Production House Fights Blockbuster on ‘Monster’ Fees

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In an age of Netflix Inc. and on-demand digital distribution, renting movies from neighborhood outlets is undeniably low tech, but that doesn’t mean there isn’t money to be made and fought over.


In a suit filed Jan. 31 in Los Angeles Superior Court, Century City-based Media 8 Entertainment claims that DEJ Productions Inc., a former subsidiary of Blockbuster Inc., bilked the production company out of more than $8.6 million in licensing fees from “Monster,” the movie for which Charlize Theron won a Best Actress Oscar in 2003.


Media 8 charges that Blockbuster, through DEJ, depressed receipts of DVD sales to avoid licensing fees.


Media 8 audited Blockbuster’s records in the summer of 2005 and estimated that its payments were short nearly $9 million, the lawsuit states.


“Our complaint alleges, among other things, that Blockbuster unfairly exploited its relationship with DEJ to structure sweetheart deals of the picture,” said Media 8 attorney Steven A. Velkei, of Liner Yankelevitz Sunshine & Regenstreif LLP.


“It’s our understanding that the transactions with Blockbuster and its affiliates were below market value, which resulted in a loss of revenues to Media 8 and its profit participants.”


Velkei said his clients only filed suit after it became clear that they would not be able to come to an informal resolution with First Look Studios Inc., which acquired DEJ in late-2005 and is named in the suit.


“We think the claims are baseless and we intend to vigorously defend ourselves,” said Blockbuster spokesman Randy Hargrove, who added he could not otherwise comment on pending litigation.


Dallas-based Blockbuster has foundered in recent years, with revenues lost to Internet rental powerhouse Netflix. To compete, the company eliminated late fees, which also cost some revenues.


It now faces the prospect of added competition from iPod downloads.


Blockbuster posted a loss of $491.4 million, or $2.67 per share, for third quarter 2005 compared to a loss of $1.41 billion, or $7.81 per share, a year earlier.


The company, which recently introduced an online video rental program, cited non-cash charges and challenging industry conditions for the loss.


A hearing is scheduled for May 23.

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