A battle over $10 million in ancillary revenue is being waged right now between Fox and the producers of “Napoleon Dynamite.” At issue before a trial judge are varying interpretations of how and where “net profits” is defined in the contract and which royalty rate should be applied to sales of DVDs.
Jared and Jerusha Hess’s 2004 film sparked a bidding war when it had its premiere at the Sundance Film Festival in 2004, and Cinetic’s John Sloss negotiated the original acquisition deal with Fox Searchlight. “Dynamite” grossed more than $44 million in theaters that summer, then achieved cult status through catch phrases, odd merchandising and home entertainment.
As usual with disputes such as this, it proves that there is always language that could be made more precise. But it’s worth following as an interesting case study that could have impact on how royalty formulas and definitions that apply to ancillary markets evolve in an era of plummeting DVD revenues and growing VOD platforms. Really, 2004 is a very long time ago in terms of where a film maintains value after a theatrical run (itself a smaller chunk of the pie).
A decision is expected soon, as reported by the Hollywood Reporter’s great THR Esq. blog, which has all the details.