AT H ARVARD L AW S CHOOL
AN INTER-UNIVERSITY CONSORTIUM TO IMPROVE THE THEORY AND PRACTICE OF CONFLICT RESOLUTION
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P ROGRAM O N N EGOTIATION
CAMILIA PICTURES
General Instructions
op
yo
Camilia Pictures began ten years ago when Raven Reynolds used a $500,000 life insurance
policy she inherited from her mother, Camille, to make a feature film with Steve Pappas, a
fellow film student at USC. The movie was Spikedriver, a stylish Western noir about a former
Chinese railroad worker turned train robber. The film won top prize at the prestigious Marseilles
Film Festival and eventually grossed more than $56 million. Over the next three years Reynolds
produced a string of critically acclaimed, often profitable, independent films, becoming well
known in Hollywood both for her producing acumen and for a hard-charging style that left her
with almost as many detractors as admirers. Under her leadership Camilia Pictures quickly
became synonymous with low-budget, high-quality, and artistically innovative films. Then,
seven years ago, to the surprise of many in the industry, Reynolds signed a deal to merge
Camilia Pictures with Labrador Entertainment.
tC
From humble origins as a fledgling cable network in 1983, Labrador and its famous mascot, The
Big Black Dog, had grown to become a major player in children’s television, entertaining an
entire generation with popular shows like Riff Raff, direct-to-video features, and book and toy
spin-offs. Several years ago, with The Big Black Dog virtually unrivaled in family television
entertainment, Labrador CEO Rick Statler set his sights on Hollywood. When Reynolds, an
industry rising star, approached him about a merger, he quickly made an offer.
No
Under the terms of the deal Reynolds would continue as head of Camilia Pictures, answering
only to Statler. Reynolds’ contract guaranteed her complete creative autonomy, but to insure
some financial accountability Statler had to approve all projects costing more than $25 million.
Other than that one constraint, Reynolds was free to spend Camilia’s annual budget at her
discretion. Under her contract, which has two years remaining, Reynolds receives a salary and a
percentage of net receipts for every film she produces, but the rights to all new projects belong to
Labrador as Camilia’s parent company. Reynolds did retain the rights to the library of previously
released Camilia films, along with a collection of older titles she’d acquired years earlier when a
venerable old movie studio went bankrupt. Industry experts have estimated the value of her
library at $400 million — $250 million for the pre-merger Camilia catalog and $150 million for
the older titles — in potential DVD and television broadcast revenue.
Do
For the first few years of its existence, the Camilia Pictures division of Labrador Entertainment
prospered. Flush with cash, Reynolds was able to expand her entire operation. Hoping to enter
the lucrative world of mass-market films and their even more lucrative sequels, but reluctant to
compromise Camilia’s brand name association with quality and artistry, she created Built for
This case was written by Robyn Kali Bacon and Robert C. Bordone, Thaddeus R. Beal Assistant Clinical Professor of Law at Harvard Law
School. Copies are available online at www.pon.org, Telephone: 800-258-4406 (within U.S.) or 781.239.1111 (outside U.S.); or by fax:
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Director of the Curriculum Development, Program on Negotiation, Harvard Law School, 513 Pound Hall, Cambridge, MA 02138. Please help to
preserve the usefulness of this case by keeping it confidential. Copyright © 2006, 2007, 2008 by the President and Fellows of Harvard College.
All rights reserved. (Rev. 12/08)
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CAMILIA PICTURES: General Instructions
Speed Productions, a wholly-owned subsidiary of Camilia Pictures, to produce and release lowbudget popcorn movies. The new production company was a success, spawning two hit film
franchises: Free Agent, a black comedy about gay assassin Dallas Free, and its sequel, Free
Lunch; and the Ninja School trilogy from director Lorenzo Cabrera.
Taking advantage of Labrador’s deep pockets, Camilia Pictures doubled its number of annual
releases and increased its annual budget five-fold (see Table 1 and Table 2). Reynolds continued
her streak of buying inexpensive independent and foreign movies and shepherding them to
mainstream success. But she also produced several higher-budget, critically acclaimed hits:
op
yo
• The Creole Persuasion, which won the Film Spirit Movie of the Year award.
• Salvation, which grossed almost $100 million and won Screenplay of the Year for writer–
director Jasper Drake.
• Persephone Underground, based on the bestselling novel, which became Camilia Pictures’
highest grossing film ever and won seven Film Spirit awards, including Movie of the Year.
Eager to move beyond film, Reynolds partnered with Internet giant Mantis three years ago to
create www.coolflix.com, a full-service multi-media Web site, with articles, downloadable
movie shorts, interactive games, and contests (including a Film Spirit Awards pool), as well as
reviews and listings. However, concerned about the site’s potential profitability, Statler refused
to authorize the original $60 million budget, forcing Reynolds to scale back her plans
considerably.
No
tC
In fact, conflicts over money have been a recurring tension in the relationship between Reynolds
and Statler. As the situation worsened, Camilia employees nicknamed Reynolds The Empress
and Statler The Executioner. The Reynolds–Statler relationship grew even colder when 5th
Dimension Films, a rival production company, released The Mark of the Panther, the first
installment in Gabriel West’s highly anticipated epic martial arts trilogy. Years earlier, Reynolds
had approached Statler about a deal to co-finance The Mark of the Panther with 5th Dimension,
but Statler, balking at the $100 million buy-in price, refused authorization. Three years later,
The Mark of the Panther trilogy had grossed $3 billion worldwide. Camilia Pictures would have
made almost $1 billion for its investment. Reynolds did not hide her disappointment in an
interview with a popular entertainment magazine, in which she called Statler a “coward” and “a
glorified insurance salesman at heart.”
Making matters worse, at around the same time Camilia failed to make a profit for the first time
in almost a decade. The losing streak has continued for the last three years and has included
some high profile flubs:
Do
• The new Web site, www.coolflix.com, failed to catch on, costing Camilia Pictures more than
$20 million before it was shut down.
• When production delays and trouble with the director pushed its budget to $100 million, Perils
of Argentina became Camilia Pictures’ most expensive production ever. Unfortunately, it was
released to mixed reviews and flat box office ($78 million).
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CAMILIA PICTURES: General Instructions
• Despite an elaborate publicity campaign, Certiorari was shut out at the Film Spirit Awards and
barely recouped its $70 million production costs (but not the $30 million spent on marketing)
when it grossed only $96 million.
On the other hand, the news at Camilia Pictures wasn’t all bad during this time: Built for Speed
Productions continued its streak of hits; Reynolds proved she hadn’t lost her awards mojo when
Partners in Crime won Movie of the Year; and Gringo was both a stylish and profitable cult hit.
But these highlights were not enough to reassure Statler that Camilia Pictures was heading in the
right direction. In fact, over the past three years, caught between a declining toy market and the
rise of rival cable network Animation Station, Statler has become increasingly anxious about
Camilia, worrying that Reynolds is expanding the budget without regard to profitability.
op
yo
The crisis point came earlier this year at the Marseilles Film Festival, when documentary
filmmaker and professional provocateur Jesse James premiered his latest, Privileges and
Immunities, a provocative look at pork barrel politics and the war on drugs. James has had a
great track record at Camilia. His last film, SUV4EVR, a biting expose of the energy industry and
automotive fuel economy standards, was one of the most successful documentaries ever made,
grossing almost $60 million worldwide. It was also, hands down, the most talked-about movie
that year, as was his inflammatory acceptance speech when he won the Film Spirit Award for
Documentary of the Year.
tC
His latest film, Privileges and Immunities, promises to be even more controversial than
SUV4EVR, going so far as to suggest that a member of Congress has ties to a Central American
drug cartel. Nevertheless, everyone in the industry expects another hit. Anticipating heated
competition for the film, Reynolds asked Statler before she left for Marseilles for approval to
spend up to $30 million to purchase it. Despite Reynolds’ insistence that James was the
documentary goose that lays only golden eggs, Statler refused authorization, telling her by email
that no documentary could be worth so much money, and that “we don’t need a political hot
potato like Privileges on our hands this year.”
No
At the Festival, Reynolds was able to head off an expensive auction, skillfully negotiating a deal
to buy Privileges using $15 million of her own money. Although this was a record-setting
purchase price for a documentary, when Privileges received both a standing ovation and top
prize at the Festival, industry insiders were already congratulating Reynolds on yet another great
deal. Marty Bagburg of 5th Dimension Films even went a step further, offering to co-release the
film if she were ever looking for a partner.
Do
Despite all the enthusiasm, when Reynolds returned, Statler was incensed. Already
uncomfortable with Reynolds’ insurrection and Camilia Pictures’ growing budget, Statler
refused to distribute the film, setting off a storm of bad publicity. In a fit of temper, Jesse James
accused Statler of censorship, telling a cable news show, “The Big Black Dog wants to muzzle
me!” Stating her support for James, Reynolds told reporters: “Out of respect for the First
Amendment, Camilia Pictures will do whatever it takes to make sure people get a chance to see
this important film.” Statler retaliated immediately, issuing a statement that, “Not releasing
Privileges and Immunities is a business decision, not a political one. Camilia has been
hemorrhaging money for years.”
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CAMILIA PICTURES: General Instructions
As the story jumped from the entertainment page to the front page (one headline read: “Labrador
Stock Drops Again—Is Statler in the Doghouse?”), and the quarterly Board of Directors meeting
approached, Statler called for a meeting with Reynolds. Reynolds attended, expecting to discuss
a distribution arrangement for Privileges & Immunities. Instead, Statler laid out what he called
“the new ground rules”: Reynolds would reduce Camilia’s budget, produce no movies costing
more than $30 million, and stop using the media to subvert his authority. Once she’d agreed to
these terms, then they could discuss options for Privileges.
op
yo
Instead of agreeing, Reynolds grew angry: “What you know about this business wouldn’t fill a
shot glass. If you don’t have the spine to release this movie, plenty of others in this town do, and
I’ll cut a deal with one of them if I have to.” Statler, equally incensed, replied that “Labrador
owns that film, and it owns you. If you don’t like that, you can quit. But if you want to fight over
it, I’ll see you in court.” Before walking out, Reynolds warned him against starting a war he
couldn’t finish: “I’m no weak-willed bean counter in a suit. I’m a trench fighter, and I don’t
scare easily. You said Labrador didn’t want Privileges; I bought it with my own money and it
belongs to me, not Camilia, not Labrador.” After their confrontation, both Reynolds and Statler
called their lawyers to discuss their options, especially regarding possible litigation over
Privileges and ¶7 and ¶19 of Reynolds’ contract, respectively, the non-interference and the noncompetition provisions.
Do
No
tC
Lawyers for both sides have agreed to a confidential meeting.
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APPENDIX
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CAMILIA PICTURES: General Instructions
Excerpt from Raven Reynolds’ Employment Agreement
op
yo
7 – Excepting the financial restrictions identified below in ¶8, Labrador
Entertainment and all its employees not directly employed by Camilia Pictures will
not engage in any undue interference with the creative operations of Camilia Pictures
or Employee’s management thereof.
Do
No
tC
19 – While the Employee is employed hereunder and for the duration of such
employment, Employee will not (i) engage in competition with Labrador
Entertainment or any subsidiary of Labrador Entertainment, either directly or
indirectly, in any manner or capacity as advisor, principal, agent, partner, officer,
director, stockholder, employee, member of any association, or otherwise in any
phase of the business of developing, producing, or distributing major motion picture
releases, and (ii) compete, either directly or indirectly, in any such manner or capacity
with any other business of Labrador Entertainment in which Employee served while
employed hereunder. Ownership by the Employee, in the aggregate, of less than one
percent of the outstanding shares of capital stock of any corporation with one or more
classes of capital stock listed on a national securities exchange or publicly traded in
the over-the-counter market should not constitute a breach of the foregoing
agreement.
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CAMILIA PICTURES: General Instructions
Table 1: CAMILIA PICTURES: ANNUAL INCOME AND EXPENSES
Includes Built for Speed Productions. All figures in millions.
Total Expenses
Production
Marketing
Distribution
Overhead
Compensation*
Year - 6
$39.00 Net Receipts
$20.00 DVD Royalties
$7.50 Premium Cable
$0.50
$1.50 Total Revenue
$68.50 Net Profit
Margin
tC
Total Expenses
$45.00 Net Profit
Margin
op
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Production
Marketing
Distribution
Overhead
Compensation*
Year - 7
$28.00 Net Receipts
$10.00 DVD Royalties
$5.00 Premium Cable
$0.50
$1.50 Total Revenue
No
Production
Marketing
Distribution
Overhead
Compensation*
Do
Total Expenses
Production
Marketing
Distribution
Overhead
Compensation*
Year - 5
$50.50 Net Receipts
$25.00 DVD Royalties
$10.00 Premium Cable
$0.70
$2.30 Total Revenue
$88.50 Net Profit
Margin
Year - 4
$101.00 Net Receipts
$35.00 DVD Royalties
$10.50 Premium Cable
$0.90
$2.60 Total Revenue
$51.85
NA
NA
$51.85
$6.85
15.2%
$90.50
NA
$1.20
$91.70
$23.20
33.9%
$96.50
NA
$3.30
$99.80
$11.30
12.8%
$144.30
$13.90
$6.20
$164.40
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Production
Marketing
Distribution
Overhead
Compensation*
Total Expenses
Production
Marketing
Distribution
Overhead
Compensation*
Year - 3
$124.00 Net Receipts
$45.00 DVD Royalties
$11.00 Premium Cable
$0.90
$2.60 Total Revenue
$183.50 Net Profit
Margin
Year - 2
$129.00 Net Receipts
$50.00 DVD Royalties
$11.00 Premium Cable
$1.10
$3.40 Total Revenue
$194.50 Net Profit
Margin
tC
Total Expenses
$150.00 Net Profit
Margin
op
yo
Total Expenses
No
Production
Marketing
Distribution
Overhead
Compensation*
Total Expenses
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CAMILIA PICTURES: General Instructions
Year - 1
$155.70 Net Receipts
$60.00 DVD Royalties
$12.50 Premium Cable
$1.30
$4.00 Total Revenue
$233.50 Net Profit
Margin
$14.40
9.6%
$116.40
$9.30
$10.40
$136.10
-$47.40
-25.8%
$142.40
$48.50
$13.80
$204.70
$10.20
5.2%
$126.40
$29.40
$15.20
$171.00
-$62.50
-26.8%
Do
*includes benefits
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PON134
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CAMILIA PICTURES: General Instructions
Table 2: CAMILIA PICTURES ANNUAL RELEASES
Includes Built for Speed Productions (BFSP). All figures in millions.
Box Office Gross
$25.5
$1.8
$96.5
$123.8
op
yo
Title
The Crow & the Sparrow*
508
Salvation*
Total
Year - 7
Production
Budget
$9.0
$2.0
$17.0
$28.0
Net
Receipts**
$11.5
$0.9
$39.5
$51.9
Year - 6
Production
Budget
$3.1
$14.0
$1.9
$20.0
$39.0
Box Office Gross
$33.2
$103.0
$7.4
$57.5
$201.1
Net Receipts
$16.6
$43.8
$3.4
$26.7
$90.5
Title
Creole Persuasion*
Ninja School* (BFSP)
Milo
Wait Till Payday
Total
Year - 5
Production
Budget
$29.0
$13.0
$9.0
$1.5
$52.5
Box Office Gross
$78.7
$112.7
$25.5
$12.9
$229.8
Net Receipts
$32.5
$46.9
$11.5
$5.6
$96.5
Title
Persephone Underground*
Free Lunch* (BFSP)
Detox: The Movie*
SUV4EVR
Total
Year - 4
Production
Budget
$65.0
$24.0
$8.0
$4.0
$101.0
Box Office Gross
$143.3
$116.3
$20.4
$53.6
$333.6
Net Receipts
$58.8
$50.4
$9.3
$25.8
$144.3
Title
Do
No
tC
Kalima
Free Agent* (BFSP)
Boneyard Boogey
My New Best Friend*
Total
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PON134
Certiorari*
Blood Oath*
Ninja School II* (BFSP)
Old School Charm
www.coolflix.com^
Total
Box Office Gross
$95.6
$70.2
$95.8
$14.9
$1.3
$277.8
op
yo
Title
Year - 3
Production
Budget
$70.0
$21.0
$18.0
$5.0
$10.0
$124.0
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CAMILIA PICTURES: General Instructions
Net Receipts
$38.2
$30.9
$40.2
$7.1
$1.3
$117.7
Year - 2
Production
Budget
$25.0
$21.0
$26.0
$42.0
$15.0
$129.0
Box Office Gross
$53.7
$12.6
$141.7
$136.2
$2.4
$346.6
Net Receipts
$22.6
$5.7
$53.8
$57.9
$2.4
$142.4
Title
Perils of Argentina*
Gringo* (BFSP)
The Saucy Intruder
Intermission*
Assumption of Risk
Turbulence
Total
Year - 1
Production
Budget
$100.0
$13.0
$25.0
$12.0
$3.4
$2.3
$155.7
Box Office Gross
$77.8
$73.7
$67.1
$17.6
$18.2
$25.4
$279.8
Net Receipts
$33.1
$32.1
$32.2
$8.7
$9.1
$11.2
$126.4
Title
Black Sheep* (BFSP)
Mount Diablo*
Privileges & Immunities
Satellite to Ecstasy
Los Condenados (BFSP)
Year - 0
Production
Budget
$60.0
$22.5
$15.0
$4.2
$3.3
Total Spent To
Date
$59.0
$20.3
$15.0
$4.2
$3.3
Projected
Gross
$150.0
$40.0
$100.0
$25.0
$25.0
Do
No
tC
Title
Partners in Crime*
Devil's Thumb
Ninja School III* (BFSP)
When Ella Sings*
www.coolflix.com
Total
Copyright © 2006, 2007, 2008 by the President and Fellows of Harvard College. All rights reserved. (Rev. 12/08)
Certainty
85%
80%
55%
40%
75%
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PON134
Sleepwalking Downhill*
Total
$40.0
$145.0
$8.1
$109.9
$85.0
$425.0
Total Spent To
Date
$15.0
$2.0
$1.5
$0.5
$19.0
Projected
Gross
$100.0
$125.0
$85.0
$40.0
$350.0
55%
Certainty
90%
80%
35%
60%
op
yo
Next Year
Production
Title
Budget
Comic Book Hero* (BFSP)
$40.0
Free Ride* (BFSP)
$35.0
Southpaw*
$30.0
Untitled Helen Stanley Project
$20.0
Total
$125.0
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CAMILIA PICTURES: General Instructions
Do
No
tC
*Produced by Raven
Reynolds
**Net receipts are all receipts to the studio after the distributors, exhibitors (theater
owners), and other contractual obligations (especially to high-end talent) have been paid.
In general, Net Receipts = Box Office Grosses - (Distribution fees + exhibitor
commissions + other contracts)
^For accounting purposes, www.coolflix.com was recorded as a film
production
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