We are all familiar with the letter ratings: G, PG, R & X; we have all seen the screen shot just before previews and opening credits at the movies stating “The following preview has been approved by…”; and we have all seen the warning screen that says we may go to jail for 5 years and pay a fine of $250,000 for reproducing or distributing the movie we are about to watch.

None of this would be possible without the Motion Picture Association of America (“MPAA”); however, there is much more to this trade association that represents the six major Hollywood studios, copyright owners, and television distributors, especially as it pertains to our field: participations. As the “voice and advocate of the American motion picture, home video and television industries”, the MPAA focuses on three distinct areas: ratings, lobbying and copyright protection.

The MPAA rates each motion picture released for audiences to gauge how suitable each title is for various age groups by assigning the letter ratings previously discussed. Though it is a voluntary system, most theater chains will not show a movie that is not rated.

Additionally, the MPAA lobbies to protect the industry from piracy and works to remove trade roadblocks. With recent events such as the Sony hack and free file sharing on peer-to-peer networks, the industry is constantly battling those who try to get content without paying for it and/or distribute to others for the same purpose.

Perhaps the biggest impact the MPAA has on our small sector of the industry is its effect on both sides of the participation statement. On the revenue side, the MPAA collects retransmission royalties, or “license fees” collected from cable operators and satellite providers who are retransmitting programming from another service, such as pay television providers, and distributing them to the copyright holders that have registered with the MPAA. The allocation of collected royalties is based on a variety of factors, including the number of hours of programming, ratings and number of subscribers, among others. According to copyrightroyalties.com, in 2012, over $306 million in retransmission royalties was collected and disbursed.

On the expense side, the six major studios pay regular dues to the MPAA to cover the services they provide to the industry. The studios then take those amounts and allocate them to titles based on theatrical performance. The allocated amount then shows up on the participation statement as “Trade Dues & Assessments”. Because the dues paid include services to the studios that are non-title specific, there is some controversy regarding dues including corporate or overhead costs being charged to individual titles.

Especially in today’s digital atmosphere, issues like copyright, piracy and protection are at the forefront. The film and television industries are in constant defense mode to keep their intellectual property safe; parents are looking to protect their children from mature or inappropriate content; and copyright holders are just trying to get paid for what is rightfully theirs. While the MPAA handles all of that, we will make sure that they have a fair and balanced impact on the participation statements.

Sills Greg Standingweb

Greg Sills

Greg Sills, CFE, has over 15 years of entertainment accounting experience. He specializes in production and distribution audits of film and television companies on behalf of third-party participants and manages the audits at Sony, CBS and MGM. Greg worked for Sills & Gentille before they merged…Learn More