Opinion ID: 400121
Heading Depth: 2
Heading Rank: 2

Heading: Licensing Procedure

Text: 8 Motion picture distributors frequently license films by competitive bidding. Under this system, exhibitors in a marketing area defined by the distributor are asked to submit bids stating the percentages and guarantees each exhibitor will pay for the film being offered. The distributor selects the most lucrative combination of bids. If it is unsatisfied with some or all of the bids it has received, it may enter into negotiations with individual exhibitors in the hopes of receiving a more profitable agreement. Defendant Buena Vista Distribution Company, which distributes Walt Disney films, has described in some detail the procedure it follows during the bidding process. We will describe these procedures below because they are typical of the practice followed by all of the distributor defendants. 9 After an availability date has been determined for first or intermediate run of a picture in greater Atlanta, Buena Vista's Southeastern District Manager mails out Requests for Offer to all exhibitors on the company's current first or intermediate run bid list for the region. Each Request for Offer advises the exhibitor of the availability date of the picture and may suggest minimum terms for a bid. It also states that the bid must be sent by the exhibitor directly to Buena Vista's Home Office in Burbank, California, by a certain date. Buena Vista furnishes special pre-addressed envelopes for the exhibitors to use in sending in their bids. If a bid is received in Buena Vista's Atlanta office, it is not forwarded, but is returned to the exhibitor with a reminder that all bids must be submitted directly to the Home Office. 10 Once they arrive at Buena Vista's Home Office, envelopes containing bids are stamped with the date and time of receipt and are retained unopened by Buena Vista's Legal Department until the scheduled moment for the opening of all bids. At that time, any bidding exhibitor may be present and may inspect all of the bids submitted. An unsuccessful bidder may later inspect all of the winning bids for 14 days after the date of its rejection letter. 11 The decision as to which bids, if any, Buena Vista will accept, is made by the General Sales Manager. He often contacts local managers, who receive copies of bids, for recommendations and advice concerning local exhibitors. According to Buena Vista, the General Sales Manager will consider, among other factors, the theatre's past grossing history; the theatre's size, location, appointments for the comfort of its patrons, and suitability for the exhibition of ... motion pictures such as those distributed by Buena Vista; and the percentage film rental terms offered and guarantee offered, if any. 12 Buena Vista, as all of the distributor defendants, maintains that it awards licenses to the theatre or combination of theatres which, in its judgment, will return the greatest film rental. Buena Vista claims to make its licensing decisions unilaterally, without consulting any other distributor or any exhibitor. Each license is supposedly awarded on an individual picture-by-picture and theatre-by-theatre basis. Buena Vista denies giving preference to any theatre because it is part of a circuit. 13 If Buena Vista is unsatisfied with the results of competitive bidding it will usually attempt to license films through direct negotiations with exhibitors. Bidding and negotiation are not mutually exclusive practices: the distributor may accept several bids but wish to license more theatres in the Atlanta area. It will then contact the unsuccessful bidders 3 and attempt to negotiate directly with each for rental terms superior to what was offered in the bidding. 14 Negotiations are conducted locally by Buena Vista's Southeastern District Manager or Atlanta Branch Manager. They will solicit new, hopefully higher, bids from the exhibitors and will pass the bids on to the home office. The negotiations are conducted orally, although an exhibitor's offer is memorialized in a signed Confirmation of Negotiated Bid Offer. Buena Vista claims that it negotiates individually with each exhibitor without disclosing the terms of any other exhibitor's negotiated offer. Again, it also claims that each negotiated offer is evaluated separately so as to produce the highest revenue for each film and without consultation between Buena Vista and any other distributor or exhibitor. 15 Because its return from each theatre ordinarily derives from a percentage of the theatre's revenue, Buena Vista has a direct interest in the box office success of the films it licenses. The parties agree, however, that the distributors do not dictate the admission prices that exhibitors may charge. Buena Vista insists it does not make adjustments in any guarantee which it has negotiated with an exhibitor, no matter how poorly a film performs.