Tom Pollock - Negotiating Pre-Sale Financing and the Star Wars Contract

In this excerpt, Pollock describes his entry into the entertainment industry and the impact of the contract he negotiated for George Lucas’ Star Wars.

See Also: Pollock discusses Running Universal Pictures

Friday, October 22, 2010


POLLOCK: I worked at the AFI for a couple of years and realized I could start a law firm with two friends of mine and get film students as clients. This was before film school was a way into the film business. So I started a law firm called Pollock, Rigrod and Bloom, with my friend Andy Rigrod, from firm Mitchel, Silverberg, and his roommate from law school, Jake Bloom. As the business manager for AFI, I was working with all of these film students, and I brought the students and all their filmmaking friends in as clients. People didn’t have lawyers in those days unless they were extremely rich because lawyers were paid by the hour. If you were a filmmaker just starting out, you got an agent if you were lucky, and the agent did the legal work. This was during the time that the business was starting to get complicated so the timing was right.

I was just having this conversation with Malcolm Gladwell, America’s greatest pop-philosopher, about the issue of timing. The timing was simply right. We started charging our clients a percentage of their income, something lawyers didn’t do at the time. We weren’t doing it because we thought we could make a lot of money; we only did it that way because we had students who couldn’t afford to pay us. One of my first clients was George Lucas. He was just doing THX-1138 but then he did American Graffiti, and then Star Wars, and 5 percent of all that became a lot. More importantly, it made our firm successful.

Using that money, Jake Bloom and I built the firm up (then Pollock, Bloom, and Dekom) into certainly, I think, the best entertainment law firm of its time. Other firms followed our techniques and began signing younger talent, signing them early, getting involved in their lives and careers. Since I knew I wanted to get into show business, I told my clients things like, “I won’t do your contracts unless you let me read your scripts too” and “You have to hear my comments even though you don’t have to follow them.” Even then, that was what I wanted to do.

This was between 1970 and 1986. That is sixteen years of a career right at the time when lots of wealth was suddenly being created in the industry. Producers began splitting up movies and selling them in individual pieces in order to get secure financing. That was new. Until then, the studios financed the movies, they did well or poorly, and that was it. Around this time as well, producers started pre-selling the rights to their films: the German rights, the French rights, the network television rights. The first film to be pre-sold to cable was Meatballs, Ivan Reitman’s first film. Reitman was an early client of mine. HBO bought the pay-television rights and with that contract we were able to finance the movie. Later, when we sold the movie to Paramount, they didn’t get the television rights because those had already been sold to HBO. Splitting rights is a common practice now.

MIP: At what point in the production process does the pre-sale begin?

It starts when you begin looking for financing. There are only three ways to get money: One is from people who normally invest, like the studios. The second is from rich uncles and other relatives who might give you money. The final way is from banks, but they want collateral even though you haven’t made the movie yet. So as collateral you put up a piece of paper that says some reputable German company agrees to pay you a million dollars when you deliver the movie. Then you get a discounted million dollars from the bank. Of course the bank will wonder how you are going to deliver. The producer then pays a completion bond guarantor to guarantee delivery.

That is the way buildings are financed; it is basically the model for the construction industry. Somebody builds a shopping center based on a contract from Macy’s or Neiman Marcus saying they will agree to a twenty-five-year lease and pay so much rent. You take that to the bank and the bank gives you the money to build the shopping center. Movie pre-sales operate on the same principal.

You just described that time as a somewhat innovative period.

In financing.

What were some of the high points? Which deals of yours have had the greatest legacy?

The Star Wars series, the Superman series, and the Indiana Jones series. The ones that are successful are always the ones that are the most innovative. Some deals were innovative but when the movie fails, not only do we want to forget about it, but also the deal is no longer interesting. I do think it is interesting that the second job I had, as chairman of Universal, and the job I have now—producing films through Montecito Pictures—are the same job. They are both about how you put a movie together, which is about knowing what is important. There are differences because companies have different needs, but the process is the same.

This goes to the broader question, which is to say that I think I have been doing the same thing, more or less, for forty years, but I have been doing it on behalf of different people. That is the big difference between being a lawyer and being an executive. As a lawyer your job is not on the line. If I wrote a good contract but the movie didn’t work, I still had a good job. But when you are out there doing it for yourself and getting judged and it doesn’t work…

I knew about ten years into running the law firm that I didn’t want to be a lawyer for the rest of my life. I started to prepare myself for being asked to run one of the major studios, which was what I thought I wanted to do. I never wanted to be a producer per se, but each year I would take on a new project that would teach me some different facet of the business. One year I set up a merchandising and licensing company because I saw how much money Lucasfilm had made in merchandising; I thought that was interesting and that I should learn how that worked. Another year I had clients who wanted to go public with a company we had formed called Imagine Entertainment. Ron Howard and Brian Grazer were clients of ours and we formed the company and took it public. I had never done that before but I thought I should do it and then let everyone know I had done it because that would make me seem more “Wall Street” and less like a hippie lawyer. Hippie lawyers don’t get asked to run companies.

I got a few job offers but they were either to do business affairs at a large studio, which I didn’t want to do, or to run a small studio, which I didn’t want to leave my law practice for. Then the opportunity came up at Universal—then called MCA—through Lew Wasserman and Sid Sheinberg, who ran it at the time. They asked me to come over, and while I told them I would think about it, I really just went home and discussed it with my wife, and told my partner I was going to do it.

Would you be willing to talk about the deals that were most innovative and successful? What made them so successful? How were they structured?

Star Wars was a unique deal in a unique situation. One of the first deals I ever did with Lucas was a two-picture deal at United Artists. It was to write and direct a movie called American Graffiti and to write a twelve-page treatment for a series of nine science fiction movies. This was in 1971. United Artists didn’t make either of them; they let American Graffiti go, it was made by Universal, and the twelve-page treatment is what eventually became Star Wars.

I don’t want to turn this into a discussion about George Lucas, but George was a person with a deep and abiding distrust of Hollywood and everything it stands for. Part of that distrust came from his upbringing in the small town of Modesto, CA. Part of it has to do with seeing his friend and mentor Francis Coppola get chewed up by Warner Bros. He didn’t want that to happen to him, so he was very concerned.

He wanted to make nine Star Wars films. He remembers six, but I remember nine. He was worried that if he made the first he wouldn’t have the rights to make the next one, and that if it didn’t do well, a studio would just bury it. What was really important to him was not how much money he made on Star Wars, but that he had control over the sequel rights, and the ability to make it. From the ownership of the sequel, The Empire Strikes Back, he obtained merchandising rights, which created the Star Wars empire. That didn’t come from him realizing the films would make a lot of money and deciding he could make a whole lot more if he owned the whole thing. Rather, the desire to own the sequel rights came from a place of fear and distrust of what a studio was going to do to him if he was not in control of his own destiny. It was a fairly simple deal, really. It just kept the ownership of all those ancillary rights in George’s name and Fox would get first crack at each sequel. I have never been able to get that for anybody again.

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