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Fox Execs, Attorneys Grapple Over Disney Files

25 Jun, 2002 By: Loydean Thomas

SAN ANTONIO – Blockbuster Video's reduced orders to 20th Century Fox Home Entertainment while the companies were negotiating a revenue-sharing deal in 1997 were coincidental, not an effort to strongarm the studio into a deal, Fox executives testified today.

Pat Wyatt, president of Fox Consumer Products, and in later taped testimony, Pam Kunick-Cohen, SVP for rental marketing at Fox, acknowledged the less than stellar business with the mega-rentalier, but declined to link that to any pressure to push through a revenue-sharing deal.

Plaintiff attorneys offered up internal documents that showed Fox executives felt that Blockbuster's lack of significant sales activity with the studio was a result of not having a revenue-sharing deal in place as the retailer had with other studios.

“Vis-?-vis Blockbuster, our numbers could have been better,” said Kunick-Cohen.

The Blockbuster deal signed in November 1998 was never a jumping-off point for negotiations with other retailers, Wyatt testified.

”We never talked about the Blockbuster deal with anyone,” she said. “We worked very hard to service the needs of independents.”

The tactic would have availed nothing anyway, she said, since virtually all other players wouldn't be able to take the studio's total output to qualify for the same deal and “there were lots of other programs for the retailers…and Rentrak had revenue-sharing.”

The deal was not a sweetheart for Blockbuster, Wyatt contended, noting “They were forced to buy everything…they had risk too.”

Wyatt denied knowing of the two Disney documents that were in the Fox legal and marketing department's files, including a copy of Disney's revenue-sharing contract with Blockbuster, and a faxed spreadsheet dated Dec. 3, 1997, that analyzed the Disney Blockbuster deal in relation to other customers.

“I did not know the Disney letter was in the Fox files,” she said. Wyatt noted Friday that

Former Disney marketing executive Kunick-Cohen, who started her position as SVP of rental marketing at Fox in August 1998 after almost eight years in rental marketing at Disney (Disney first started revenue-sharing with Blockbuster in late 1997), used her prior knowledge of Disney's deal and other trade sources to analyze Fox's deal with Big Blue, but a letter of intent had already been signed and the major points of the deal solidified.

“In the final stages of negotiation I had knowledge that I shared about how [Fox's] deal benchmarked, so we weren't getting totally screwed because we were the last ones in,” said Kunick-Cohen in her taped testimony.

Though she was aware of the documents from Disney, Kunick-Cohen said she had no role in bringing them to Fox, saying it was “against my business practices,” and she has no specific idea how they got into her files. She said she understood one may have come from a former Canadian Disney executive.

“I couldn't remember all the terms,” of the deals, Kunick-Cohen testified, so she supplanted whatever she could recall of the Disney deals and used trade magazine articles in providing her analysis of the Fox deal for Wyatt. “There was a lot of minutia and detail I could not recall…I did not get any of that information of those deals personally.”

Laura Cook, senior EVP for legal affairs at Fox, also testified in a taped appearance that while she is the one who prepared and signed off on revenue-sharing deals -– and she was aware of the Disney documents (had in fact had made a notation of “confidential” on the revenue-sharing deal that was in her own files) –they did not play a role in her activities with the deal, she said.

“The document may have been in my files, but it's not something that we would have referred to during our contract negotiating…” she said. Cook noted she signs “virtually all agreements that Fox enters into anywhere for any reason” and often her signature is a formality after staff prepares an agreement.

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