There are numerous movies made in the United States a year. The creation of these movies takes time and money but can provide a considerable amount of profit based on their success. Contracts are made between actors and producers committing to playing a role in a particular movie. Kim Basinger made a verbal contract to play a role with Main Line Pictures. Later she rejected the role due to nude scenes to maintain her image. Main Line sued Kim Basinger for breach of contract. The company believes without Ms Basinger in the film they would lose money. It is difficult to determine to calculate lost profits to Main Line. In order to determine a dollar amount lost is close to impossible even with pinpoint accuracy due to many variables that come into play. This paper will study what claims by Main Line Pictures are valid and invalid.
First it important to analyze Main Line Picture’s maximum and minimum lost profit amounts should be revised based on domestic distribution revenues of three million dollars. The maximum and minimum lost profit should not be revised because it represents a reasonable estimation of the cash flows of the future. This is estimation because the deal has not been finalized. This approximation should be considered but not for Main Line Pictures analysis of the maximum and minimum profit lost. This same estimation was used for foreign sales but never finalized. Even though it was reported, the information about the foreign pre-sales was excellent it was still estimation. Again since the contract was never finalized Main Line Pictures could not analyze the profit loss. Another aspect to the maximum and minimum lost profit was the loss of 2.1 million on the “without Basinger Film.” This should be adjusted because under the law it is the duty of Main Line Pictures to minimize its losses. According to Slovenko (2002) this is also known as avoidable consequences. This means the company must move on and find a suitable replacement to recoup costs. The company will have no problem filling the role due to the supply of suitable actresses. The 2.1 million dollars is how much the company could be short after making the film. No film company would continue to make a movie if they knew they were going to lose money. This loss is expected sales versus budget cost for Main Line Pictures and Basinger should not be held accountable.
Second it is important to analyze if Basinger’s three million salary for “Final Analysis” should be relevant to determine the lost profits to Main Line Film. This is not relevant due to it was an opportunity cost for her take an alternate course of action (Investopedia 2010). Main Line Film was only able to contract her services for one million but the three million would benefit Basinger. This benefit does not determine the lost profits for Main Line.
Additionally it is important to analyze if the comparison of revenues for Basinger films with revenues for Fenn Films is relevant to determine the lost profits to Main Line. The comparisons of these two are not relevant to the lost profits. The reason why Main Line wanted Basinger to fulfill the role the movie was due to her other successful line of movies. It is difficult and impossible to correlate her participation to the overall success of the movie. Abraham Ravid, a professor of economics and finance at Rutgers University, who in a 1999 studied almost 200 films released between 1991 and 1993, states, “There is no statistical correlation between stars and success (Porter 2006).” He also goes on to explain that a star has no impact on its rate of return. This proves that the comparison between the revenues for Basinger films and revenues for Fenn Film is not relevant to determine lost profit to Main Line Film.
The third aspect in this case is to analyze why the plaintiff’s expert was correct in not attempting to estimate revenues for “Boxing Helena” beyond pre-sale amounts. The plaintiff’s expert in not attempting to estimate revenues is correct due to the unreliable and difficult to forecast the revenues for the film industry. There are many variables that play into the success of the movie. One of the most important variables that cannot be predicted is the taste of the consumer. Consumer’s likes and dislikes change daily, making difficult for film makers predict the success of the movie (Gomery 1998). Additionally, it would be impossible to predict the presale at the time of productions due to the inability to estimate box office success in the future. The movie could be desired at the point of production but once released there could have been multiple similar films that were released. It can also depend on the release date competing with other movies at the box office.
The fourth claim that should be analyzed is the lost profit adjusts downward to include an estimation of domestic revenue without Basinger. The lost profit needs to be adjusted downward due making revenue into an educated estimation. The domestic deal was not finalized before Basinger left, making the estimation not accurate. The loss profit should be analyzed for the potential estimated revenue that will be earned from Fenn’s film. The 1.7 million advances are valid to use without Basinger. This money provided the film company production costs, which would be repaid from domestic revenues (De Vany 1999).
The fifth factor to analyze is suppose Basinger had remained with the film and assume the three million dollar profit shown in the plaintiff expert’s minimum damage calculation was correct. It is not reasonable to assume that Main Line’s pretax cash would have increased. The reasoning behind this is there a several contractual claims against the profits of the film company. It would have been absorbed by overhead costs and would not show a direct profit by Main Line.
The last item to analyze is the jury’s lost profit assessment. The reason for Basinger termination of contract was she did not want to ruin her image. This contract was an oral statement and the role had not been explained to her. The problem with the lost profit assessment was it was based on assumptions and estimations. The film company used estimations that were not final, such as the domestic revenue with Basinger. As stated above the 1.7 million dollars were estimated without Basinger making, showing that partners had confidence in the film’s success with Basinger. Additionally, Basinger not being a part of the movie changes the variables in the production of the film. This means that the movie budget must be adjusted upward due to the decrease of producer’s fees due to change in the actress. All these variables will change the revenues of the movie, making losses based on Basinger leaving not relevant.
Basinger broke her contract with Main Line due to fears of damaging her image. In her mind she felt that breaking a contract was more important. As stated above Main Line was concerned that they were going to lose money due to her leaving. The company had not yet started the movie and did not have solid amount of money dedicated by partners. The only money that was invested was the 1.7 million dollars which was Basinger not being a part of the film. Basinger should pay a small fee for terminating her contract but not based on the bloated estimations by the film company.
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