Netflix’s lawyer said at a hearing that the reorganization plan is “built almost entirely on the back of the Netflix contract.” The streaming video company pays Relativity an undisclosed amount to license an undisclosed number of movies each year.
Netflix wanted the court to let it out of the licensing contract, saying that the studio may not have the wherewithall to fulfill its end.
That would be a problem, the company says: “Since we have to pay tens or hundreds of millions of dollars for pictures, we have to reserve and allocate” resources, the attorney told the court. “If we expect from one source, we can’t commit to another.”
He added that Relativity’s production plan indicates that “they don’t have the capacity to make the numbers for 2016 or 2017.”
But Wiles says that Relativity’s contract with Netflix already calls for a penalty if the studio falls short.
“So long as they have the movies, they have to give them to you or else they pay a penalty,” Wiles said. “If they only have 12 or 15 – whatever the minium is – they have to give them to you or else they pay a penalty….It seems straightforward to me.”
He added that “nobody thinks that this bankruptcy was anything that [Relativity CEO Ryan Kavanaugh] was looking forward to, or tried to engineer.”
The judge also noted that Relativity plans to enlist actor Kevin Spacey — who stars in Netflix’s series House Of Cards — to help run the studio. “They’re lining up people you have working relationships with and gone out of their way to offer you what they can.”
Netflix said that it will try to negotiate a compromize with Relativity, and takes some comfort from the judge’s insistance earlier today that the studio complete key financing deals — and demonstrate that Spacey and his business partner Dana Brunetti are locked in to run the studio.