A number of directors are pursuing litigation against the digital indie film distributor 1091 Pictures for failing to make promised revenue-sharing payments after selling their films to the platform, now owned by Chicken Soup for the Soul Entertainment. Helmers are scrambling to reclaim distribution rights to their work out of fear that 1091 Pictures’ parent company could declare bankruptcy.
Filmmakers say they are owed their share of distribution revenue from licensing deals with 1091 but Chicken Soup for the Soul Entertainment has not come through with payments. Some have taken the company to court, including small-claims court, to press their cases.
Chicken Soup for the Soul Entertainment acknowledges that the company, which also owns Redbox and Crackle, has faced “cash flow issues,” as CEO Bill Rouhana told PvNew. The company already disclosed that it was unable to file its third-quarter earnings information on time.
“The company has been working to address cash flow issues and to pay our content owners,” Rouhana said in a statement. “Unfortunately, this has taken much longer than anyone anticipated. We are working to address these filmmakers and their concerns.”
CSSE acquired 1091 Pictures for $15.6 million in March 2022. based in Cos Cob, Conn., CSSE is rooted in the feel-good self-help book and media franchise. The company went public in 2017 with a “crowdsourced” IPO that raised $30 million. Under the leadership of Rouhana, the company has expanded in recent years with acquisitions of streaming platforms such as Crackle, formerly owned by Sony Pictures Entertainment, and Red Box Entertainment, the physical and online distribution network that has struggled amid the rise of streaming platforms. 1091 Pictures was formed by industry veterans Danny Stein and Joe Samberg through the acquisition of Orchard Film Group. Among the high-profile titles in the 1091 library are Morgan Neville’s “The Music of Strangers: Yo-Yo Ma and the Silk Road Ensemble,” Taika Waititi’s “Hunt for the Wilderpeople” and Rob Epstein and Jeffrey Friedman’s “Linda Rondstadt: The Sound of My Voice.”
In 2020, director Julia Kots sold her narrative film “Inez & Doug & Kira” to 1091. According to Kots, she signed a five-year distribution contract that included a small advance upon contract signing and release. The distribution split, she says, was to be 70% for Kots and 30% for 1091, after 1091 recouped out-of-pocket costs. Payments were to be made quarterly, according to Kots. Since the film’s release in September 2020 on multiple TVOD and AVOD platforms, Kots says that she has never received a check from 1091.
“I decided to go with 1091 because they were known at the time for their transparency with filmmakers,” Kots says. “They have a web-based portal where the filmmaker can log in and see all the stats — where the film plays, how much it earns each month.”
Kots claims that based on a 1091 dashboard revenue tracking program, she is owed $3166.74. While that may be a small paycheck by Hollywood standards, to indie directors like Kots, it’s significant money.
The director filed a small-claims court claim in November against CSSE, 1091 and CEO Rouhana. In December she sent 1091 a termination and cease and desist letter that stated a contract breach and a demand for payment.
“Their stock is in the toilet,” Kots says. “They seemingly don’t care that I filed a lawsuit against them. If they were trying to raise capital or refinance, they would be negotiating to get the lawsuits dropped.”
Details about 1091 and CSSE were first reported on the Steinway PianoBlog earlier this month. She is not alone in her battle to regain film rights and unpaid revenue from CSSE and 1091.
On Nov. 7, filmmaker James Fox sued CSSE and 1091 via his production company, CE3, for failure to make revenue payments on two films bought by 1091 – “Moment of Contact” and “The Phenomenon.” CE3 is also seeking back the rights to both films.
In December 2022, Tom Huang sold North American digital rights to his film “Dealing With Dad” to CSSE. According to Huang, his contract stated a minimum guarantee advance of $20,000 and proceeds of the film would, like Kots, be split 70/30. On May 9 this year, “Dealing with Dad” was released online on outlets including Amazon, AppleTV, GooglePlay, and VUDU for rental and purchase, as well as cable TV pay per view.
Huang’s Los Angeles-based lawyer, Mark Litwak, sent a breach of contract notices to CSSE’s chief acquisitions and distribution officer David Fannon in July. Huang asserts that he has not received any payments from CSSE.
“We were on a carefully laid path to make our money back for our investors who trusted us, only to have a company like Chicken Soup come in, buy out our distributor and then refuse to pay us what we are contractually owed, all for what?” says Huang. “People like this really destroy my faith in humanity. It’s so hard.”
Directors Corey Goode (“Cosmic Secret”), Thomas Simmons (“Coyote: The Mike Plant Story”) and Jonathan Wysocki (“Dramarama”) are also battling CSSE for what they say are unpaid funds due. While Wysocki was told in November that he could have the rights to “Dramarama” back, he is still fighting to get his film off certain AVOD and TVOD platforms.
“On December 4, I had to reach out platform by platform and send cease and desist letters,” says Wysocki. “My next step is figuring out how I get all this money I’m owed” by CSSE.
Goode has also sent emails to various employees at CSSE inquiring about unpaid revenue for “Cosmic Secret,” but felt like he was getting the runaround.
“Throughout all of this, they have been selling and making money off of our films while not paying us,” Goode says. “These big corporations in the entertainment industry count on the fact that indie filmmakers can’t afford to fight a long legal battle. We (filmmakers) are not sleeping well at night. We don’t know how to pay bills.”
CSSE last year merged 1091 Pictures assets with its Screen Media division to bolster both companies ability to help indie directors and producers make their content available on free and paid streaming platforms as well as through other on-demand venues. The acquisition of 1091 brought about 4,000 movies and TV titles to CSSE. At the time CSSE predicted to investors that the 1091 acquisition would generate $10 million in incremental revenue and $3 million in earnings before interest, taxes, depreciation, and amortization over the course of one year.
Amid CSSE’s struggles, in October three top executives at Screen Media — Amanda Sherwin, Mike Messina and Seth Needle — left CSSE to launch distribution, marketing and consulting company Blue Harbor Entertainment.
Given CSSE’s public signs of distress, it’s no surprise filmmakers are turning to litigation in a bid to retrieve film rights fearing they could potentially get tied up in bankruptcy proceedings.
In 2010, David Bergstein’s indie distribs ThinkFilm and Capitol Films Development went bankrupt. Many filmmakers including Ross Kauffman and Alex Gibney lost the U.S. rights to their respective Oscar winning films “Born Into Brothels” and “Taxi to the Dark Side” for close to two decades.
While CSSE recently agreed to take “Inez & Doug & Kira” off their platform, in an email to Kots from a CSSE executive, obtained by PvNew, the company will not relinquish its rights to the movie.
“Per section 11.2 of your attached agreement, you do not have the right to terminate this agreement,” the email reads.
A knowledgeable source says that CSSE want to make things right with filmmakers but currently do not have enough working capital.
The Redbox deal could be partly to blame.
CSSE acquired Redbox Entertainment in August 2022. The deal was valued at $375 million, comprising about $50 million in CSSE stock and the assumption of $325 million in debt. CSSE said they expected revenue to more than triple via the Redbox acquisition to approximately $500 million annually.
But the company’s presentation to investors at that time indicated that its budget called for the company to obtain a working capital loan of up to $40 million secured by a first lien on the company’s accounts receivable. CSSE did not receive the $40 million loan in April 2023 from HPS Investment Partners as it expected and had disclosed in an August 2022 Securities and Exchange Commission filing.
CSSE is hardly alone among small- and medium-sized media firms feeling the pinch in a fast-moving economic landscape that includes everything from rising interest rates to fever-pitch competition for streaming eyeballs and advertising dollars.
“The stress now is that all of us fighting [CSSE] are all little independent filmmakers,” Wysocki says. “We are not some giant media company that’s dealing with this other giant media company. So I’m remiss to spend thousands and thousands of dollars in order to get the thousands of dollars that I’m owed. It’s infuriating because I had about 12 offers on ‘Dramarama.’ But the reality is I don’t know how I’m going to proceed.”
(Pictured: “Linda Ronstadt: The Sound of My Voice.”)
