By Ezra Doner
In 1974, the iconic British comedy troupe Monty Python scored big with their breakout movie, Monty Python and the Holy Grail (herein, Grail), produced by Mark Forstater and others. In 2005, they scored again, with Spamalot, the Broadway musical adaptation of Grail.
When it came to profits of Grail, producer Forstater, under the contract, was clearly an equal partner with each of the original six Pythons; in effect, a seventh Python. As to Spamalot, however, the profits situation was not quite as clear; was Forstater meant to be a one-seventh Python (Forstater’s claim) or a one-fourteenth Python (the group’s rejoinder)? Earlier this month, the dispute generated a first round legal decision in the UK’s High Court of Justice, Chancery Division (Forstater v. Python (Monty) Pictures Ltd.,  EWHC 1873 (Ch)).
In this case, did the Pythons take a funny position? Did Forstater? Who was right? Who was funnier? For the answers, keep reading . . .
General and Spin-off Profits
In the deal documentation for Grail, there were two categories of profits: general profits of the film, and spin-off profits. As to general profits, each of the Pythons was to receive 5.6875 percent, as was Forstater, with the balance of general profits allocated to investors and others. Forstater’s share of general profits was thus equal to that of each of the original six Pythons, making him, in effect, a seventh Python as to this pool.
As to spin-off profits, however – profits from books, soundtracks and stage productions like Spamalot as to which the Pythons had put special creative effort – there was a different arrangement. The Pythons and Forstater alone were to share 50 percent of the profits of spin-offs – the so-called “top half” of these profits.
More than 30 years after the release of Grail, the success of Spamalot put “top half profits” into the cross hairs.
Since Spamalot was a spin-off of Grail, certain payments in respect of the show were spin-off profits of Grail, and the “top half” – 50 percent of these profits – was to be shared only by the six original Pythons and Forstater. But were the six Pythons and Forstater each to receive a one-seventh share of spin-off profits? Or was Forstater only entitled to one-fourteenth – that is, one-half of a one-seventh share?
“Top Half” Documentation
The deal documentation for “top half profits” provided that Forstater was to receive 7.1429 percent of this 50 percent pool. Of course, 7.1429 is one-seventh of 50, so it might seem that Forstater was to receive one-seventh of this pool. And during the 30-year period between the initial release of Grail and the opening of Spamalot, Forstater had periodically invoiced the Pythons for one-seventh of “top half profits” from books, records, etc., and he had been paid a one-seventh share.
Second Look at the Top Half
When Forstater invoiced for one-seventh of “top half profits” of Spamalot, however, the Pythons took a fresh look at their files and reached a new conclusion. With much more money at stake, their representative now asserted that yes, Forstater was to receive 7.1429 percent of “top half profits”, but no, that wasn’t one-seventh of the “top half”, but rather one-fourteenth. How could that be?
As stated above, the “top half” consisted of 50 percent of spin-off profits, and in relation to 50 percentage points, 7.1429 points is one-seventh. But the contract didn’t say that Forstater was to receive 7.1429 out of 50 points; it said, in effect, that he was to receive 7.1429 percent of the “top half”.
Waterfall and Pool Constructs
The allocation of monies of an entertainment venture (and other ventures as well) is sometimes spoken of as a “waterfall”. The “water” – the money – flows downhill, from one “pool” to the next, and pursuant to the profits formula, at each level, certain monies flow out of each pool. The overall cascade from one pool to the next, including the various outflows, is the “waterfall.”
In the case of Grail spin-offs, it’s true that the “top half” consisted of 50 percent of spin-off profits, and that 7.1429 is one-seventh of 50. But when the “top half” became its own pool, then notwithstanding its origin as 50 percent of other monies, this new pool turned into . . . 100% of . . . itself! Its origin as a lesser percentage was now irrelevant; the “top half” pool was a new, standalone amount.
So Who Won?
The judge in this case found that, by the letter of the contract, Forstater’s 7.1429 percent of the “top half” was just that: 7.1429 hundredths (in Latin, percent literally means “by the hundred”). And 7.1429 hundredths is, simply, one-fourteenth. But the judge also found that this part of the contract reflected a mistake, because the parties’ true agreement, as reflected in their conduct over the subsequent 30-year period, was that Forstater would receive one-seventh of the “top half”. Accordingly, the judge reformed (or, to use British legal language, “rectified”) the contract to correct the mistake, awarding Forstater one-seventh, not one-fourteenth, of “top half profits”. In other words, the judge treated Forstater, for this purpose too, as a seventh Python.
If you are the party rendering an accounting, don’t wait until there’s an unusual revenue event to double check your work. Rather, when issuing the first profits statement, take a fresh look at the contract. Maybe the way you remember the contract, or maybe the way you’ve been reading it, is incorrect, or maybe new channels of distribution or new types of derivative uses require special consideration. You only have one chance to render an initial profits statement, so you might as well give it your best. Similarly, if you are the participant, when receiving a first profits statement, take a fresh look too.
Second, at the deal stage, check and double check your expression of profit percentages. Consider expressing each percentage in the waterfall as a percentage of 100%, or as a number of points out of a more limited pool, or as a fraction. Indeed, consider expressing it more than one way. As the Grail case shows, 7.1429% of 100% is not the same as 7.1429 points out of 50 points, nor is it the same as one-seventh. And if you’re representing a “seventh Python”, consider just asking for one-seventh . . .
One question remains: of the two sides in the litigation, who was funnier? Early in the relationship, Forstater, as a producer, had apparently asked the Pythons for an increased profit percentage on more than one occasion. In his decision, the judge cited to the following 1974 diary entry by original Python Michael Palin:
. . . as we [the Pythons] are a soft lot and not at all businesslike, I think it would be in the finest traditions of Python irrationality if we gave Mark [Forstater] an extra £1000 and a silver tray with some cut glass sherry glasses and told him to stop writing to us for more money. Beyond that even I am not prepared to go. Oh, all right, some cheese straws to go with the sherry glasses.
As to which side was funnier, you be the judge!
Ezra Doner is an entertainment and copyright lawyer who focuses on the film, TV and other content sectors. He has worked both as an in-house business and legal executive and as a private lawyer. He does not represent any of the parties in this case.
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