by Michael Kandel

Recap of 2011’s Legal and Business Affairs in Television. People reading this should not substitute it for what an experienced professional can provide such as an attorney or accountant. This WIKI will provide and give you a sense of what has been going on throughout the year 2011.

Background

During the Fall 2011 semester at Syracuse University, I was enrolled in the Television , Radio and Film Course, Television Business. I was given the assignment to make a WIKI discussing what is going on in 2011 pertaining to the Legal and Business Affairs of Television. I will be using the textbook “The Business of Television” By: Howard J. Blumenthal and Oliver R. Goodenough, printed in 2006 as a guide. The topics I will be going over will be: Contracts, Work Relationships, Unions, Legal Entities, Tax Issues and any events that have happened during 2011. I will briefly discuss what they are and hopefully provide you with examples of each that was brought up in 2011. Please feel free to add anything that is relevant and even post comments.

Information on Contracts

This link, 2011 Screen Actors Guild and Basic Television Contracts, will be able to show you what a valid Current Television contract looks like.

A contract is a binding agreement between two or more parties. There are a few things people should be aware about  when making a legal contract. Contracts can be either verbal or written but are preferred to be written down as it is harder to prove a verbal contract in the court of law¹. However an oral contract can be used if a reasonable observer can prove the validity of the contract. In the case Trademark Properties Inc, v. A&E Television Networks there was an oral contract between Richard Davis and his company against A&E Television Networks that stated Richard had an oral agreement to split revenues from the reality television series “Flip This House”. The court ruled in Richard’s favor and was awarded $4 million. The defendants appealed stating that there was a lack of evidence and that the oral contract to split revenues had not been reached. The Appelate court in the Fourth Circuit upheld the jury’s decision 2:1. The reason why it was upheld was because the court found the oral contract to be reasonable and true².

By writing down the agreement, allows both parties to be aware of their rights and responsibilities. An oral contract can be risky when it is used in a court of law which is why it is preferred to have a written agreement between both parties so that no conflicts can arise in the future.

Rentrak which provides media measurement and analytical services³ signed a contract with SHORTS HD international as of October 11, 2011. Shorts had its U.S. launch in 2010 and with the help ofRentrak’s service, Shorts HD will be able to see TV viewing data from millions of reporting households⁴. Rentrak serves the most recognizable companies in the entertainment industry and they will help grow Shorts content and advertising opportunities.

Information on Work Relationships      

Keeping a business relationship is an important aspect for the growth of the business. It is important to have respect in a business relationship. You want the other party to feel safe and appreciated. Another way in building a better relationship is being open and honest with each other. One can do this by clearly communicating to the other party the good and the bad. It also helps to be an effective listener as you show you care for what they have to say.¹²

Check out this article (click here)  as it shows how competitive Television Markets are familiar with each other.

Information on Unions

An article(SAG Board Expected to Proceed with AFTRA Meger) posted by the Los Angeles Times on December 13^th 2011 talks about how the Screen Actor’s Guild president, Ken Howard, is underway at merging the SAG and the American Federation of Television and Federal Arts. Howard is optomistic about a Jan. 22 meeting to complete the merging agreement.  Digital distribution has posed a threat to members and had affected the traditional amount of income they would normally receive.⁶ The purpose of the merger is to give members more bargaining power in their contracts. Former SAG president, Alan Rosenberg, is against this idea as he fears the merger into a larger union would leave actors with less of a voice.

Information on Legal Entities

When deciding the type of entity to choose from, a business would look at the advantages and disadvantages that are offered for each.

The most popular types of entities to choose from are:

1. Corporation (C-Corp)
2. Partnership
3. S-Corporation
4. Limited Liability Company (LLC)
5. Sole Proprietorship

This link (click here) will provide you with detail about each entity.

Another popular form of entity is a Loan-Out Corporation which is a separate entity that is set up for an actor/actress. People invested with a Loan-Out Corporation because of the tax advanatges ffor the corporation such as no payroll taxes. Currently, people keep loan out corporations with purpose of using it for  pension planning, profit-sharing plans or health insurance. ¹¹

Information on Tax Issues

People working in television business that do not have a permanent business affiliation will look at ways to deduct its expenses with the goal of paying as little taxes as possible.

The following is useful in preparing 2010 Returns. For more information click here

Lookinging at IRS Publication 463 Travel, Entertainment, Gift and Car Expenses we can see possible deductions employees can take. Focusing in on the Entertainment part, employees can take a deduction on entertainment expenses if they are entertaining a customer, client or employee. By looking at the chart below, you will be able to understand the rules and definitions of taking that entertainment deduction.¹⁰

General rule	You can deduct ordinary and necessary expenses to entertain a client, customer, or employee if the expenses meet the directly-related test or the associated test.
Definitions	• Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client.• An ordinary expense is one that is common and accepted in your trade or business.• A necessary expense is one that is helpful and appropriate.
Tests to be met	Directly-related test• Entertainment took place in a clear business setting, or• You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit. Main purpose of entertainment was the active conduct of business, and
	Associated test• Entertainment is associated with your trade or business, and• Entertainment directly before or after a substantial business discussion.
Other rules	•You cannot deduct the cost of your meal as an entertainment expense if you are claiming the meal as a travel expense.• You cannot deduct expenses that are lavish or extravagant under the circumstances.• You generally can deduct only 50% of your unreimbursed entertainment expenses (see 50% Limit).

Business related meals and expenses are deducutible up to 50% unless its an:

1. Employee Reimbursed Expense. Meaning an employee can’t take a deduction from a meal if the employer reimburses you.

2. Self Employed. If you are self employed than you are not allowed to take the 50% deduction on meals and entertainment if all of the following are conditions are met.

• Expenses are incurred as an independent contractor. An independent contractor is self-employed.
• You are reimbursed by the customer or client for expenses incurred.
• Provide adequate records of expenses to client or customer.

3. Advertising Expenses. Not subject to the 50% if you provide meal an entertainment to the general public in hope of promoting or advertising goodwill in the community.

4. Sale of meals or entertainment. Cannot take 50% if you actually sell meats, or good to the public inlcuding facilities.

5. Charitable sports event. You are not subject to the 50% if you pay for a sports package deal that includes a ticket to a qualified sporting event.

The entertainment deduction will depend on the type of business you have.

Miscellaneous Events that Happened in 2011 to keep you up to date!

ABC’s Daniel Burke died at 82 as reported in the Wall Street Journal on October 27,2011. He was responsible for engineering the acquisition of the American Broadcasting Company in the 1980’s.

Mark Burnett innovates television by partnering up with ACTV8. Mark plans to bring in a whole new audience as he plans to attract a bigger  audience and increase participation in television. The article further explains that anyone with an iPAD, iPhone or Android can interact, socialize, consume and participate in real time while watching their favorite television shows.⁵ 

An article posted by Vairety on June 12, 2007,Vokulich gets a CW Biz Role, talks about how Rich Vokulich left CBS Paramount to become the new head of business affairs at CW.⁷ However four years later(click here for article) his services at the broadcast network were no longer needed.⁸

Jeffrey Schneider was named Executive Vice President of NBC Universal’s new position. He will be in charge of the Business Affairs, Entertainment and Digital Networks and Integrated Media. He will oversee negotiation, acqusitions for various networks including, Telemundo, Bravo Media, mun2, Oxygen Media and Style and even digital businesses such as iVillage, Daily Candy, Swril and Fandango.⁹  Jeffrey Schneider being promoted is not to be confused with the Jeffrey Schneider over at ABC who si the SVP of communications for ABC News.

Conclusion

This is what has been going on in the Legal and Business Affairs for 2011. Please feel free to comment and even add something to the WIKI.