The next type of copyrightable work on the list consists of motion pictures and other audio-visual works. A "motion picture" is defined in the statute as "an audio-visual work consisting of a series of related images which, when shown in succession, impart an impression of motion, together with accompanying sounds, if any." Some audio-visual work, such as film strips or sets of slides, don't fit this narrow definition. But that doesn't make much difference in practice because the copyrights in all audio-visual works are handled in basically the same way. Fortunately for our purposes, the legal rules governing copyrights in motion pictures are simpler than the rules governing copyrights in music. But the business models that depend upon motion picture copyrights are at least this intricate. Again, I'll use a slide to sketch the main features of those rules and models. In this lecture, I'll give you a quick overview of the structure. Then, in subsequent lectures, we'll return to specific sectors of this structure and discuss the rules and controversies that have arisen in those sectors.
As we saw, a typical piece of recorded music implicates two copyrights-- the copyright in the musical composition and the copyright in the sound recording. Much of the complexity of the music industry arises out of the complex relationship between those two rights. By contrast, in the typical film, there exists only one copyright in the motion picture itself. In the United States, this copyright is ordinarily owned by the producer of the film. Sometimes, that producer will be an individual person. More often, the producer will consist of a company, which creates the film, aided by a motion picture studio, which typically finances and distributes it. Finally, the producer is sometimes a branch or subsidiary of the studio itself. In this presentation, I'll assume the producer is an independent company.
To create the film, the producer, of course, needs the assistance of myriad artists-- screenwriters, actors, directors, and so forth. Do those artists share in the copyright in the film? In some countries, the answer is yes. And then, complex contractual arrangements are necessary to acquire all of their rights. In the United States, by contrast, the answer is no. The copyright in the film is owned by the producer, which hires the various artists. The character of the deals used by the producer to assemble the creative contributions of the artists vary. Suppose, for example, the producer wishes to adapt an already existing novel. The producer might negotiate an assignment of the copyright in the novel. Indeed, we'll see an example of this in a minute. But that's rare. It's much more likely that the producer will obtain a license to make a so-called "derivative work" based upon the novel, leaving the copyright in the hands of the novelist.
What about the screenwriters, actors, director, and composer, whose work is, of course, essential to convert the novel into a motion picture? Decades ago, it was common for the producer or studio to hire such people as long-term employees, in which case, their creative contributions would belong to the producer or studio. Today, by contrast, these relationships are more likely to be arm's length. But the legal outcome is similar. The way in which this is achieved today is through so-called "work-for-hire" agreements, which we'll examine in detail in Lecture 5.
If the movie is filmed on-site, rather than in a studio lot, the producer customarily obtains and pays for releases from the owners of the buildings that will appear in the background of the scenes. It's far from clear that such releases are legally required. Lawyers for the producers typically take the position that the owners of the buildings have no enforceable rights and, thus, that the producer could, if it wished, make and show the film without paying them anything. However, the insurance companies that provide the producers' so-called "errors and omissions" insurance tend to be highly risk averse and demand that the producers obtain these releases. If the producer wishes to include an existing sound recording in the soundtrack of the movie, the producer will obtain a so-called "master use license" from the record company that owns the copyright in the sound recording and a synchronization license from the music publisher that, as we saw, owns the copyright in the composition embodying the recording.
What do these various artists and copyright owners obtain in return for entering into these contracts and licenses? In most cases, they're paid a negotiated flat fee. However, a few of the most important contributors, for example, the key actors and perhaps the director, may negotiate a share of the back-end profits generated by the film.
So to return to our story, the producer, which now owns the copyright in the completed film, typically enters into a perpetual, worldwide, sometimes universe-wide, distribution agreement with a major motion picture studio. Like the music publisher who figured so prominently in the previous section of this lecture, the studio then typically makes money by issuing a series of licenses to companies that wish to present the film to consumers in one way or another. Typically, the first set of such licenses is granted to theaters, which then show the film to their patrons, collecting box office revenues. The terms of the deals between the studios and the theaters have changed dramatically over time. Nowadays, when the dust settles, typically between 40% and 50% of the revenues collected by the theaters are paid to the studios.
When attendance in theaters begins to decline, the studio is likely to enter into similar licenses with pay TV companies, airlines, and so forth, permitting them to show the film to their subscribers or passengers. Next, the studio will probably grant a similar license to a television network, which will broadcast the film, leavened, of course, with advertisements, to the public at large. Cable companies may pick up the network signals and relay the broadcast to their own customers. When they do so, they have to pay the studios fees. But the amounts of those fees are governed by another compulsory licensing system of the sort we discussed in connection with the music industry. More on this later.
The studio then may begin to exploit ancillary sources of revenue, which are increasingly valuable. For example, it may issue a mechanical license to a record company, which will produce CDs and other products containing the recording of the soundtrack of the movie. The studio may authorize a merchandise manufacturer to make and sell dolls, lunch boxes, backpacks, and other products based upon the characters or plot of the movie. Sometimes, advertisers will pay to use components of the film in their ads. Last, but not least, the studio will likely authorize sales of copies of the film to video stores and, now, online distributors, which will make them available, either by sale or rental, to customers.
So that's enough for now. We'll return later to several litigated cases that implicate one or another part of this overall business model.