MORALS; SEXUAL HARASSMENT; DISCRIMINATION. In the event Distributor becomes aware of a violation or alleged violation of Distributor’s policy by any key individual whether or not such violations occurred prior to, during or after such services were provided, or Distributor becomes aware that a Key Element has committed or has been charged with an act considered under state or federal laws to be a felony or crime of moral turpitude, then Distributor shall have the right to: (i) cease distribution of the Picture; (ii) delete any credit given to such Key Element in connection with the Picture and/or (iii) modify, edit and/or reshoot the Picture to the extent necessary to remove the Key Element from the Picture. One film distributor recently began adding this “morality clause” language to its contracts. Sony film. Spacey did not have a morality clause in his contracts, according to sources, and was paid for the entire final season of House of Cards — even though he won’t appear in any of the episodes — and for All the Money in the World. Lawyer Schuyler Moore has begun to add a morality clause to contracts in an effort to protect his distributor clients from being saddled with the next #MeTootainted film. “Any distributor can say, ‘I’m not picking up this film if somebody involved in the film has some charge like that.’ Absolutely. I’m doing it, and [these clauses] are enforceable,” says the Greenberg Glusker partner. “And it’s just a question of drafting it in a way that works.” As such, there’s a new version of liability affecting <strong>Hollywood</strong>, and studios and buyers are scrambling to figure out how to handle it. Naturally, talent reps are balking. “I’m all for [#MeToo]. I totally support it. But I think [broad morality clauses] create a bad precedent,” says attorney Linda Lichter. “It’s one thing to say someone is a criminal. It’s another thing to say someone has been accused by someone and you can fire them and not pay them.” Others claim studios and buyers are hypocritical if they are unwilling to include a morality clause covering their own executives. Directors and talent endure economic hardship when their films are bought by a company whose top execs, like Weinstein, become synonymous with sexual What Does Sony’s New CEO Have Planned? Spider-Man: Homecoming (left) and Jumanji ignominy. On the flip side, Fox Searchlight lost millions on the release of <strong>The</strong> Birth of a Nation after revelations that star-filmmaker Nate Parker had stood trial for rape when he was a college student (Parker was acquitted) and that his accuser later took her own life. In the post-Weinstein landscape, a number of distributors have been left in vulnerable positions. YouTube Red dropped Morgan Spurlock’s Super Size Me 2: Holy Chicken! following the filmmaker’s admission of sexual misconduct, but not before paying $3.5 million that sources say it likely Moore won’t get back. <strong>The</strong> Orchard dodged a bullet when its $5 million acquisition of Louis C.K.’s I Love You, Daddy became unreleasable after a wave of harassment accusations were leveled at the comedian. Though C.K. was not legally obliged to take back the film, he wrote <strong>The</strong> Orchard a check to reimburse the company for what it had paid toward the film’s release. Kenichiro Yoshida may not offload the film studio (just yet), say analysts BY GAVIN J. BLAIR Will Sony’s incoming CEO finally cut the cord Feb. 2, Yoshida identified movie production, on <strong>Hollywood</strong>? On Feb. 1, the conglomerate said top exec Kaz Hirai, 57, would hand over must be “very careful” with because of large along with semiconductors, as areas the company the reins to CFO Kenichiro Yoshida, 58, on April 1. investments required. (And on Feb. 6, worldwide <strong>The</strong> move ignited new speculation that Sony’s networks president Andy Kaplan, home entertainment chief Man Jit Singh and president/CMO entertainment assets could end up auctioned. Hirai has been a passionate advocate for Sony Sheraton Kalouria exited in a restructuring.) Pictures Entertainment, while Yoshida, a veteran Damian Thong, Sony analyst at Macquarie of corporate strategy who joined Sony in 1983, Capital in Tokyo, notes that “SPE is not a monolithic movie business” but includes a studio, not as much. But despite Yoshida’s reputation for paring underperforming units, many Sony watchers say he’s unlikely to unload SPE right away. “I postproduction facilities and cable channels. “One credit [Yoshida] with a big part of the turnaround of the past few years,” says Eric Jackson of EMJ Capital, which owns Sony stock. “He’s forced transparency on the different business units.” Yoshida and Hirai led Sony from huge losses to forecasting a record $6.6 billion profit for 2017 with such film hits as Jumanji ($857 million globally) and Spider-Man: Homecoming ($880 million). On <strong>The</strong> Report Behind the Headlines “Everyone is trying to cover their asses as much as possible,” says one distribution exec whose company recently began adding morality clauses to its contracts. One producer insists that restrictive clauses will spark an inability to finance movies. “If there is anything downstream that impedes the ability of a financier to recoup his investment, the financier will not invest,” says this producer, adding that bond companies do not currently address the potential of a key figure negatively impacting a film because of a sex scandal. Film Finances Inc., the top bond completion company working in <strong>Hollywood</strong>, declined to comment. “<strong>The</strong>re’s definitely an opportunity for a company to come up with some sort of sex abuse insurance,” says the producer. That’s a point echoed by Lichter. “<strong>The</strong> studios should start thinking about whether there’s some kind of insurance for this type of thing,” she says. “This is a whole new territory.” Lacey Rose contributed to this report. Hirai (left), the president and CEO of Sony Corp. since 2012, will be succeeded in April by Yoshida, now the company’s CFO. reason Sony has remained relevant is an understanding that electronics is linked to content,” he adds. But in this era of M&A, Jackson thinks Sony should consider expanding its entertainment assets, perhaps by acquiring Lionsgate or MGM: “I would guess it’s more likely they sell their mobile phone and financial services units rather than their pictures unit.” But one Tokyo-based Sony analyst says a creative deal could lead to a sale: “If they can form some kind of alliance and sell maybe 30 to 40 percent of SPE, then that is a possibility.” YOSHIDA: KAZUHIRO NOGI/AFP/GETTY IMAGES. SPIDER-MAN: CHUCK ZLOTNICK/SONY PICTURES ENTERTAINMENT. JUMANJI: FRANK MASI/SONY PICTURES ENTERTAINMENT. MOORE: COURTESY OF SUBJECT. THE HOLLYWOOD REPORTER 12 FEBRUARY 7, <strong>2018</strong>
ACADEMY AWARD ® INCLUDING NOMINATIONS BEST PICTURE OF THE YEAR 6BEST ACTOR GARY OLDMAN
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