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The Lawsuit of the Rings - New York TimesThe New York Times

June 27, 2005

The Lawsuit of the Rings

What if Frodo Baggins, instead of confronting the evil empire in "The Lord of the Rings," just got himself a lawyer and sued?

The real-life corollary is going on now in Hollywood where Peter Jackson, one of the film industry's most powerful and popular directors, is suing New Line Cinema, the subsidiary of Time Warner that financed and distributed his Oscar-winning "Lord of the Rings" film trilogy.

In his lawsuit, Mr. Jackson claimed that New Line committed fraud in its handling of the revenues generated by 2001's "The Fellowship of the Ring," and as a result, he was underpaid by millions.

The suit does not specify a damage award. But in an interview last week, his lawyers said that, after New Line applied its contract interpretation from "Fellowship" to the other two movies, Mr. Jackson was underpaid by as much as $100 million for the trilogy.

Lawsuits in Hollywood are as common as hobbits in Middle Earth. What makes Mr. Jackson's suit draw such widespread interest here, other than his clout in the industry and the amount at stake, is one specific allegation about New Line's behavior. The suit charges that the company used pre-emptive bidding (meaning a process closed to external parties) rather than open bidding for subsidiary rights to such things as "Lord of the Rings" books, DVD's and merchandise. Therefore, New Line received far less than market value for these rights, the suit says.

Most of those rights went to other companies in the New Line family or under the Time Warner corporate umbrella, like Warner Brothers International, Warner Records and Warner Books. So while the deals would not hurt Time Warner's bottom line, they would lower the overall gross revenues related to the film, which is the figure Mr. Jackson's percentage is based on.

According to people on both sides of Mr. Jackson's lawsuit, the claim strikes at the heart of the modern vertically integrated media company. One of the apparent - though largely unproven - benefits of media integration is the ability of conglomerates like the Walt Disney Company, Time Warner, the News Corporation, Viacom, Sony and General Electric to sell subsidiary rights to the many divisions within the company.

By painting this corporate synergy as "self-dealing," Mr. Jackson's lawsuit and similar suits filed in the last few years, called vertical integration lawsuits, argue that the idea of the media conglomerate is at odds with the interests of the creative minds behind the content.

If that idea was not enough to make studio heads very nervous, Mr. Jackson's status in the business could encourage other directors and stars who take a percentage of gross revenues to look more carefully at the accounting on their films. And because deals between corporate siblings are approved at the highest levels, vertical integration lawsuits often focus on senior division executives and their sales chiefs..

Since no studio head or corporate executive wants to be subpoenaed in a lawsuit over accounting, vertical integration lawsuits are almost always settled before reaching open court.

Citing corporate policy, Richard Socarides, a New Line spokesman, declined to comment on details of the litigation, but released a statement that said, "We don't agree with plaintiff's claims, and will defend ourselves vigorously." A litigator for New Line, speaking on the condition of anonymity because he is working on this lawsuit, said the money paid to Mr. Jackson so far is in line with the contract he signed.

"Peter Jackson is an incredible filmmaker who did the impossible on 'Lord of the Rings,' " this lawyer said. "But there's a certain piggishness involved here. New Line already gave him enough money to rebuild Baghdad, but it's still not enough for him."

Mr. Jackson's suit was filed on Feb. 28. In an April 29 court filing, New Line categorically denied all of his claims. Currently, both sides are sending out deposition notices, and Mr. Jackson's lawyers are preparing discovery demands allowing them to see detailed financial statements of New Line and its corporate sibling, Warner Brothers.

According to Peter Hoffman, a tax lawyer for leading Hollywood producers in the 1980's and a former chief executive of Carolco Pictures, all the legal saber rattling around claims of self-dealing and pre-emptive bidding could be avoided if studios turned the clock back and compensated stars based on net profits, not gross revenues.

"Once upon a time, Hollywood studios paid a lot of money to net profit participants, and it was a fair deal," said Mr. Hoffman, who is known in Hollywood for his knowledge of arcane deal making. "Then the studios got greedy and stopped paying, and now we have gross players who used to be net players fighting over vertical integration. The studios brought this problem on themselves."

Time Warner does not break out the revenue of feature films from total entertainment revenue in its statements, and a spokesman for New Line declined to comment on financial numbers. Mr. Jackson, who is directing a remake of "King Kong" for Universal Pictures with a budget of $150 million that includes a $20 million advance to Mr. Jackson to be applied against his share of gross revenue, was also not available for comment.

John Schulman, who since 1984 has been general counsel at Warner Brothers Entertainment, the sublicensee of many of the rights of the "Rings" film trilogy, said that the studio has never used self-dealing to cheat profit participants, and always sets any pre-emptive bid at market rates. "We value our relationship with talent, and it is in our interest to maximize profits to our participants."

The "Rings" film trilogy, produced for an aggregate $281 million, has made more than $4 billion in retail sales from worldwide film exhibition, home video, soundtracks, merchandise and television showings, and cleared more than $1 billion for New Line after payments to profit participants, according to one of Mr. Jackson's lawyers, Peter Nelson.

Thanks to escalators in the contract Mr. Jackson signed to serve as director, co-writer and co-producer of the trilogy, he reportedly receives about 20 percent of the gross revenue realized by New Line for the trilogy, minus expenses such as taxes.

Mr. Nelson declined to confirm the terms of the deal he negotiated for his client, but did state that Mr. Jackson had received almost $200 million to date from New Line for the trilogy.

One thing is certain: if it were not for Stanton Stein of the Santa Monica firm of Alschuler Grossman Stein & Kahan, life would be much easier for studio accountants.

Mr. Stein, the litigation lawyer who filed Mr. Jackson's suit against New Line, first brought a vertical integration action for the producers of the "Home Improvement" television series against Disney in 1997.

Mr. Stein, known as Larry, would later file similar suits against the Fox Television, a division of the News Corporation, for the producers of the show "Cops," and for Alan Alda and David Duchovny, the stars of the shows "M.A.S.H." and "The X-Files."

Mr. Stein's legal strategy in these lawsuits was to use a "top down" theory of insider conspiracy. According to Mr. Stein, there was only one place to point the finger of blame. "The foot soldiers inside a studio can't do this self-dealing," he said, "without the people at the top knowing what's going on."

Mr. Stein has sought to depose the News Corporation chairman, Rupert Murdoch, in all of his vertical integration lawsuits against Fox. All the suits, as well as the "Home Improvement" suit, were settled before Mr. Stein could depose a company chairman or chief executive.

"It's true I don't do trials, because if you have a good lawyer, you don't have to go to trial," Mr. Stein said. "A lot of attorneys think what I do on vertical integration litigation is easy, and they take a run at it. But if you don't know a hell of a lot about studio accounting and intellectual property law, it's amateur hour."

In the "Rings" matter, home video, television and merchandising were handled by divisions of New Line, except for certain foreign rights, which were handled by Warner Brothers. Soundtrack sales were handled by Warner Records, a Time Warner subsidiary that was recently sold to an investor group led by Edgar Bronfman.

But Mr. Socarides said some lucrative rights did not go to Time Warner companies. The pay television deal went to Starz, not Time Warner's HBO. He added that the "Rings" book trilogy remains with Houghton Mifflin, which is not a Time Warner subsidiary (although editions related to the films were released by Warner Books).

To defend itself, New Line has hired Robert Schwartz, the head of entertainment litigation at O'Melveny & Myers, who has gone against Mr. Stein in many profit participation cases.

Mr. Schwartz declined to comment on the specifics of Mr. Jackson's claims, except to say that he is accustomed to dealing with litigants "who say they're not going to settle for anything less than 100 cents on every dollar in dispute." He added that "in my experience, these are the guys who in the end walk away with a nickel on every dollar."

When told of Mr. Schwartz's comment, Mr. Nelson replied, "I'm confident that after we see all the financial records from New Line and Warner Brothers that we're trying to get to, every dollar in dispute will become four dollars."

Red State Humor Turns Blue - New York Times The New York Times

June 13, 2005

Red State Humor Turns Blue

LOS ANGELES - It's been variously referred to as hick, redneck, Nascar or Wal-Mart comedy. The humor bends toward jokes about a grandmother's flatulence and deer hunting with the wife.

But to J. P. Williams, the personal manager who conceived the popular Blue Collar Comedy Tour, consisting of a movie, a DVD release, a television show and stage performances featuring Jeff Foxworthy, Larry the Cable Guy (real name Daniel Whitney), Bill Engvall and Ron White, it all comes down to this venerable show biz maxim: Funny is money.

"I'm into low costs and big profits, and I bet I make more money than the execs running the studios - none of whom are over 6 feet," said the 6-foot-1 Mr. Williams during a recent interview in the Sunset Strip offices of his management company, Parallel Entertainment. "I'm not doing this to get a good table at Mortons."

Mr. Williams has pulled together a $75-million-a-year enterprise built on the individual and group efforts of the troupe. Blue Collar stand-up routines and comedy sketches - like Larry the Cable Guy's buzz phrases "Git-r-done" and "Lord, I apologize," and Mr. Foxworthy's "You might be a redneck if ..." - have become part of the vernacular of tens of millions.

And it's a national business that, except for the traditionally country-act-resistant Boston-to-New York corridor, plays across the so-called blue state/red state divide. Larry the Cable Guy's concert tour was the sixth most popular live act in the United States for the first quarter of the year (Josh Groban was No. 1), and the best-selling comedy act, with sold-out performances in Buffalo, Detroit, Pittsburgh, and Baltimore, according to Pollstar, the concert business publication.

Nielsen SoundScan data in the first week of June showed that Los Angeles was the best-selling market for comedy albums by Mr. Foxworthy and Mr. Engvall, and Minneapolis-St. Paul led in CD sales for Larry the Cable Guy's latest, "The Right to Bare Arms."

Mr. Foxworthy, who was probably the best known of the troupe before the Blue Collar show, credits Mr. Williams's prescience.

"J. P.'s gift is not in creating markets, it's finding markets that are already there, but people are overlooking," Mr. Foxworthy said. "When everybody was telling me to lose my Southern accent and get rid of the cowboy boots, it was J. P. who told me to stick with my act, because that's what made me special."

And while the Blue Collar troupe's high profits are something that the Hollywood entertainment machine drools over, the success has happened without a hit movie, a program on a Big Four network or a single make-or-break star.

Mr. Williams's management company, which handles 18 comedians, is privately held, and he declined to break out the financial figures. But he has been able to turn Blue Collar into a vast merchandising business, with calendars, books, greeting cards, T-shirts, belly rings, barbecue sauce and even thong underwear. Mr. Foxworthy said that his calendar alone generated $1 million in annual retail sales.

But the gravy in the business is undoubtedly in DVD sales. According to the trade magazine Video Business, the 2003 feature film, "Blue Collar Comedy Tour: The Movie," and the straight-to-DVD follow-up, "Blue Collar Comedy Tour Rides Again," have generated more than $85 million in retail DVD sales and rentals. "Git-R-Done," a 2004 film of Larry the Cable Guy's solo stage act, which cost just $62,000 to produce, tallied more than $15 million at video stores.

Although the Blue Collar home video revenue is driving the profits at Parallel, weekly television appearances give the acts the broadest commercial penetration. The "Blue Collar TV" series, a half-hour of sketches and stand-up culled from the live shows, is a solid ratings performer on WB, where its premiere in 2004 gave the network its highest viewership in three years in its time slot, with 5.4 million viewers. The show also pulls in good ratings on Comedy Central, the Viacom channel where WB shows are repeated.

"The thing about comedy is, people try to make it too complicated," Mr. Williams said. "Sometimes, it works best when it's simple."

In his business, he who has the hot acts rules. Mr. Williams began his career straight from high school in 1983, running errands at Spotlight Enterprises, a New York nightclub booking agency run by his uncle. After working with performers like Robert Townsend, Jamie Foxx, David Alan Grier, and Damon Wayans, Mr. Williams's career took a turn when he borrowed $20,000 from his first management client, Mr. Foxworthy, to start Parallel in 1991.

According to Mr. Foxworthy, Mr. Williams conceived the Blue Collar tour as an alternative to the hugely popular Original Kings of Comedy tour of the late 1990's, which resulted in a concert film featuring Steve Harvey, D. L. Hughley, Cedric the Entertainer and Bernie Mac that sold $38 million in theater tickets.

"That was a show for urban hip people," Mr. Foxworthy said. "But that show left out the people who were not hip. They're the ones who wake up every morning and go to work and go to war, and, dadgum, there's a whole lot of 'em out there."

But unlike the audience for "The Original Kings of Comedy" concert film, the audience for Mr. Foxworthy and company stayed home when "Blue Collar Comedy Tour: The Movie" opened in January 2003. The film, which cost $2 million to produce, grossed just $634,000 at the box office for Warner Brothers.

The film was rushed to DVD, where initial sales were about 500,000 units, a respectable number. The Blue Collar act might have withered at that point if not for the interest of Kathryn Mitchell, then an executive for Comedy Central, who picked up the film for her network.

"Blue Collar Comedy Tour: The Movie" had a November 2003 debut and was the highest-rated film ever on Comedy Central, which then bankrolled a sequel and ordered six more concert films (all to go direct to DVD for Paramount Home Video).

Comedy Central has also commissioned a raft of solo efforts from the Blue Collar stable for cable premieres. Thanks to the push from Comedy Central, sales for the first film have reached over three million DVD units for Warner Home Video.

"Warner Brothers had no idea what they had with Blue Collar," said Ms. Mitchell, now general manager at the cable network BBC America.

Mr. Williams says that the beauty of the comedy DVD business is not in the retail sales - Wal-Mart sells many of the DVD's as a loss leader to pull customers into the stores - but the production profits earned by his comics and his film arm, Parallel Productions, which he operates with a partner, Alan C. Blomquist.

"Because we financed the production, we made a hell of a lot more money than those guys who only get a piece of a 20 percent royalty," Mr. Williams said in reference to the studio practice of counting 20 percent of a title's gross video revenues toward a royalty pool to be divided up by actors, directors and writers.

So, just who is the audience watching "Blue Collar TV" and paying all this discretionary income for the merchandise? Both Ms. Mitchell and Michael Clements, the co-executive vice president for comedy development at WB, labeled the audience as "diverse."

A look at the audience at any Blue Collar concert reveals a sea of white faces, and a large proportion of women. It's an audience that roars at Larry the Cable Guy's bawdy Southern good ol' boy observations (though Mr. Whitney is from Nebraska), appreciates that Mr. Foxworthy shuns four-letter words and titters at jokes that skewer their fear and distrust of minorities - as long as the humor doesn't express overt dislike for any single minority. Hillary Clinton and Michael Moore are targets of derision on general principle, but more pointed political commentary meets a cool reception.

But Mr. Williams says that appreciation of the Blue Collar franchise is not tied to class or money. "People who like to laugh love all sorts of comedy," he said. "And they always have a need to see it as a community, because that just makes the laughs bigger."

The New York Times > Business > Media & Advertising > The Movie Midas
The New York Times

March 7, 2005

The Movie Midas


OOn the Saturday before the Academy Awards, film executives jammed into a tent on a Santa Monica beach to trade accolades at the Independent Spirit Awards, an event devoted to honoring independent films.

The open secret, of course, is that most independent film labels today are owned by major Hollywood studios: Focus Features, the producer and distributor of "Eternal Sunshine of the Spotless Mind," is owned by NBC-Universal, a division of General Electric, and Fox Searchlight, which produced last year's critical darling, "Sideways," is a part of Rupert Murdoch's multinational behemoth News Corporation.

The most notable shutout at the Spirit Awards was suffered by a true independent: Lions Gate Entertainment, the largest surviving distribution and production company not owned by any Hollywood studio, did not manage a single nomination, despite having released "Fahrenheit 9/11," which grossed $119 million in domestic box office, and the low-budget "Open Water," which grossed $31 million last year.

But Lions Gate executives had this consolation as they watched the Spirits and the following night's Academy Awards ceremonies from the nosebleed seats: they were making all the money.

On Oscar weekend, Lions Gate's "Diary of a Mad Black Woman" was the No. 1 film at the nation's box office, with ticket sales of $21.9 million in only 1,483 theaters. On the same weekend, the company's "Saw," a gruesome serial killer film, was on top of the DVD charts, with sales and rentals reaching almost $80 million after its Feb. 15 video release.

Lions Gate's Oscar weekend market share was anything but a fluke. Five years after joining Lions Gate, its chief executive, Jon Feltheimer, and its vice chairman, Michael Burns, have forged the largest vertically integrated competitor to the major studios, with a production facility, television unit, foreign sales arm and - most important to Wall Street media watchers - an 8,000-title library. The library, which collects titles for the home entertainment market, generates nearly half of Lions Gate's revenues.

While paying off the debt from acquisitions that filled that library, Lions Gate has functioned with a strict cost discipline that sets it apart not just from the studios but also from other independents: it will not risk more than $8 million to produce or acquire a feature film. And the company follows Mr. Feltheimer's instructions to seek out audiences, like the one for "Diary," that other film companies do not often reach (in this case, black women of a certain age).

As a result, Lions Gate's movies grossed $302 million at the nation's theaters in 2004, beating all the studio specialty labels except Miramax Films, which is owned by the Walt Disney Company.

"I'd love to have a film like 'Sideways,' but with that you're betting on execution and awards season marketing," Mr. Feltheimer said. "What's more important is that we stick to the plan that me and Michael Burns came up with five years ago: We want to be the smallest studio with the smartest plan and the biggest library."

Lions Gate's recent success has come as an unwelcome surprise to many Hollywood studio players, who had predicted a poor showing for "Diary," an adaptation of an African-American gospel play. And many of this crowd would rather be seen mowing their own Bel Air lawns than dealing in the rough trade like "Saw."

Lions Gate, which trades on both the New York Stock Exchange and the Toronto exchange, closed at $11.38 a share on Friday, up 14 percent a share for the week - and has a current market capitalization of $1.2 billion, up more than 12-fold since 2000, when Mr. Feltheimer joined as chief executive.

At the time, Lions Gate, which was founded in 1997 by Frank Giustra, a Canadian mining promoter, was reeling after a disastrous deal with Mandalay Entertainment. The company was then recapitalized by a group of investors recruited by Mr. Burns and Mr. Feltheimer, who came to Los Angeles 30 years age as a rock guitarist and eventually took top executive posts at New World Television and Columbia TriStar Television.

Nowhere is Mr. Feltheimer's edict that his company "service the film audiences that are not being serviced by the studios" more evident than with "Diary," an adaptation of a play by Tyler Perry, who also wrote, produced and starred in the film. Mr. Perry is known for plays with positive messages, upscale characters and, often, a gun-toting, pot-smoking grandmother whom he plays in drag.

Despite grossing close to $100 million in ticket and merchandise sales in the last five years, Mr. Perry, 35, was a virtual unknown in Hollywood until he signed with the William Morris Agency in 2003. Soon he had a development deal with CBS and was talking to Fox Searchlight about a film adaptation of "Diary."

Both the deal and the talks collapsed. "The problem at CBS and at Searchlight was that I kept being told that I needed other writers to make my projects work in Hollywood," Mr. Perry said last Thursday. Furthermore, he said, "I got mad when a man from a studio told me that black people who go to church don't like to go to movies."

By contrast, after Lions Gate got his script in May 2004, it took only a week to get a green light. It helped, of course, that Mr. Perry picked up half of the $5.4 million production cost. Black Entertainment Television, a division of Viacom, split the rest of the cost with Lions Gate. As of Sunday night, "Diary" had grossed close to $38 million in domestic box office in its first 10 days.

"No one at a studio ever takes the time to try to understand audiences like the ones that go to Tyler's plays," said John Hegeman, Lions Gate's marketing chief. "This core audience is older, female, black and is largely ignored by Hollywood, so they just stopped going to movies."

Although Lions Gate has increased its theatrical production, including a film in which the singer Usher will play a starring role and "Crash," starring Sandra Bullock and Don Cheadle, it has also stepped up productions and acquisitions of titles that are popular in home video. Last year, American consumers spent $1 billion on Lions Gate home video titles.

"It's home video that really makes the company go," said Dennis McAlpine, a media analyst with McAlpine Associates.

Rob Zombie is the type of artist who fits the Lions Gate home video equation, said Peter Block, the head of acquisitions. Mr. Zombie, a heavy-metal musician whose real name is Robert Cummings, had a film project, "House of a 1,000 Corpses," that was bounced from Universal to Metro-Goldwyn-Mayer and then to Lions Gate before it was released in 2003. It generated $12.8 million in domestic theatrical box office and $15 million in revenues for the home video division.

Lions Gate's "Monster's Ball," for which Halle Berry won an Oscar, was the company's first theatrical hit, in 2001. But the first big surprise on video was Mr. Zombie's film, which was acquired for just $1 million. "It hit because Rob pretty much does what Tyler Perry does," Mr. Block said. "He toured with his band and told his audiences all about his movie, which was great free publicity."

But what has Wall Street interested in Lions Gate - possibly as a takeover target - is not the piles of on-screen corpses but the company's coveted library of titles. With the help of investors like Paul Allen, Mr. Feltheimer bought out the library of Trimark Pictures for $80 million in 2000, and the library of Artisan Entertainment for $200 million in 2003.

As a result, Lions Gate's library will generate about $400 million of the company's revenues of $750 million for fiscal year 2005, according to filings with the Securities and Exchange Commission.

Mr. McAlpine, the analyst, said that Lions Gate is "the last of the vertically integrated independents and the most likely acquisition candidate for the major studios."

For now, the film Mr. Block is most excited about is "Hard Candy," which he picked up at this year's Sundance Film Festival for $2.5 million. It tells of a 32-year-old Internet predator who meets a young girl in a chat room. The centerpiece of the film is "a castration scene with a twist," Mr. Block said.

"The secret to what we do is that we put out films where the audience says, 'That's not a studio film. It's a Lions Gate film,'" he said.

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Scott Greenstein, the Sirius Radio executive who agreed to pay half a billion dollars for Howard Stern.

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Studio Wars Honed Skills Used to Nab Radio Star


Published: October 11, 2004

During his career as a merger-and-acquisitions lawyer and independent-film executive, Scott Greenstein, a one-time protégé of both Harvey Weinstein and Barry Diller, told colleagues and potential deal partners, "I'm your guy."

He was the guy who said he could get the stars, get the money, and get the movie deal closed.


Sometimes, he delivered; sometimes, he did not. But last week, Mr. Greenstein, 45, became the alpha guy of the entertainment business, if only for a day or two. As president of sports and entertainment programming for Sirius Satellite Radio, he was integral to the luring of Howard Stern from commercial broadcast radio to the subscription-based Sirius.

Backed by Sirius's significant coffers, Mr. Greenstein and Don Buchwald, Mr. Stern's agent, hammered out a deal worth $500 million in fees and production costs over five years. The news was heralded as a transformational moment for the fledgling medium of satellite radio, promising a possibly profitable convergence of content, data transmission, consumer electronics, and, of course, celebrity.

It also instantly bolstered the perception of Sirius from that of money-losing also-ran to a formidable competitor to the industry leader, XM Satellite Radio.

"It feels like the biggest media personality deal ever; it feels like the biggest radio deal ever; and it feels like it has the nerve center of America paying attention to media deals," Mr. Greenstein said last Friday.

That tremendous confidence - or perhaps hubris - comes in part from his experiences working for Mr. Weinstein, the co-chairman of Miramax, and Mr. Diller, a longtime movie and television executive who is concentrating on interactive commerce these days.

Mr. Greenstein said the lessons he picked up from Mr. Weinstein and his brother Bob and, later, Mr. Diller, came in handy last week

"What I learned at Miramax is that if you see where extraordinary creative talent can be brought into the family, move quickly, because if you don't, someone else will," Mr. Greenstein said. "What Barry Diller taught me was very special, and that was how unique and valuable content can be."

Mr. Greenstein shares another trait with the two men: he's a polarizing figure, thanks in large part to the aggressive ways he conduct business.

A native of Freehold, N. J., Mr. Greenstein joined Miramax Films in 1993, shortly after the Walt Disney Company bought the company from the Weinsteins. Mr. Greenstein's skills in deal making and acquisitions were needed at Miramax, which was about to step up production and distribution operations. By the time he left Miramax in 1997, Mr. Greenstein was known as "the third Weinstein brother."

Mr. Weinstein declined an interview request, but released a statement praising Mr. Greenstein as "a true innovator and pathfinder."

"What people at Miramax admired about Scott was that he would do the impossible for Harvey," said Peter Biskind, the author of "Down and Dirty Pictures: Miramax, Sundance, and the Rise of Independent Film" (Simon & Schuster, 2004). "If Harvey said, 'Fly to the moon,' Scott would find a way to do it. With the Howard Stern deal, that's very much in evidence."

There is no love lost between Mr. Greenstein and Mr. Biskind. In the "Down and Dirty" book, some of the descriptions assigned to Mr. Greenstein include "hatchet man," "attack dog," "terrier on speed," and "crime scene laundryman who wipes the blood off the walls."

Mr. Greenstein said: "Biskind was out to get me because I wouldn't dish dirt on Harvey and Bob and Diller. I refuse to cooperate in any story where Biskind is mentioned because I don't want to see him make another cent off a book that is full of inaccuracies."

When informed of Mr. Greenstein's comments, Mr. Biskind said: "My book is accurate. And Scott cooperated with me on the book. He just didn't go on the record."

Mr. Greenstein's tenure in the independent movie world was eventful. At Miramax, he negotiated the deal that brought "The English Patient" to the studio. In 1997, Mr. Greenstein left to become co-president of October Films, another independent known for films like "The Apostle."

By 1999, Mr. Diller had purchased October, combining it with other companies to form USA Films. Mr. Greenstein, who had little equity in the company, was made chairman, and two minority shareholder owners, one of whom was a co-founder of the company, were fired.

Mr. Diller, currently the chairman of InterActiveCorp, declined, through a spokesman, to comment. But in "Down and Dirty Pictures," Mr. Diller said he chose Mr. Greenstein to run USA Films because "he will go anywhere, knock down any wall, call anyone, do anything, and I'm an admirer of that."

An example of Mr. Greenstein's aggressiveness can be seen in his outbidding others for rights to Steven Soderbergh's "Traffic," which became a box-office and critical hit.

But three years later, Mr. Greenstein was out of a job, after clashing with other executives of the owner at the time, Vivendi Universal. Mr. Greenstein began looking for media deals to do on his own. After a brief pairing with Stanley Jaffe, a former Paramount Pictures chairman, which ended after their attempted acquisition for Artisan Entertainment failed, he went to work with Apollo Partners, a private equity group and a major backer of Sirius.

Mr. Greenstein quickly signed Maxim magazine, the rapper Eminem, the National Football League, and the National Hockey League to programming packages. By July, he was meeting with Mr. Buchwald in what began as talks about Sirius's supplanting XM as a sponsor of Mr. Stern's morning show produced and syndicated by Viacom's Infinity Broadcasting. A month ago, he and Mr. Buchwald started negotiating the price for moving Mr. Stern's show to Sirius.

Amir Malin, a former co-owner of October Films who has kept in touch with Mr. Greenstein over the years, lauds Mr. Greenstein's deal-making but offers some cautionary words. "It's a great deal for Scott, because it's not his money, and, if it works out with Howard Stern, it's a genius deal," said Mr. Malin, the former chief executive of Artisan Entertainment, which he recently sold to Lions Gate Films. "If it doesn't work out, Sirius is in bankruptcy. There are no shades of gray here. It's do or die."

According to Mr. Malin, the math is simple: Sirius has committed itself to pay Mr. Stern's operations a yearly fee, $100 million, that is almost eight times Sirius' current yearly gross revenue figure.

Mr. Greenstein repeated the company's stock response: if a million of Mr. Stern's fans pay $12.95 a month, the deal will pay for itself.

"I'm not worried," he said.

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The New York Times

October 6, 2004

Hollywood High Noon: Lawyers in a Duel for Clients


LLOS ANGELES, Oct. 5 - Before the outcry and the lawsuits, Barry L. Hirsch could have taken the easy path into retirement.

Earlier this year Mr. Hirsch, the 70-year-old show-business lawyer whose clients include Julia Roberts, Jennifer Lopez, Michelle Pfeiffer and Francis and Sofia Coppola, was offered what some would consider a generous retirement package by the younger shareholders in Armstrong Hirsch Jackoway Tyerman & Wertheimer, a premier entertainment law firm that Mr. Hirsch helped found here 24 years ago.

Mr. Hirsch, the firm's chairman, was not being forced into retirement, said his fellow board members, many of whom he had recruited into the firm. But if he chose to stay on, they said, his multimillion-dollar annual salary would be reduced, he would have to share much more power in the realigned organization, and his personal expenses would be reined in.

If he chose to continue working, Mr. Hirsch would have to acknowledge that he was "no longer the rainmaker at this firm, but, instead, a rainmaker," said James R. Jackoway, the president of the firm, now called Jackoway Tyerman Wertheimer Austen Mandelbaum & Morris.

But since the rainmaker in question is the unconventional Mr. Hirsch - a licensed marriage and family counselor who officiated at Ms. Lopez's second wedding - there is no slow ride to Palm Springs on the horizon.

Instead, Mr. Hirsch has decided to go to war with Mr. Jackoway and what has become Mr. Hirsch's former firm. With some younger partners there - Robert S. Wallerstein, Howard A. Fishman and David J. Matlof - Mr. Hirsch founded a new firm in August. (Another former partner in the old firm, George T. Hayum, jumped aboard last month.)

The split has created a battle over money and clients (with some of Hollywood's most successful actors and directors caught in the middle), touched off dueling lawsuits among deal-making lawyers who usually stay out of the courtroom, and provided a spectacle for those who thrive on gossip about show business's bloody internal politics.

As of last week, Mr. Jackoway confirmed, Ms. Lopez, Ms. Roberts, Ms. Pfeiffer, the Coppolas, the actors Bernie Mac and Owen Wilson and the director Wes Anderson were among clients who had jumped ship to the new firm, called Hirsch Wallerstein Hayum Matlof & Fishman.

Speculation was rampant among fellow deal makers as to where the loyalties of other famous Hirsch clients, like the actor Jude Law and the directors Sydney Pollack and Barry Levinson, would ultimately lie.

What makes this conflict unusual is that high-profile lawyers seldom make their wrangling as public as Mr. Hirsch and Mr. Jackoway have. Entertainment industry lawyers are usually considered to be the voice of reason, counselors who make wise decisions in their clients' interest while staying above the fray of internecine Hollywood business disputes.

"Since I've been an agent, I've never heard of this kind of thing between big Hollywood lawyers," said Ari Emanuel, one of the founders of the Endeavor Agency. Mr. Emanuel was represented by Mr. Jackoway when Mr. Emanuel's former boss, Jeffrey Berg, chairman and chief executive of International Creative Management, caught him taking I.C.M. files just before he started Endeavor in 1995. That dispute was settled amicably, without litigation, according to an executive at I.C.M.

Mr. Hirsch said the fight grew from his long-standing protests over what he called a change in culture at his old firm. "It turned into a business with a bottom-line approach rather than a business about serving clients," he said. "I tried to rehabilitate a dysfunctional firm and keep the clients out of any dispute. I want to solve my dispute amicably."

So far, the proceedings have been anything but amicable. Papers filed in Los Angeles Superior Court by the Jackoway firm say that Mr. Hirsch and his colleagues collected their bi-weekly paychecks on Friday, Aug. 13, and, after the close of business, bolted.

Over the next 36 hours, Mr. Hirsch and the partners who first joined him backed a truck up to their old offices, downloaded files from their office computers and removed miscellaneous office furniture and boxes filled with hard-copy client files, the papers say.

By the following Monday, Aug. 16, Mr. Hirsch and his new team had hired a publicist and christened their new legal boutique down the street in the Century City neighborhood, and were urging clients from their old firm to jump ship.

Also on that day, Mr. Jackoway and his fellow board members Alan S. Wertheimer, Barry W. Tyerman and Geoffry W. Oblath were served with a lawsuit that Mr. Hirsch and his new law partners had filed on the previous Friday. The suit states that Mr. Hirsch and the other plaintiffs had effectively been pushed out the door by a scheme that would have improperly diverted revenue and concentrated power in the hands of the defendants by converting the firm from a corporation into a limited liability partnership on Sept. 1.

Legal issues in the dispute turn partly on whether Mr. Hirsch and his colleagues misappropriated trade secrets by what the Jackoway side calls "wild looting" of the firm's records.

According to Gregory Keating, who teaches professional business practices at the University of Southern California Law School, disputes between lawyers over who owns what in a legal file are commonplace but often resolved without trial.

"It's the client's right to control the actual work product in respect to attorney-client confidentiality," Mr. Keating said. Thus, if the clients whose information was in the files have switched to Mr. Hirsch's new firm, "it may not really matter that the old firm owns the actual paper that's in the file," he explained.

A more colorful assertion by Mr. Jackoway and his partners is that Mr. Hirsch, with his training and skills in psychology, persuaded clients to switch representation for his sake rather than their own by making them feel sorry for him. "Hirsch used the psychological pressure points known to him as a therapist to manipulate their emotions," the Jackoway firm's court filing says.

Mr. Hirsch, who has a master's degree in behavioral science from Azusa Pacific University, scoffed at that contention. "The idea that I'm some sort of Svengali who hypnotized clients to come with me is laughable," he said last week. "My clients are sophisticated business people perfectly capable of acting on their own free will."

Challenging Mr. Hirsch's claim to have been squeezed out, Mr. Jackoway said in an interview that Mr. Hirsch "left secretly and without discussion because of his hubris and greed."

A Yale Law School graduate, Mr. Jackoway, 52, represents David Letterman and Mr. Letterman's Worldwide Pants production company. He and his partners have a client list that also includes the actors Nicole Kidman, Cameron Diaz and David Caruso, the talk show host Jimmy Kimmel and the screenwriters Ron Bass, Brian Helgeland and Gary Ross. "My loyalty is not to any law firm, but to my individual lawyer, Alan Wertheimer, whom I've been with for 20 years," said Mr. Ross, whose screenplay for "Seabiscuit" was nominated for an Oscar last year. "I have to worry about making movies, so I'm not really that interested in the fight between Alan and the firm and Barry Hirsch."

In the current troubles Mr. Hirsch, at least, sees a silver lining. "Instead of retiring, I still get to do what I love to do and do so well, which is represent clients," he said. "What does my age have to do with anything?"

Mr. Hirsch said he had recently heard from many people over 45 who felt trapped in miserable jobs until they heard of his own exit from his old firm.

"To borrow the words of Joseph Campbell from the 70's, I tell older people afraid of starting over to just follow your bliss," Mr. Hirsch said.

Copyright 2004 The New York Times Company