Boxoffice (Jan-Mar 1963)

HERMAN LEVY ANALYZES: Heater and Pass Clauses In Universal Contract NEW YORK — Revised clauses in Universal’s licensing agreement have been analyzed by Hennan Levy, general counsel of Theatre Owners of America. Commenting on the changes, H. H. Martin, Universal general sales manager, told Boxoffice that the revisions could be compared more to “sharpening a pencil’’ than to new clauses. Provisions I'elative to drive-in theatre heater charges and passes have been added. MUST ACCOUNT FOR PASSES In regard to passes. Levy pointed out that the additional clause thereon provided that all persons admitted free, or by way of free or reduced price, coupon, script or other written or printed authorization, with or without a service charge, should be accounted for. He noted that, if the total of those using passes, etc., exceeds three per cent of the total number of patrons attending that day, the excess is to be treated as paid admissions and is to be added to the gross intake for percentage film rental puiposes. Although the contract sets out three per cent as the pass ceiling, it provides that a different percentage may be agreed upon at the time of signing the picture contract. Levy said it would be necessary for the exhibitor to keep an accurate count of passes. The additional clause on heater charges requires the exhibitor to account for all receipts obtained from the rental of heaters or from heater service charges by including them in gross receipts for percentage film rental purposes. However, the exhibitor may deduct from the gross receipts the actual receipts obtained from the rental of one heater or from one-heater service charge per car, provided that the heater rental or heater service charge is ti*uly optional with the patron and provided, further, that the deduction does not exceed (unspecified) cents per car. COURT RULED ON HEATRES Levy said he assumed that, since the amount of deduction per heater, or per heater service charge, had been left blank, it was to be filled in at the time a contract was signed. He noted, however, that the clause provided that, if the blank was left unfilled, “the deduction may not exceed ten cents per car.’’ Levy said the heater provision was in keeping with a 1960 New Jersey court decision, holding that a “compulsory charge” for a heater, whether the patron wanted it or not, was actually a part of the admission price and the exhibitor had to include the charge for gross receipts purposes. He said the court stated, in part; ‘“The attempt by the defendant (theatre owner) to call these ten cent charges service charges was merely a device to avoid paying the called -for percentage under the licensing agreements on the ten cents involved. “The defendant’s argument that these were services made available, regardless whether they were used or could be used, has a hollow ring and is one which I cannot accept.” In summary. Levy said the exhibitor is required to pay film rental percentage on heater service charges and on heater rentals, if option was not given the patron to rent or not to rent; and, on all passes, etc., used in any one day which exceeded three per cent of the total number of patrons attending on that day. Continuing, Levy wrote: “In addition to the current requirement that the exhibitor use a separate and distinct series of tickets for each admission price classification, he is to be required to use a separate classification for free or reduced rate admissions. He will also be required to tear each ticket upon presentation and return one stub to the patron, which stub shall contain on it the entire serial number. “The exhibitor is to keep and to preserve, for at least four years, full and accurate books and records, the latter to contain all sources of income; and of the acquisition, disposition and supply of tickets, used or intended to be used. “There is a provision that any breach of these conditions will give Universal the privilege to terminate a contract and, upon such cancellation, the exhibitor agrees to return the print to Universal.” Levy observed that the “liquidated damages” provision, giving specified damages to the exhibitor, if there be a breach of contract by Universal, had been eliminated. Instead of that clause, he said, there is a new measure of liability; to wit. Universal will be liable to the exhibitor for damages which are not to exceed the profit that the exhibitor would have earned on the particular picture, after deducting the profit he earned on the substitute picture which he played. The TOA counsel also noted there was a 47 State Legislatures To Convene in 1963 New York — Forty-seven state legislatures are scheduled to meet in regular session in 1963 with at least four states having bills with some film industry significance. The only states whose solons are not convening are Kentucky, Kansas and Virginia. Classification and censorship measures are on the dockets in Ohio, New York, Maryland and Illinois, but some of these are perennial bills. Censorship and classification measures are on tap in various local areas in various states, particularly in Texas. It is reported that in approximately 30 states there are proposed bills which would have fringe effects on the motion picture business. new damage clause which would go into effect as soon as the exhibitor pulled out a picture in advance of completion of the contract running time. Instead of liquidated damages, as defined in the old contract, the new rule provides that the exhibitor will pay the full rental stipulated in the contract. If it is a percentage picture, the formula for damages will be as follows: A week day is to be considered one unit; Friday and Saturday, two units each; a state-observed holiday, two units, and the day preceding said holiday, two units. ’The average unit gross of the theatre is to be computed for the days that the picture has played. That average unit amount will then be multiplied by the number of units represented in the days that the exhibitor did not play the picture. In addition to this “unit damage,” it is provided that Universal is to be entitled to injunctive relief to compel the exhibitor to comply with the contract playing dates and to further damages that Universal may suffer from the failure of the exhibitor to play the picture as contracted for. Levy pointed out that the old definition of the term “percentage picture” was that it “shall mean and refer to a motion picture for which the license fee is computed and determined in whole or in part upon a percentage of the gross receipts of the theatre.” As revised, this definition has the following words added: “after giving effect to the provisions of this agreement relative to pas.ses and heater charges.” COMPO Dues Drive Starts; Two Circuits First to Pay NEW YORK— Although the Council of Motion Picture Organizations will not launch its dues drive until January 8, two Baltimore circuits did not wait for the starting date and became the first to pay their dues before Christmas. J. L. Whittle of Allied Theatre Owners of Maryland reported that the F. H. Durkee Enterprises had paid for 19 theatres and the Ritz Enterprises for its houses. According to Charles E. McCarthy, COMPO executive vice-president, meetings will be held in most of the exchange cities this week for the launching of the dues drive. Exhibitors and sales staffs of all companies will attend and theatres will be assigned to salesmen for the collections. These dues, as in the past, will be matched dollar for dollar by the distributing companies. Albert Johnstone Dies; lA 4th Vice-President NEW ORLEANS — Albert S. Johnstone, fourth vice-president of the lATSE, died here Tuesday morning following sui'gery. He had entered the hospital December 28. Johnstone began his career as a rewind boy at a local theatre while still in school, later becoming a projectionist, and in 1928, traveling for ERPI, predecessor of Altec Service Corp. A member of New Orleans Operators Local 293 since 1914, he had served as secretary and as president almost continuously from 1919 until his death. He became an International representative in 1943 and was elected vice-president in 1954. He is survived by his wife Mary and two daughters. 6 BOXOFFICE :: January 7, 1963