issue it then to comply.”

 

Also specific to the industry are completion bonds, which guarantee the finishing of a production; they are issued by a few completion bond companies and are expensive to obtain. For that reason, Barrow and Mathis say they’re used only for films with $5 million or higher budgets.

 

Navigating the insurance maze needn’t cause producers to tear out their hair. “Call for help,” says Mathis. “People often call their home and auto insurance agents about production insurance. But this is a specialty area. Try to find insurance agents who work with the industry, and don’t be put off when we ask a lot of questions!”

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