By: Bruce E. Colfin
Until a relatively short time ago, common use of interactive laser video disc technology was a dream of the future. Neither affordable nor widely known by the general public, it was used primarily as a training or instructional tool by such organizations as the department of defense for training fighter pilots, or major corporations for institutional training.
Just in the past few years, audio, film, video, and computer technology has blended to create interactive laser video. In more recent times, the availability of laser video technology has proliferated to the extent that the retail cost to the consumer has dropped significantly. Although still not inexpensive, the technology and available programming is now attainable by small businesses as well as the general public. Many existing computer systems can be upgraded, and the cost for the addition of a CD-ROM drive, sound cards and audio speakers is easily affordable if the purchaser has some knowledge of the technology.
As the market has matured and grown, interactive laser video programming is now regularly produced utilizing a variety of media which may include visual images which have been videotaped, filmed or produced by computer, various types of graphics and other art, animation, text, and music. Presently, there are a number of different competing interactive systems available to the public. Some of these systems have been funded and developed by major multinational entertainment and communications conglomerates.
There is increasing demand and a continuously growing marketplace for all uses of interactive laser video products, including entertainment, education, information, instruction, games, training, and other uses which may be combinations of the above. This article is directed toward future thinking producers of interactive laser video programming who are looking to take advantage of a growing mass market.
The production of interactive laser video programming is a complicated and expensive process. As a variety of media are drawn upon for interaction between computer and laser video disc, additional rights must be acquired by the producer. The significance of being aware of, and acquiring, the proper rights when producing an interactive video program cannot be underestimated. What follows is an overview of some of the aspects that must be considered in an agreement which contemplates the production of interactive laser videos, it is by no means complete.
The interactive laser video production company, if it is the financier as well, will be the executive producer and/or owner of the copyright in the program. In the digital world of computers, the master of the program will be contained on some form of memory media or software, which when completed, will be in laser compact disc form.
Although many movies and long form music videos are found on the larger 12″ video disc, interactive laser video discs designed for the consumer are in the compact disc form. All laser video discs are not compatible with every laser video disc player or CD ROM drive. There are different technologies, systems and formats available. There are programs which are designed primarily for operation on specific laser video systems. The producer of such a program, if it retains the right to distribute the program to the consumer, may actually need a license from the “operator” of the system (“platform”) for which the program is designed, in order to utilize the proprietary technology or intellectual property that is specific to that system.
In the instances in which the system operator seeks to control distribution or may have commissioned the production, it will seek to have the producer assign any of the copyrights in the work which the producer owns or has created. In other circumstances, the producer will retain all rights in the program other than those rights that are owned by, or have been provided under license from, the system operator to the producer.
The ultimate distributor may be the manufacturer or publisher of the laser disc and must also be concerned with the acquisition of all the necessary rights. The agreement between an interactive laser video production company and any ultimate owner or distributor will generally require the production company to provide a guarantee that it has received releases or licenses for all copyrighted or proprietary material of any other nature that may be included in the videodisc. The materials include music and sound recordings, the other types of media materials may include text, graphic art from other sources, photographs, film, “stock footage” and fine art reproductions. Most likely the distributor will attempt to solve this problem by insisting that the producer indemnify the distributor. In addition, the executive producer may be required to secure errors and omissions insurance to cover any unintentional lapses in clearances that may occur, but this still may not suffice.
The producer will subsequently choose a director and additional production personnel, including lighting director, art director, camera operators, set designers, audio and video engineers, film or tape editors, computer, photo, special effects technicians, graphic artists, as well as animators. Even make-up artists, hairdressers and various assistants may be necessary. Some of the personnel may be subject to the director’s approval as well. The design or plan may include “storyboards” and/or shooting scripts that specify the details and manner in which the formats interact. If not selected by the executive producer, these specifications are usually subject to its approval.
Certain rights must be obtained from the professionals involved in the production. The executive producer will seek to buy all rights that any artistic or production personnel may have by a one time only payment to all the participants involved. The agreement between the participants and the executive producer will usually be either a “work for hire” contract or an assignment of all rights (“buy out”), which has the effect of limiting or extinguishing the rights to future income for the hired professionals from the exploitation of the completed video product. Some participants, including the producer and director, may be entitled to, or may negotiate for, a share of future income in the form of royalties.
In addition to acquiring any rights from the technical participants and performers in the video, prior to releasing the final product, certain rights in and to any musical elements must be acquired as well. If any musical compositions are included in the programming, the production company must seek a licensing agreement with the owners of the master recording as well as the underlying musical composition.
Both a master use license and a synchronization license must be acquired. The master use license is acquired from the company which owns the rights to the master sound recording, usually but not always a record company.
Record companies are generally the exclusive owner, throughout the territory agreed to, of the rights to any recorded music featuring an artist signed to it. The company also owns the sound recording copyright (and renewals, if any) and the unlimited right to use and exploit the sound recording (and or/music videos) in any configuration of communication media. This may possibly include use in interactive media which was invented long after the term of the production agreement had ended.
The synchronization license is acquired from the publisher of the underlying musical composition for the use of the tune in synchronization with visual images. In addition, it is conceivable that there will be other uses of musical compositions as the result of the new interactive media.
It is to the producer’s advantage to use musical compositions that are created solely for the laser video program. In this case, the producer would, by agreement, be the owner of what the music industry defines as a “Controlled Composition.” If the songs are not controlled by the producer, it is the producer’s ultimate responsibility to secure the rights to use the songs in the interactive program.
From the conclusive owner of the program’s point of view, if the payment to the producing company (including directors and producers) is not a one time “buy out” of all rights, then any sums of money which are paid to the producing company would be considered advances that are subsequently recoupable by the company from the royalties otherwise payable to the producer from the sales or other uses of the product.
The owner of the program or its distributor may seek to pay royalties from its “net receipts”, or only in the event all of its costs have been recouped. However, net receipts can be very tricky. A typical contractual definition for “Net Receipts” can be extremely broad and may include all amounts received by the company, less any amount which the company paid in connection with the exploitation of the videos, including but not limited to all of the production costs, payments to third parties, promotion and publicity costs, advertising, shipping, replication, processing and compact disc duplication costs, as well as distribution fees.
It is important to be extra cautious when any contract states that payment will be from net receipts. If the negotiator is not careful, the included fees and costs which may be deducted from a distribution company’s receipts can account for most of the money received. Distribution fees payable to third parties can be a significant percentage of the company’s gross receipts. Thus, an inexperienced negotiator might naively believe he entered into a great deal merely because he will receive a portion of the company’s net receipts. Quite often, there is no “net” left to be credited to the producer’s royalty account after every expense is paid out of the income generated from the sale of the product.
If the ultimate consumer of an interactive laser video disc is the mass market, it is in the producer’s best interest to control all of the rights to exploit the programming. However, because of the extremely high costs involved in the production, this may be realistically impossible. Even so, if produced for entertainment purposes, the artistic and creative control of the production may be a point for negotiating consideration. In the event a producer does retain the ownership of the final product, it will then be possible to license it to various other parties for distribution, sale or other uses, on a territory by territory basis.
© 2000 Jacobson & Colfin, PC