The secret of United Artists' success was the adoption of a particular brand of independent production system that had its foundation in Krim and Benjamin's decision to provide complete production finance to independent producers. Instead of going to the banks or other financial organisations to obtain production funds, especially during a period when banks were unwilling to take risks, independent producers would be financed by United Artists in exchange for worldwide distribution rights of the films they would produce. Although at first sight this arrangement is reminiscent of the agreements some independents made with the major studios in the 1940s (unit production), it nevertheless has a number of characteristics that sets it apart from studio-controlled filmmaking. To identify these characteristics we shall examine the details of a typical distribution agreement between United Artists and independent producer Stanley Kramer's Lomitas Productions, which was signed on 31 December 1957. The contract has two main sections, one that focuses on the details of production and one on the details of distribution.37
Under the provisions of the contract Stanley Kramer's company would produce six films (at least three in which Kramer would be a producer-director while in the rest he would undertake only the role of the producer) for United Artists within a three-year period between 31 December 1957 and 31 December 1960. All the films would be prestigious productions, either based on pre-sold properties - including: Inherit the Wind (based on a produced play by Jerome Lawrence and Robert E. Lee); On the Beach (based on the novel by Nevil Shute); and My Glorious Brothers (from the novel by Howard Fast) - or they would be premised on original screenplays (with two screenplays already agreed upon by the two parties: The Defiant Ones and Invitation to A Gunfighter).
As the films' financier, United Artists retained a number of approvals (or check points) which were essential for the signing of the deal and which included the following:
1. the literary property or subject matter on which the picture is based
2. the production budget
3. the cast budget
4. the production schedule
5. male and female stars
6. the producer
7. the director
8. the locale or locales of production of each picture, if it is to be produced outside the US38
As can be seen, the distributor did not retain a right of approval of the screenplay (provided of course that it could be filmed within the approved budget), which was a major concession to a creative producer like Kramer and unheard of in studio agreements with independent producers. Furthermore, the contract specified that the producer would not have to submit daily rushes to the distributor, even though the latter would have the right to view a rough cut of any of the six productions before editing for final cut took place.39
In terms of budget, United Artists would lend the agreed funds to Lomitas Productions or, alternatively, would guarantee bank loans to the production company. The distributor would be also responsible for pre-production advances (cost of literary properties; costs of writing the screenplays; other usual pre-production costs), would provide a weekly salary to Kramer for administering the productions for the duration of the contract, and would guarantee completion money (funds allocated to the production company if the film runs over-budget). In other words, United Artists would be the complete financier of Lomitas Productions, from pre-production to completion, but once the agreement (with all the distributor's approvals) took place, the producer would be in effect free to make the type of picture he or she wanted without any form of interference from the investor/distributor.
From the time a negative print was delivered to the distributor, United Artists had the right 'to examine the material and make recommendations'.40 This provision, however, was of consultative nature and could not be forced upon the producer, unless the film was not deemed suitable for exhibition for technical reasons and therefore could not obtain an MPAA certificate. Then United Artists would discuss distribution strategies with a representative of the production company retaining, however, controlling judgement of the overall marketing plan. The distributor then would undertake the release of the film worldwide through its global distribution network, or in the areas where UA was not represented through foreign sub-distributors.
United Artists was granted permission by the production company, which was the copyright holder of the picture, to exploit the film for a period of ten years, after which the production company had the right to buy the distributor's interest in the picture for an agreed price. This was another of the unique selling points of United Artists, an exception among the majors that offered independent producers copyright of their pictures. And if a producer physically owns the rights to the films his or her company produces, then this producer has every reason to lay claim to the label independent, despite his or her relationship with one of Hollywood's seven main companies (by 1958 RKO had gone bankrupt, bringing the number of majors down to seven).
Once the film was in release, the distributor was responsible for the accounting of the film's gross receipts, which were defined as follows:
1. domestic theatrical gross receipts (from US and Canada and from other outlets such as the Army, the Navy, hospitals, and so on)
2. foreign theatrical gross receipts (from foreign markets or outright sales or sub-distribution)
3. incidental gross receipts (non-theatrical and television)41
After grosses were collected, the distributor would have to deduct certain standard fees (trade association fees, taxes, industry assessment fees, and so on), before proceeding to obtaining its distribution fee, a percentage of each film's total gross receipts, for the service of releasing a film worldwide. The fee was 30 per cent of the gross receipts in the US and Britain, but it could go as high as 45 percent of the gross in a number of territories (such as Holland, Greece, Finland, India, Mexico, Portugal, Burma, Afghanistan and Pakistan). For the rest of the world the fee was 40 per cent of the film's gross.42 Following the deduction of the fee, the distributor was left with the producer's share of gross receipts from which it would subtract the costs of advertising and marketing, other advances pertaining to the exploitation of each film, as well as any money owed to talent who had made gross income participation deals.43 The remaining income (known as the producer's net income) would then be divided as follows, with everything else classed as net profits and divided according to specific agreements with net profit participants.
1. United Artists (the production loans with 6 per cent interest)
2. United Artists (the pre-production advances)
3. Lomitas Productions (for any completion money advanced, if the distributor had not provided this money)
4. Lomitas Productions' sales representatives
5. other people (deferred salaries of director-producer and stars)44
As this was a multi-picture deal United Artists and Lomitas agreed also to cross-collateralise profits, that is, to balance profits and losses across the six films for the duration of the contract. In other words, profits from a film could be used to pay for pre-production advances for the next picture, while the final profits for the two parties would be allocated and distributed at the end of the three-year period for which the agreement stood. According to Balio, cross-collateralisation was a protection mechanism for the distributor in case one film by an independent producer made exceptional money, while the same producer's next picture proved a disaster at the box office.45
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