Volume 3, Number 2
By: Eric Ervin*
The
Alternative Dispute Resolution (“ADR”) techniques of arbitration and mediation
are fast becoming the most effective methods an independent film producer has
for protecting his or her rights in the film distribution process. Innovative, risky, yet creative films have
garnered the appreciation of the public, creating an atmosphere in which the
American independent film business is flourishing.[1] This burgeoning industry consists of
individuals and companies who are engaged in the production and/or distribution
of all motion pictures other than those generated by the acknowledged major
Taking
creative ideas, and turning those ideas into a successful film, demands
collaboration between film producers, distributors, and exhibitors. Distribution is essential for a film’s
financial success, given that it is primarily the distributor’s responsibility
to create revenue for a film. Distribution
lays the foundation for generation a revenue flow that recovers production
expenditures and funds future projects.[5] The role of a distributor is to organize and
facilitate the commercial exploitation of the film. Characteristically, when compared to films
produced by major studios, independent films are individually financed
low-budget projects. Frequently, an
independent film producer, if not financially broke when production commences,
is absolutely penniless when the film is finished.[6] Therefore, while the distribution component
is important to all film producers, it is of vital importance to the
independent film producer.
In
order to keep the distribution revenues flowing, lawyers are increasingly
choosing to use the ADR methods of arbitration and mediation to avoid the
delays associated with litigation.[7] Entertainment industry lawyers have noted
that the use and acceptance of ADR is growing throughout the entire industry.[8] The film industry has extensive experience
with arbitration due to its involvement with various labor unions that use
arbitration to resolve labor disputes.[9] Lawyers representing independent film
producers with limited resources to dedicate to litigation efforts recommend
ADR as the most effective way to level the playing field between their clients
and distributors.[10] Moreover, lawyers who represent financially
able distributors acknowledge the benefits of mediation and arbitration,
especially in foreign distribution deals.[11]
This
field guide addresses the emerging use of the ADR processes of arbitration and
mediation in independent film distribution contracts. The focus will be primarily on arbitration,
secondarily, on mediation. Part II of this
guide provides a background of the independent film business, spotlighting the
distribution aspect. Part III provides a
short explanation of ADR and its application within the entertainment
industry. Part IV identifies arbitration
as very useful in the context of a distribution deal between an independent
movie producer and a distributor. Part V
discusses the advantages of arbitration in a film distribution dispute. Part VI explains the benefits of conducting
distribution dispute arbitration through an arbitral institution. Part VII considers the rapidly growing
foreign market for independent films, and the necessity of arbitration in
foreign distribution contracts. Part
VIII examines the heightened need to use an arbitral institution in the context
of a multinational distribution dispute.
Part IX is a synthesis of this guide, providing a conclusion regarding
the value of using arbitration in an independent film contract.
II. BACKGROUND: THE FILM INDUSTRY
The
film business consists of three major areas: production, distribution, and
exhibition. Production entities identify
and develop stories and scripts, work with agents to cast actors, assemble
creative talent (i.e., directors, cameramen, and stylists), locate studio
facilities and shot locations, and, above all, organize financing of the
project.[12] When the production process is complete, in
order to generate the maximum income achievable for the film, it must be made
available to as many consumers throughout as many territories as possible.[13]
The
exhibitor shows the finished film to consumers.[14] In the context of film, the term “exhibition”
is used in a broad sense to include all methods by which audiovisual works are
displayed to the public.[15] The most common forms of exhibitors are
theatres, video stores, and television broadcasters; less common forms include
airplanes and trains.[16] The primary commercial function of the
exhibitor is to collect revenue from consumers, retain a fee, and deliver the
remainder to the distributor.[17] The secondary function of an exhibitor is to
inform distributors and producers about the types of films local consumers want
to see. The exhibitor has the closest
connection to what consumers desire.
Exhibitors are geographically limited to serve consumers that come to
their premises, or those within reach of their broadcast signal.[18] Exhibitors, therefore, need products that
appeal to consumer interests in their market area.[19] The exhibitor communicates the consumer
demands to distributors, who communicate that desire to producers. The result is the production of high demand
films, such as the unfailing action-adventure genre films.[20] Thus, one can understand why it is hard to
get exhibitors to accept independent films without big stars or action
sequences.
Distribution
is the process of supplying the finished film to the venues where the film will
be shown.[21] This definition may seem oversimplified as it
does not explain the complicated nature of the distribution process. Moreover, this definition does not reveal how
difficult it is for an independent film producer to obtain distribution, let
alone a favorable distribution contract.
In comparison, major studio films do not have a hard time securing
adequate distribution because such studios are semi-vertically integrated.[22] This means that the studio owns a production
facility and a distribution company, so it need not seek outside distributors.[23] Furthermore, the fact that the studio has
invested a significant amount of money in production gives the studio an
incentive to finance distribution of the film in order to recoup its
expenditures.
An
independent producer who lacks financial capacity and industry credibility has
weak bargaining power when negotiating a distribution deal. Whereas major producers who have stars signed
onto their project and track records to demonstrate their success can obtain a
distribution deal before actual production, independent film producers usually
have a finished film before they enter into distribution negotiations. Thus, independent producers have a hard time
acquiring distribution deals.[24] While negotiating a distribution deal, the
bargaining power of the parties is determined by the perceived desirability of
the film and how much risk each party is willing to take.[25] Because the producer has a finished product,
the distributors know exactly what they are bargaining for.[26] The distributors gauge from experience the
amount of risk they will assume, and the financial ramifications of that risk.[27] Thus, in a negotiation over acquisition of
film rights, the distributor often has stronger bargaining power than the
independent producer.[28] This is an extremely vulnerable position for
the independent producer.[29] In order to maximize their leverage
independent film producers need to know how to generate competition among
distributors.[30] Generating such competition is achieved by
strategic release of a film into the distribution marketplace. This entails such tactics as ensuring that
all screenings are shown on a big screen to a large audience, staging a
carefully planned major film festival premiere, or restricting sneak previews
in an effort to minimize pre-premiere discussion and stigmatization.[31]
The
distribution deal is created when the film producer licenses to the distributor
the exclusive right to exploit the film, for a definite amount of time, in
specific medias and specific territories.[32] It is important to recognize the necessity of
“exclusivity” in the distribution contract.[33] Exclusivity means that throughout the entire
distribution process only one party holds the rights to exploit a film during a
particular time period in a particular territory.[34] There is a period of time, or “window”, in
which the theatrical exhibitor can exclusively exploit the film.[35] Subsequent to the theatrical window, the film
is released to allied and ancillary markets.[36] Such ancillary markets include home video,
cable and network television, merchandising, music and print publication, and
even airplanes.[37] Media refers to the means utilized to exploit
the film, e.g., television or video.[38] The initial media for exhibition of a film is
typically theatrical.[39] A territory is the geographical region in
which the distributor exploits the film.[40] It is common for territories to be divided up
into foreign and domestic markets.[41] These territories can be sub-divided into
smaller areas.[42]
Typically,
the distributor pays the independent producer an initial advance for the use of
the film.[43] The distributor recoups any monies it has
expended in financing distribution process, and retains a fee for its services.[44] The producer will receive back-end payment,
i.e., money upon completion of the contract, if and only if, the film makes
enough money to cover the distributor’s fee and all of the various expenses.[45] The distributor and the producer will only
gain a profit if the distributor is able to stimulate both business and popular
appeal for the film in each media and territory.[46]
The
distributor oversees the entire process of launching a film in a certain media
and territory. The distributor must
arrange numerous licensing agreements with different sub-distributors, or
exhibitors.[47] As a method of soliciting the film to
exhibitors and sub-distributors, the distributor is typically required to enter
the film into various film festivals or film markets such as The Sundance Film
Festival and The International Film Festival at Cannes.[48] The film markets serve to generate business
deals, as well as popular word-of-mouth.
The
distributor is largely responsible for the successful performance of all
licensing deals it acquires.[49] The distributor must give each licensee a
window of time in which the licensee can exploit the film.[50] The window of use licensed to each exhibitor
must be coordinated, so that there are no conflicting periods of use, and
maximum revenue is realized.[51] For example, once a film has been exhibited
on broadcast television, it may not be desirable to pay cable exhibitors.[52] To stimulate the success of the film, the
distributor must conduct a promotional marketing campaign that will encourage
exhibitors to license the film and consumers to go see the film, rent the
video, or turn to a channel.[53] Distributors are also in charge of making
sure that all materials needed for exhibition are delivered to the exhibitors.[54] For example, the distributor is responsible
for getting the film printed, booking screens for exhibition, and ensuring
production of enough videocassettes to fill shelves.[55]
Importantly,
the distributor is responsible for collecting licensing revenues from
exhibitors. The distributor keeps
transaction records to account to the producer for all revenue received from
exhibition of the film.[56] If the film makes enough money to generate a
back-end profit (i.e., gains a profit – less the advance, fee, and expenses),
the distributor pays a percentage of such profit to the producer.[57] In the past, it was rare for an independent
film to generate back-end profit, but the recent popularity of independent
films has changed this trend.[58] Currently, new movie making technology serves
to help create high quality, low-budget films that are often one-tenth the cost
of an average studio film.[59] This offers independent producers, as well as
distributors, profit and recoupment possibilities that are increasing
exponentially.[60]
III.
ALTERNATIVE DISPUTE RESOLUTION WITH A FOCUS ON
MEDIATION AND ARBITRATION
Alternative
Dispute Resolution is characterized as private resolution of legal conflict
without reliance upon litigation.[61] Avoiding the delays of litigation, ADR
typically reaches a quicker resolution of the dispute, and limits expenses.[62] There are many types of ADR, including: negotiation, mediation, binding arbitration,
mini-trials, private judging, court annexed ADR, summary trials, and moderated
settlement conferences.[63] An agreement to enter into ADR proceedings is
created by contract.[64] Because ADR proceedings are based on contract
the parties have the ability to create the guidelines for the dispute hearing
and award.[65] The parties can select which kind of ADR they
will use.[66] The parties can set the procedural rules of
an ADR institution, or the parties can generate their own rules.[67] The parties can select the mediators,
arbitrators, or neutrals (the judges).
These neutrals are chosen because they are particularly knowledgeable
about the disputed issue. Neutrals have
neither precedent, not legal rules, to adhere to in creating an ADR judgment.[68] The private quality of ADR helps to ensure
confidentiality in regard to facts and issues of the dispute.[69] Furthermore, ADR’s private nature allows the
judgment to be entered without setting a court precedent.[70]
The
film industry is increasingly using mediation and arbitration to resolve
disputes.[71] Mediation is a private method of dispute
resolution involving a neutral third party who tries to help disputing parties
reach a mutually agreeable solution.[72] Unlike arbitration, a decision made through
mediation is not binding.[73] In mediation, the neutral helps both sides
“recognize the interests and desires of the opposing party, and to craft a
mutually satisfactory solution.”[74] Mediators work to facilitate mutually
agreeable compromise of the parties’ viewpoints and contentions, while
arbitrators evaluate and deliver a final binding resolution of the dispute.[75] Mediation focuses on participants viewpoints
individually and in relation to one another; thus it is a process that helps to
mend long-term relationships that have become frayed by temporary disputes.[76]
In
a recent survey, film industry companies and lawyers agreed that their
experience with resolving disputes through mediation has been excellent.[77] They emphasize the value of having a strong
neutral that is familiar with the intricacies of the particular aspect of the
film business at issue.[78] Although arbitration is used more in the
entertainment industry, many entertainment lawyers feel that a dispute is more
easily resolved through mediation.[79] In the entertainment industry, mediation is
primarily used to promote party communication and stabilize relationships so
that the parties can continue to work together in the future.[80] Lawyers note that mediation promotes an
opportunity for moderation and compromise of viewpoints, which leads to a
quicker settlement.[81]
Mediation
is not used as much as arbitration in film distribution disputes because
mediation is non-binding.[82] In the film distribution industry, the need
to concretely determine the use of rights necessitates a binding decision.[83] A detriment of mediation in this context is
that parties can conduct a full mediation of the issues and then continue to
operate in bad faith unaffected by the mediation order. Lawyers prefer arbitration due to the fact
that it provides more finality for the parties; a party cannot appeal and
reverse an arbitration award simply because the outcome was not in their favor.[84] The certainty of a final award allows the
distribution process to continue, and money to keep changing hands.
Arbitration
involves submitting a dispute to a neutral arbitrator for the purpose of
obtaining a final, binding award.[85] The arbitration agreement confers jurisdiction
upon the arbitrator(s) who will decide the case.[86] The arbitrator’s power to fashion an award is
only limited by the agreement of the parties.[87] The parties can designate a specific issue to
be resolved, and the arbitrator has no power to decide issues other than those
specified by the parties.[88] An arbitrator has the power to create an
award that does not follow any set legal rule, so long as the arbitrator is
acting in good faith pursuant to his jurisdiction.[89] If one party does not voluntarily comply with
an arbitration award, the other party can have the award confirmed by a court
in a short hearing.[90] Upon confirmation, the award is the same as
any other court judgment.[91] The judgment creditor can have a law
enforcement officer seize the judgment debtor’s assets to satisfy the award.[92] Importantly, binding arbitration awards are
very hard to overturn.[93] One California case, Moncharsh v. Heily
& Blasé[94],
reasoned that in return for a quick, inexpensive and conclusive resolution
of a dispute, the parties agree to take the risk that the arbitrator may make
mistakes and commit errors of fact and law.
Overall, the grounds for an appeal to vacate an award are narrow, such
as when the award was procured by corruption or fraud, or if the arbitrator
lacked jurisdiction.[95]
IV. IDENTIFYING THE NEED
TO USE ARBITRATION IN THE FILM
DISTRIBUTION CONTEXT
There
is a heightened necessity of using arbitration in the film distribution
context. Disputes over the method of
performance of the distribution contract frequently arise.[96] Some examples of performance disputes relate
to the following: whether or not the
producer has properly delivered all necessary materials to the distributor,
whether or not the distributor’s promotional marketing was sufficient, whether
or not the distributor entered the film into the necessary film festivals or
markets, and whether or not the distributor used its best efforts to solicit
sub-distributors or exhibitors in various territories around the world.
Another,
and maybe more important, reason for the special need of arbitration is that
distributors have been known to be creatively deceptive in their methods of
accounting for revenue of a film.[97] An example of this is bad faith
characterization of distribution expenses.[98] A dishonest distributor can misapply expenses
incurred on one film to another film, leaving an independent producer’s profit
negligible, or perhaps, forcing the producer into bankruptcy.[99]
To
illustrate, consider the example of the distributor who goes to Cannes to solicit
an independent producer’s film for licensing deals. The distributor is most likely marketing
numerous films and representing many different clients.[100] In the marketing of those films, there are
operational overhead costs which might include:
rental of a suite of rooms to serve as headquarters, airfare, local
transportation, lodging and meals for staff, shipping of materials, duplication
of video cassettes, and entertainment of foreign buyers.[101] The deception occurs when the distributor has
more of an interest in certain films, be it due to production participation, or
a more substantial business relationship.
The distributor will acquire an independent film, expecting it to have a
low licensing response.[102] The distributor then focuses its energy on its
preferred films and uses revenue generated by the independent film to cover its
operating costs.[103] Under these common circumstances, the
independent producer’s film benefits the distributor while the producer
receives little or nothing in return.[104] The producer is ruined at the outset because
the distributor is expecting the film to fail and does not adequately promote
the film.
Although
the film may not experience good sales, the distributor gains in a number of
ways. The distributor collects a distribution
fee.[105] As noted above, a distributor can
characterize revenues from the independent producer’s film in a way that helps
to cover the overhead of attending markets.[106] Furthermore, the distributor can characterize
advertising of its own services as advertising needed for promotion of the
movie.[107] The distributor may earn fees by marking up
the cost of various deliverables and pocketing the profit.[108] Finally, the distributor may secretly receive
kickbacks from poster designers, trailer makers, and film developing
laboratories.[109]
Arbitration
is the mechanism that equalizes the powers of the independent film producer and
the distribution company in a dispute over performance of the distribution
contract. Financial limitations preclude
many independent producers from bringing claims of breach of contract against a
financially powerful distributor. The
inability to obtain enforcement of the distribution contract creates a
situation in which a dishonest distributor continues to knowingly perform in
bad faith without worry of reprisal.[110] The ADR tools of mediation, and more
specifically arbitration, allow independent film producers the opportunity to
effectively protect their rights.[111] Therefore, it is necessary for an independent
film producer to negotiate for an arbitration agreement.[112] Distributors may not eagerly agree to
arbitration because they are more likely to have breach claimed against them;
they want the strategic protection of litigation.[113] Nevertheless, and independent producer who
can explain the benefits of using arbitration in a film distribution context
will have a better chance at convincing a distributor to agree to arbitration.
V. THE BENEFITS OF
ARBITRATION IN A FILM DISTRIBUTION
DISPUTE
There
are numerous reasons why arbitration, as compared to litigation, is
specifically useful for the independent film distribution industry. Reduction of litigation costs, the
possibility of quick resolution, and the guarantee of an arbitrator who has
industry knowledge are all contributing factors.[114] Arbitration appeals to parties who desire
confidentiality and an atmosphere conducive to continuing positive working
relationships.[115] Significantly, arbitration provides for a
scenario in which creative people can come together to produce a creative
outcome.[116]
Within
the distribution process there is a unique need to have a quick method of final
resolution.[117] During arbitration, the parties need not
continue to operate under disputed licensing agreements while their case moves
its way up a court docket, or is held up by procedural delays.[118] An arbitrator can work within the timetable
of the dispute, to construct an order in an amount of time that does not
interfere with the distribution process.[119] This is important for both producers and
distributors alike, because a film that is locked up in dispute in court may
miss its window in a valuable market.[120] The film may fail to take advantage of
advertising, a particular season, or a popular sentiment that can enhance its
profitability. This could translate into
a major loss for an independent film producer.
A film that is taken out of the distribution process, pending a court
decision, may not regain its ability to attract exhibitors, whether that is due
to the producer’s economic insolvency, or loss of reliability in delivering the
film.[121]
An
arbitral award that is final permits the film distribution process to proceed
with certainty. Arbitration proceedings
and awards are less likely to be attacked on an appeal than litigation
judgments, because the law severely limits appeal of arbitration awards.[122] Knowing that an award is final, and
relatively unappeallable, allows the parties to adjust, and then proceed with
performance, confident that current decisions will not be halted by an adverse
appellate decision.
Parties
involved can place their trust in an arbitrator who has specific experience in
the entertainment industry. In most
cases of entertainment industry arbitration, the arbitrator has experience in
the specific genre of the dispute itself.[123] There are several benefits to having an
arbitrator who is knowledgeable of the business practices of the film
industry. Lending trust to the
proceedings is favorable because it helps to create a less adversarial atmosphere,
and a more compromising attitude. An
arbitrator with experience will detect, and correct, any failure by either
party to meet industry norms.[124] Producers trust arbitrators who have an
understanding of the nuances of good faith performance. Distribution companies trust arbitrators who
have experiential knowledge, because such arbitrators know the cutthroat
protocol of the distribution process.[125] These companies would rather use a seasoned,
less-easily-swayed arbitrator, because in litigation juries often harbor a
“built-in-sympathy” for artists (independent producers) over faceless
corporations.[126]
A
unique aspect of an arbitration that is conducted during the performance of a
contract is the ability of the arbitrator to make interim orders. An arbitrator who addresses a copyright
infringement in mid-performance licensing dispute, provides a good example.[127] It is likely that an arbitrator in such a
situation will typically be asked to make an interim order, pending the outcome
of arbitration.[128] An interim order in this situation may stat
that during arbitration, a licensee should not continue to use the copyright of
the licensor or sell products (distribute, display, etc) manufactured under the
license. Also, the licensee should not
hold itself, nor one of its subsidiaries, as an authorized licensee for the
products. Furthermore, the licensee is
not allowed to grant sub-licenses, or take any other action that could possibly
affect the validity and/or value of the intellectual property rights.[129] In other cases, an interim order may be
sought to preclude a party from making a statement concerning ownership, or
disparaging the products to other distributors in the industry.[130] This is significant where the parties attend
trade fairs and industry meetings such as the various film festivals around the
world.[131] Essentially, an arbitrator can create an
order that will address both the need to maintain the process of distribution
and that of settling the dispute.
In arbitration concerning the
interpretation of a distribution contract, an arbitrator may have to fill in
areas of the contract that remain undetermined or ambiguous. This is indispensable in an industry where
there is a tendency for parties to use incomplete contracts, or otherwise fail
to specify important parts of an agreement.[132] Moreover, this is important in an industry in
which parties begin performance based on deal memos rather than long form
contracts.[133] Where neither distributor, nor the film
producer, has expressly reserved use of certain rights (e.g. radio, publishing,
or merchandising) the arbitrator can place the rights in control of the
deserving party. For example, an
arbitrator may recognize that the film producer should retain ownership of
radio and print publication rights, but that the distributor must be granted
limited use of such rights in order to advertise the film.[134]
An
arbitrator who is experienced in the film industry financing is highly valued
in accounting of revenues disputes because the film industry is notorious for
having complicated methods of accounting.[135] In distribution contracts, commonly used
terms such as “net profit” and “gross profits” do not necessarily have a single
interpretation.[136] Major distributors have contractual
definitions of these terms that are lengthy and cumbersome.[137] Frequently, these terms only have meaning in
connection with the specific definition in the contract.[138] Interpreting these extensive definitions is
hard and requires industry experience.
In litigation, explaining these terms to a judge and jury poses the
threat of uncertainty for both sides.
Therefore, in a dispute involving the calculation of profits, or an
audit, an arbitrator with a background in entertainment issues is better than a
judge who may not have the same kind of inside information.[139]
The
process of arbitration preserves party relationships, and limits the
significance of the proceedings and/or awards within the film industry
community. The less adversarial and more
compromising attitude of arbitration, as compared to litigation, helps to
maintain positive working relationships between parties.[140] The film industry is comprised of a
relatively close linked group of financiers, creative teams, and other talent.[141] Therefore, parties have a social and business
incentive to utilize and fully participate in the arbitration process, because
it is likely that parties to a dispute will work together on a future project.[142]
The
confidentiality of arbitration proceedings and awards is welcomed in such a
tight knot, publicity conscious community.
Parties confronting sensitive issues do not want to have the dispute
proceedings proliferated throughout the media.
If the dispute is litigated, the press will access all public records
available to report on the dispute.
Because arbitration records and awards are private, only the parties can
divulge the substance of the proceedings.[143] To assure confidentiality, the parties can
address privacy rights in their arbitration agreement.[144] Where the issue of privacy has not been
addressed in the agreement, or one party refuses to agree to confidentiality
regarding the proceedings and award, a party seeking privacy can ask the
arbitrator to order confidentiality as a part of the arbitral award judgment.[145]
Significantly,
whereas parties to litigation must always be aware of what the possible
precedential outcome of their case will be; parties who do not prevail in
arbitration can enjoy the fact that the award does not set an adverse
precedent.[146] Independent producers, who are at the losing
end of an award, do not need to feel as if they have provided more leverage for
distribution companies. Distribution
companies who have an award leveled against them can be pleased that the award
has not created precedent that previously tentative claimants can seize upon,
as a catalyst for litigation.
Arbitration
is advantageous because the parties can create the procedural rules for the
arbitration proceeding.[147] Arbitration is based on contract, which
allows the parties to determine the scope of the procedural rules.[148] The parties can set the procedural rules
either on an ad hoc basis, or under the auspices of an arbitral
institution.[149] Ad hoc arbitration is characterized by the rules
of the arbitration procedure being solely created by the parties.[150] The parties get together and tailor all of
the rules, including but not limited to, the scope of the arbitrator’s powers,
the scope of discovery of evidence, interim orders, and the design of the
award.[151] For example, the independent producer can
design the procedural rules of arbitration to deny the larger distributor the
procedural advantages of litigation tactics and delays; and the distributor can
limit the amount of sensitive information allowed into the proceedings.
A great deal of arbitration in
the film distribution industry is conducted under pre-set rules of arbitral
institutions.[152] The primary advantage of using an arbitral
institution is that such organizations provide pre-made arbitration rules,
drafted and refined by experts.[153] Whereas ad hoc arbitration can lead to frustration and uncertainty if a particular
procedural point has not been addressed, institutional arbitration provides a
measure of convenience and security.[154] The use of these recognized arbitration rules
helps the inexperienced to ensure that the arbitration process will be set in motion,
that it will be reasonably fair and efficient, that there will be a final
decision, and that the decision will be enforceable.[155]
VI. ANALYSIS
OF ARBITRAL INSTITUTIONS USED IN FILM
DISTRIBUTION DISPUTES
A producer who is not
experienced in ADR should use, or at least understand the benefits of using,
the services of an arbitration institution.
By using an institution the producer is assured of having rules that
help to create equal standing between the disputants.[156] Two organizations are frequently used by the
entertainment industry in domestic distribution disputes: the American Arbitration Association (AAA)
and the American Film Markets Association (AFMA).[157] The AAA is an extremely large organization
with offices in most of the major cities throughout the United States.[158] Due to the size of the AAA and its extensive
experience, the organization and its procedures are well developed and are
readily accepted and acknowledged by entertainment lawyers.[159] Though the AAA is not film distribution
industry specific, the industry uses the AAA to resolve many different kinds of
film related disputes.[160] Examples of entertainment industry disputes
that have been resolved through the AAA are varied; they range from damages to
private homes during filming, disagreements regarding the location of where a
major award event will be held, to unauthorized use of celebrity likenesses.[161]
The AFMA is film industry
specific, with a focus on the interests of domestic and international
distribution deals.[162] The AFMA helps novice independent producers
entering into distribution contracts, by providing standard form contracts with
arbitration clauses for film distribution deals.[163] The AFMA has extensive film industry
experience, covering a wide range of disputes including; agreements associated
with production, financing, multimedia licensing, sales agencies, international
licensing, domestic distribution, and exhibition.[164] This experience has enabled the AFMA to
develop unique rules that address arbitration of contracts between film
producers and distributors.
VII.
USING ARBITRATION IN MULTINATIONAL DISTRIBUTION DISPUTES
The growing foreign market for
American independent film has created a situation in which independent
producers, as well as U.S. distributors, must be aware of the value of
arbitration in a dispute concerning foreign distribution contracts. Currently, the independent film industry is
experiencing a boom in foreign licensing, because of deep-pocketed foreign
buyers.[165] The presence of privately owned television
stations and the increase of cable and satellite television delivery,
supplemented by the opening of markets due to political and economic change,
suggest that the revenues from the international film market may soon be
equivalent to the revenues generated in North America.[166] The independent film industry has taken
advantage of the new and largely untapped demands coming from foreign cable and
satellite station exhibitors.[167] In a survey conducted by KPMG, it was
reported that U.S. members of the American Film Marketing Association generated
$1.6 billion in foreign sales of American films in 1998.[168]
Arbitration is indispensable in foreign distribution disputes whether they are between U.S. distributors and foreign sub-distributors, or American independent film producers and foreign distributors.[169] Taking a foreign party to court in another country is extremely difficult, uncertain