How Does Merchandise For Live Action Remakes Work?

by Justin Sevakis,

Jason asked:

Fox had Alita: Battle Angel available at Licensing Expo in Vegas. Which parts of James Cameron's agreement with manga artist Yukito Kishiro is between him & Kishiro, compared to james cameron's a:ba merch agreement with fox? Does Kishiro get any royalties on this merch? Now that Fox is being bought by Disney, will Disney honor those agreements?

When a Hollywood studio buys remake rights to an anime, manga or other property, they're almost never selling directly to a major movie studio. Instead, the rights are sold to a much smaller production company, usually owned or co-owned by one of the prospective producers of a film. In Battle Angel's case, this was James Cameron's company Lightstorm Entertainment. In the movie business these small companies are known as "production shingles", named after the interchangeable nameplate on the offices they typically occupy on the Studio lots.

From that point, the producers develop the property, trying to get the agreement of directors, other producers, and major actors, and also coming up with a workable screenplay. Concept art is created, as is lots of graphical presentation materials, trying to give an impression of what the eventual film might look like. They then try to package all of their work together and sell it to a major studio, who then takes it that final distance towards production and eventual release. They bring in more financing, develop consumer-level marketing for the project, and work with the production studio to actually produce and release the film.

While the production shingle might be the immediate licensee of the remake rights, those rights are then sub-licensed to the movie studio, as they have dedicated teams set up for merchandise sub-licensing, artwork approvals, and all the other stuff that goes into producing movie-based goods for people to buy. The production studio then works with the studio to produce the film, market the film, promote the film, and everything else that goes into the project.

One thing that Japanese creators often have a hard time with in dealing with the American production system is the lack of control. Where the Japanese system grants the creators the right to approve virtually every aspect of a production, that basically never happens in the US. This means that Kishiro would almost certainly not see any merchandise before it's released. While Japanese creators are often invited to set and shown various aspects of the film as it's being produced, this is a matter of the producers being polite and respectful, rather than any legal obligation.

The Disney buyout, while having been rumored for a while, was only announced officially on the day this very article is being written. Giant corporate buyouts take years to fully suss out, and this particular one is not yet a done deal. As this film is scheduled for release in July, it is not possible for the merger to have completed by that time. But even if it was, new owners of a company are legally obligated to the terms of whatever deals their predecessors signed. In other words, nothing would change in terms of the agreement covering the remake rights. Lightstorm would simply be dealing with Disney instead of Fox when it came time to collect royalties.

Ah yes, royalties. Hollywood studios are infamous for their funky accounting tricks to make it look like even their most successful films never turn a profit, thus never necessitating that they pay out royalties that are based on profit. Studios are actually sued so often for such things that forensic accountants for attorneys suing the studios actually have office space AT the studios. So I would hope that Kishiro and anybody selling remake rights would negotiate a deal based on gross revenues and up-front license fees, not profits. Merchandise royalties are a major point of any deal like this.

If I trust anyone to navigate the murky waters of movie studio finances successfully, however, it's James Cameron. He may not have directed the film, but he's still the producer, and Lightstorm is still his company.

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Justin Sevakis has worked in the anime business for nearly 20 years. He's the founder of Anime News Network, and owner of the video production company MediaOCD. You can follow him on Twitter at @worldofcrap.

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