The Intangible Investor: Hit Horror Movie’s IP Story Frightens Some Studio Execs – It Shouldn’t

Sinners looks to be little more than a gothic horror movie set in the John Brown South with incredible box office appeal. Its storyline, however, reflects a subtler narrative about ownership and the bold agreement involving intellectual property rights that the film’s celebrated writer-director, Ryan Coogler, was able to secure from Warner Bros, which has some studio executives running for their wooden stakes.

Coogler has carved out a much-reported ownership deal for the intellectual property of Sinners, including characters, that is virtually unprecedented among even leading directors and writers. Some studio heads are upset because Coogler’s agreement gives him the rights to Sinners in 25 years (2050), when he is 63, as a dangerous precedent that could undermine the economics of the studio system. Shareholders may also be concerned.

It is exceedingly rare to get a movie studio to agree to give the rights to one of its hits back to the filmmaker after a time. Most studios fear the precedent it could set and the impact it may have on future revenue.

Others argue that the deal is not without precedent and is simply a result of Coogler’s fabulous track record and negotiating savvy. Some art and independent filmmakers have been able to strike highly attractive “back ends,” including a return of rights, but the initial payments to these artists are often paltry and successes rare; the franchise potential effectively nil.

Unique Creator

By any standard, Coogler is not a typical writer-director. His five films to date have generated $2 billion and garnered strong critical support and awards. He and his fiduciaries are likely thinking that a studio should be working for him, not he for a studio. Coogler, who is African American, is already one of the top grossing filmmakers of all time with just five films, and he is not yet 40 years old. With $366 million revenue to date, Sinners is still being seen in some theaters months after its release and is at its streaming peak. Even with a hefty marketing budget, likely as high as the production cost of the movie, Warner Bros’ outlay was only $90 million-$100 million—modest by today’s standards.

After years of making films based on existing, IP-protected characters, like Marvel Comics’ Black Panther and Apollo Creed, Coogler has made an original genre movie with characters and themes he could call his own, and it could pay dividends for the rest of his life. Warner Bros would like to keep Coogler happy. The agreement giving him eventual ownership of his film means that he will have access to franchise quality property when he is still young enough to monetize it on his own behalf. It has been suggested that he gave up initial compensation to affect the eventual transfer of ownership.

The contract gives him final cut and a piece of the box office revenue right from the start. Coogler has stated that owning his movie about Black ownership in the in Mississippi in 1932 is  nonnegotiable.

The film takes place in Jim Crow Mississippi in 1932 at the height of the depression. Twin brothers Smoke and Stack (a play on the Howlin’ Wolf blues classic, “Smokestack Lightning”) return to their small town from Chicago with tough-guy skills learned from gangsters at the top of their game. They are no longer thinking sharecropping, but business-owning in the only way they can. They open a juke joint blues club that caters to Blacks hungry for escape. However, they still need to rent the space from a Klan member and his boys.

“The movie has everything to do with the film’s central theme and why it is so resonant: the art of the deal,” says Tania Clark in a New York Times guest essay, The Movie Deal That Made Hollywood Lose Its Mind. “Negotiation is a central thread in Sinners, a repeated motif about the power and consequence of deal-making in America.”

Also, part of the motif is the film’s use of blues music, an artform that Blacks created but lost control of and only got back partially through popularity generated by young white musicians in England in the 1960s.

Bucking the System

Sharecropping was an agricultural system, prominent in the Southern United States after the Civil War, where landowners provided land and sometimes supplies to farmers (often formerly enslaved people) who then worked the land and shared a portion of the crop with the owner. This system, while appearing to offer a new form of labor after slavery, often trapped farmers in cycles of debt and poverty due to high interest rates, unpredictable harvests, and exploitative practices.

“Nobody Black had the leverage to negotiate a good deal in the Jim Crow South,” notes Clark. “Despite the vampires in the film [spoiler alert!], the real monsters are the ordinary-seeming men, like Hogwood, the covert Klansman from whom Smoke and Stack buy the mill they are going to turn into the juke joint, who smile as they take your money and shake your hand, and have no intention of honoring the terms.”

Angry Creators

In the recording industry, Taylor Swift’s much heralded grab for her master recordings, which were subject to a relatively standard recording industry requirement the teenage Swift had agreed to under the direction of her parents, reflects not only her desire for creative control but recognition of her celebrity and business acumen. While Swift may believe she no longer needs to make the label money on the strength of her incredible popularity, she still needs to honor her agreement, which she was eager to sign at the time she had no status.

Swift did not want to accept the high cost of acquiring her recording masters from Scooter Braun’s company, estimated at $300 million. (Some successful singer-songwriters pay dearly to buy back their master recordings, if they want to. Many can afford it). She would not take the deal, which was likely fair, given their value, so she re-recorded her albums. Her fans simply were asked to buy them again, and buy them they did, in droves. Swift can rely on the loyalty of her huge fanbase to command almost any agreement she wishes. No, you can’t rewrite contract history, but Swift did.

Fair for Whom?

Are those “standard” master recording agreements and movie deals fair? It depends on whom you ask. Record and movie studio executives and their co-investors invest huge amounts of capital with historically low chances of payback. In most cases, their lottery ticket is the IP rights. To them, these assets represent the potential for a big win and a rare upside they need to compete and grow. If celebrities can walk away from these agreements or refuse to sign them in the first place, the economics of the music industry will need to change.

My question: How and when are corporate inventors going to exercise their leverage and require ownership or, at least, equity participation, in what they create? University and independent inventors have much more skin the game. They receive as much as 50% of the revenue from their inventions, but ownership rarely, if ever, reverts to them. Rather, many patents for university inventions are left on the shelf to wither and die.

Work for Hire

Corporate inventors, and virtually all employed at tech companies, publishing houses, animation studios, and so on, are under work for hire. What they create is owned by their employer. (An exception may be music publishing rights, which are often retained by the writer). The company may wish to throw employees a bonus or other bone from time to time, but ownership is out of the question, even for the most successful creators.

Could a successful inventor at IBM, Qualcomm, Nivida or Pfizer be persuaded to join a smaller company for the right deal involving equity in their invention or, at least, in the company monetizing them? I am sure there are more than a few successful researchers would want to leave the nest and give it a try. Of course, it is not that simple. Researchers and inventors may be locked up with their current employer through notebooks, non-competes and other restrictions, as well trade secrets. A lot will depend on their track record, consistency, industry and revenue-generating ability of the inventor, and the competition in the marketplace. Additionally, it is often difficult in tech to attribute success to a specific patent associated with a particular inventor or product; less so in pharma and medical devices.

Changing Tides

The days of creator “sharecropping” may be slowly coming to an end. With AI biting at their heels (or, perhaps, because of it), now may be the time for some artists and inventors not to accept “standard” ownership arrangements and seek more participation, if not eventual control. Traditional IP owners and distributors – technology, pharma and medical companies, movies studios and record labels – may find it difficult to hold out for once so-called standard agreements, especially when valuable content and monetizable inventions are in poor supply.

Sinners, a vampire Western cum gangster show, is more entertainment than anything, appealing to people of all races for its defiant vibe, bloody action and shadowy villains. But it is also saying something about ownership and creativity worth hearing.

In any industry, those who control distribution believe it is their right to own the most valuable assets in perpetuity and control how and by whom they are used. In the creative industries, where financial hits are few and far between, such privileges are not easily relinquished.

Coogler’s success and that of Swift, Prince, Gates, Brin and others—artists, inventors and entrepreneurs who were able to retain control, if not ownership, of their IP rights, may be a harbinger of deal-making to come. With the playing field leveling somewhat for the most successful creators, forward-thinking music labels, movie studios, tech companies and publishers should not fear agreements that yield eventual control. They will become inevitable. The trick is to discern a way to make those deals work on behalf of their bottom line and investors, while leaving room for innovators who may have earned the right to control the future of their assets.