On Thursday, October 29th, 2020, JSEL sat down with a legendary practitioner in the entertainment industry — Bruce Tobey, head of the Entertainment and Media Practice at O’Melveny and Myers.
Mr. Tobey is a highly regarded entertainment transactions lawyer with more than a decade of executive experience. His practice covers all aspects of production, distribution, financing, and licensing of feature film and television productions as well as digital media. He also provides strategic and operational advice to investors and companies in both traditional and new media, including ViacomCBS, Univision, and Bron Studios, and has worked in a host of roles through the industry, including as COO of CBS Films, EVP of Paramount Pictures Corporation, and GC/VP of Broadband Sports.
We spoke to Bruce for over an hour, covering a host of topics, from his professional journey, to his predictions about the future of entertainment…
Q: Tell us a bit about how you got started in the entertainment industry?
I went to UCLA Law School; I grew up in Los Angeles, but I do not have any family in the entertainment business, it just struck me as interesting. I decided I was going to try and get into it when I graduated.
Unfortunately, there is no great, clear path into this industry (there wasn’t at the time, there still is not). So I concluded the best thing I could do is get a job at a good solid firm that had entertainment and see if I could work my way over.
The good part of that is that I got some very good early exposure to both corporate and bankruptcy law, which served me well later on. I was at my first firm for almost two years, when I got a call to go to a different firm that was just starting an entertainment practice. They were looking for somebody who just had a solid legal background, but didn’t have to have entertainment experience. I decided to jump on it and it was probably the best career move I ever made.
We were relatively small at the time, 26 lawyers. They did not have an entertainment practice, but the partners were very close personal friends with the senior executives of Columbia Pictures and 20th Century Fox. In the entertainment legal community at the time, there were very few firms that didn’t represent both the studios and the talent. And these executives were concerned because they didn’t feel comfortable with their lawyers disclosing the know-how of their company’s inner workings. It’s hard to tell somebody something on Monday, if he or she is going to be opposite you on Tuesday.
So my partners jumped at the chance, and it turned out to be an extraordinary success for our little firm. Within a short period of time we were doing work for Fox, Columbia, Paramount Pictures, Disney, and Warner Brothers, as well as some other production companies. My own practice really evolved – I got to do everything from production work on movies, to M&A, to major licensing transactions. It was a terrific experience. I had no idea what it was going to be when I went, nor did I realize I was going to stay there for close to 15 years, and go from being a 3rd-year lawyer to a name partner of a 150-person law firm. The exposure I got over those years was extraordinary. I got to meet lots and lots of people at the studios, from the newest person in the legal department, to the chairman of all the studios and their parent companies. It’s hard to gain that kind of soup-to-nuts understanding of what the company is, but it was terrific.
Q: So, when did you decide to leave private practice?
I hadn’t planned to be a lawyer my whole career. Strangely enough I got a call from somebody about an opportunity to go into the sports world. This was at the height of the dot-com frenzy. I was offered a role at a new company, a digital sports company. It was in registration to go public at the time; it was a terrific group of executives that had been the top three or four people at some of the leagues. I had a long conversation with my wife and decided to go for it. What came with it was an 80% pay cut, which wasn’t ideal, but it gave me the chance to go be an executive (as well as general counsel). I’d always wanted to do that, but hadn’t found the right opportunity.
Well, as you all know, the dot-com world went from its height to failure in a relatively short period of time. My parachute, as it were, was a call I got from the chairman of Paramount as we were preparing to shut down my dot-com, who asked me to come over and be his right-hand person. I had known him from his work at Fox and also at Columbia Pictures, and so it was somebody I was familiar with, somebody I respected, and somebody who was prepared to give me a very substantial position at Paramount.
Q: That’s pretty fantastic. What were you doing at Paramount?
I went over to ostensibly be, almost a COO-ish type role – not by title but by operation. I had lots of responsibility, lots of people to work with and lots of people working for me. At the time, Paramount was a more diversified company than it is right now – Paramount, in addition to being the motion picture company, was a very heavy producer of television. It was also an owner of television stations. It co-owned what was then called the “UPN” network, which over time morphed into the CW. We had consumer products; we had a theater chain. And my job went from being a big job to a bigger job. And, as a result, I got to see everything at the company. I was not a lawyer by title, although I’d be lying to say I didn’t fulfill that role from time to time, in addition to my business activities. But it was an extraordinary opportunity for me – I probably spent, on average, 2 hours a day with the chairman, working through whatever issues or problems or deals he was interested in, and learned about the business, about how it works, the economics of it, the good parts and the bad parts of the business – it was terrific.
One of the other things I got to do was be one of the Paramount representatives on the MPAA board, which is basically a trade group the studios all belong to. As part of that, the chairman and I were on a committee with people like Bob Iger and Peter Chernin and Bob Daly, and it gave me some terrific exposure to those people. So, it was a great position, a great opportunity. But, jobs are jobs, and one day my CEO left the company, which changed everything. When new people come in, they like to bring in their own people, and even when they don’t, things change.
Q: Is that when you went to CBS?
Yes. Long story short, after a couple of years with the new management team, it just seemed like a good idea to move on. I’d really fallen in love with being on the business side, didn’t necessarily want to go back to law at that time, and got a very exciting call shortly thereafter by Les Moonves, who was then running CBS. Les wanted to start a motion picture company within CBS (this is now after CBS and Viacom had split). Leslie wanted to create a movie company, he wanted me to be the COO, and he wanted to build it from scratch.
That is a terrific, terrific opportunity – you get to build a business that you enjoy, that you get to put your own imprint on, and when you have, at the time, a $20B company behind you, you don’t really sweat the “can I pay my bills” stuff, as you often do with start-ups. We got to build it from scratch, create the model, spend lots of time with the other divisions of CBS, to try and work together, and figure out how to take advantage of all the other promotional opportunities CBS assets offered our new fledgling division. Again – very terrific opportunity for me to take all the lessons that I’d learned over the years, from all the studios, all the different senior management people I’d been exposed to, apply my own sense of best practices, and create a company. It was – I don’t want to keep using the word extraordinary, but it was an extraordinary opportunity. It was great fun; we built a really wonderful company with some terrific people. And, I’m very, very thankful for having had that opportunity.
Q: So how did you get back to private practice?
Well, jobs have their own life cycle. At CBS, after five years, it seemed like time to move on – the company strategy was changing within the greater CBS strategy, and it was just a different business plan that was going to shrink down the company and its scope. So it seemed like a good time to move on.
I wasn’t sure what I was going to do at that time. I got a call from some friends at O’Melveny and Myers at the entertainment group, who said why don’t you come hang out here for a while, as you figure out what you want to do. That seemed like a good idea.
Q: And you’ve been there ever since?
That was eight years ago. I came in with one foot in, one foot out, and to my surprise, things went a little bit differently – and better – than I thought. A couple years ago, I found myself being named one of three co-chairs of the Entertainment, Sports & Media department. I’m now the sole chair of the Entertainment, Sports & Media department.
Q: And what kind of work are you doing?
O’Melveny has always had a very strong entertainment practice – about three years ago, we really doubled down on the sports practice, and built that up. A couple things my partners and I did there include buying the Carolina Panthers football team for David Tepper, and buying the AC Roma Soccer Team for one of our clients. So really doubling down on sports has been a lot of fun.
We also continue to do lots of business for the studios and for production companies. The business, as you know, is evolving – maybe, against its will, in some respects. But that makes it a very interesting and challenging time for the industry.
That also creates lots of opportunities for lawyers. I’ve had a terrific time, continue to enjoy what I do. I have wonderful people that work with me, in our group. We work with the rest of the firm on an everyday basis, domestically and internationally.
Q: Have you found your experience as an executive has changed your legal practice?
Absolutely. I think one of my great lessons from having been on the executive side is that I obtained a greater appreciation for what our clients want and need. As a consumer of legal services for ten years, I think you get some insights that you wouldn’t necessarily get as a provider of legal services. In many respects, that’s made me a better lawyer, and a better, more effective, more efficient lawyer from our client’s perspective.
Q: And what about the reverse? Do you feel like your legal experience helped you develop as an executive?
Sure. When I first started – I did a year of corporate and a year of bankruptcy. It was kind of forced upon me. But I learned a lot. And I don’t want to pretend that I became an expert in a year – you can’t. But when you practice, just becoming aware of issues, knowing when you need to reach out to other subject matter experts. Sometimes that’s what’s really important.
So, as I grew as an entertainment lawyer and businessperson, I also had that other experience – the corporate experience, which really helped. For example, a lot of what I’ve done during my career is joint ventures. One was just announced yesterday: Spyglass is doing a joint venture with three other companies to do low-budget comedies. There’s an entertainment component to that, but there’s also a corporate component to that. So having expertise and awareness in corporate law, as well as traditional entertainment and all that comes with it, allows me to understand the totality of what we’re doing. If all you know is the corporate, but you don’t understand the business, you’re going to be a little less effective about making sure the company is designed in a way that’s going to be functional and practical for the business. But it goes the other way, too. So, the short answer is: the more you can learn, the better.
Q: I can imagine in the work that you do, there are often disagreements, big personalities; are there any tools you were able to develop, specifically, to try and deal with those issues?
When you’re on a transaction, you have two jobs: one is to advocate for your client, the other is to get the deal done for the client.
And sometimes it’s hard to do both. You can fight for the sake of fighting. Or you can try and solve the problem. Entertainment law firms used to like to say, we are deal-makers, not deal-breakers. When you have an impasse, knowing the business – having the knowledge and the confidence to be able to go to your client, and say: Is that really important? Is it worth giving up this other thing? Trying to find solutions – it doesn’t have to be a trade, sometimes it can be a workaround.
Understanding the challenges that the other side has is also really important. Sometimes people either can’t say yes, because it’s policy, or they’re afraid they’re going to get fired, or they have an institutional issue from their parent company. Being aware and acknowledging that the other side may have legitimate issues that they have to overcome, and trying to come up with ways to try and solve the problem for both sides – that’s our job. And at some point, you can get enough experience, and a good enough reputation, where the other side will trust you, as well as your client. They know that everything that comes out of your mouth isn’t advocacy, that you aren’t positioning, but you’re trying to help the two sides come to a deal.
The nice thing about a transaction, versus litigation, is that in a transaction, you’ve got two sides that theoretically have a common goal. It may have differences. But they’re both trying to get to the same end. In litigation, it’s largely: I win, you lose. As a transactional lawyer, having the subject matter expertise, both of the law, but also of the business, particularly if you’re like me and largely living in one industry…that’s a recipe for success.
Q: So, let’s talk about the industry a little bit. Are there any parts of the industry you’re interested in? Anything you’re especially concerned about?
In the latter category, I would unfortunately have to place the motion picture business. The theatrical motion picture business is very, very challenged. It was going through challenges before the pandemic; the pandemic has brought it to a standstill both domestically and internationally. We’re now starting to see production reopen. But the motion picture business is really, really struggling.
Q: Why do you think that is?
It’s competing with television, and, in particular, streaming platforms like Netflix, Disney+, Hulu, HBOMax, that we never really thought of as competition. The quality on – shorthand “TV” – is extraordinary these days. When I first started, actors and actresses in motion pictures wouldn’t want to do TV. That’s no longer the case: our greatest actors and actresses are showing up on TV shows, TV series, that are as good or better than anything you’d see in the theater.
Also, just think about just the dollars and cents of it all. Most of us who are subscribers to these platforms pay $5, $10, $20 per month for these services and then you forget about it – at some point it’s almost like a fixed cost, and you’re not aware you’re paying these fees. On the other hand, if you’re a family and you want to go out to the movies, you buy five tickets, buy concessions, maybe go out to dinner before: it’s a $100+ evening. If you’re a couple, you’re going to get a babysitter, get a nice dinner: it’s not an inexpensive evening. By contrast, you can stay home, order take out, and watch some great filmed entertainment on your television set, from the comfort of your own home in your pajamas.
Q: And what effect do you think that will have, for the motion picture business, after the pandemic ends?
It’s a struggle. What you’re going to see (and I’m a little concerned about it) is the blockbusters just dominating the movie business. It’s going to be harder and harder to get people to leave their homes to go see high quality drama, that you can get in your living room if you wait two or three months.
The only way to combat that is to make the motion picture quality and motion picture-going experience better. We’ve seen lots of companies introducing stadium seating, food in your seats, to make the experience better and different. But all of that comes at a cost. We have a fantastic theater in my neighborhood that serves food – a small theater with very big screens. But tickets are over $25. And that’s just admission.
So, again, you solve one problem and create another.
Q: What about on the TV side? The streaming side?
There’s another trend I think is worth talking about. In particular, a lot of the economic arrangements made between streamers and production companies are “cost plus” deals. I’ll just use Netflix as an example. So, Netflix will go to a production company and say “I will pay a license fee to obtain your program; I will pay you 130% of your budget.” The production company goes and makes it – could be a show, could be a movie – and then delivers it to the platform, and the platform will pay a license fee that pays the cost and 30%.
This is a great model for a production company to protect their downside – once you get that commitment, you can’t lose money. And that’s…nice. That’s not the norm in regular movie and television production (where you normally are taking substantial risk).
But the trade-off is that you’re capping your upside. As part of the rights that the platforms are getting – which are growing, if anything – it pretty much becomes your sole source of making money off of your show. There may be opportunities downstream, or after a couple of years, but that’s predominantly the money you would make in the short-term.
And the problem with that is, while it’s great to protect your downside, if you’re running a studio or production company, and you have overhead, and you have development expenses (quite a bit of what you develop doesn’t turn into production, so there are lots of costs trying to create films and TV that never go anywhere), the only way to fund yourself is with big hits. The studios have made their living by having these “mega-hits” that make so much money, that they pay for both the overhead and development, and also provide the studio with the profit they need to grow and expand their business and company. At my time at Paramount and CBS films, we did a lot of budgeting. And as you do these budgets, you watch the costs always go up, things become more expensive to make, advertise, market, distribute – and you come to the conclusion that you’re not ultimately sustainable without big hits.
So, if you become dependent on this cost-plus model, how do you have that “home run,” that mega-hit that will fund you into the future? That remains to be seen. I don’t know that anyone knows, yet. It’s a little easier as the studios now cross into the streaming platform business themselves – it’s easier for them to think that, if they have a big hit, it might not show up in a box office, but it may show up in increased subscriber growth at my streaming platform. So it’s not so much the studios that are facing these problems as the independent production companies that are trying to figure out how they’re going to make money to grow, to become a much bigger, more viable entity in the future.
And that’s a struggle – I don’t have an answer, right now. I think everyone’s trying to find an answer. I think at the moment, especially over the last few months, everyone is very “downside oriented,” and are just happy to know that they can keep the lights on and keep their people employed, and are not too worried about making mounds and mounds of profit – it’s more about survival, at least until the industry (and the country) returns to some sense of normal. But it’s still a very concerning – to me – issue. Our business is more interesting and healthier when we have well-funded competition within the business. It’s better for everybody, including the many, many people who work in the business, to have the business and the employers grow.
Q: And is this the sort of thing that gets worse in the context of, say, the pandemic?
Sure. Independent production is largely financed through bank loans. A lot of times, it’s a single picture or single series production loan you obtain through the bank. And what we typically have done is collateralize that loan through licensing the program that you’re going to go produce to a single studio, or a number of studios, or a streaming platform. Then you take that contractual right, and you’re able to finance your picture, the bank will loan against it.
As part of this process, the banks often will insist that you put a “completion bond” in place – essentially an insurance policy, where a third-party will tell the bank that, if the money on the production costs are not adequate for whatever reason (something happens on the show, the producer is incurring overages), then the completion guarantor will either commit to finish funding and complete the picture (which is necessary to deliver the picture and trigger the receivable). Or they’ll step in, decide it’s a lost cause, and decide to pay back the bank the loan that they advanced.
Part of what comes with the completion bond, is that the bank will assume most risks, but not all risks. And what happened with the pandemic is, the bond companies are saying: “I will not assume the risk of pandemic: production shutdowns, actors getting sick, states closing and precluding productions, etcetera.” The bond companies won’t take this risk because they can’t get reinsurance to protect the risk that they’re taking.
So you run into a situation where an independent, really right now, has no ability to get production funding from a bank, unless the production company is big enough, and has enough other assets that it can pledge to collateralize the loan. But the traditional single-picture studio self-collateralized production loan isn’t happening right now. And that’s very concerning to the industry, lots and lots of people are trying to figure out the solution. At the end of the day, whether it’s the streaming platform, the production company, the bank, the bond company, the reinsurance company: somebody ultimately has to take that final risk. It may turn out, at least in the short-term, that the government, whether state or federal, is going to have to step in and do that, which is less than ideal, even if they were willing to.
But that’s a very, very real challenge right now for the independent filmmakers. I’m confident that there will be a solution in time, hopefully before the vaccine, I hope that’s not the only way to solve this problem. But it’s a very real problem, it’s permeating the industry. And while production is starting to get back up to speed, if you do a deep dive, you’ll see that most of that production is coming from the studios, and the networks, and the deep-pocketed people that can afford to essentially self-insure against pandemic risk.
Q: Well, what about new industry actors? You’ve talked about the industry consolidating, and bigger conglomerates starting to take over. What about a new player, like Quibi? They just filed Chapter 11: do you think that there’s a possibility that someone like that could start to break things up?
You know, I think the problem that Quibi had – and in some respects, traditional media also has – is that you’re largely competing with “free.” Quibi was meant to be consumed in 3-5 minute “bites,” which means you’re basically competing with YouTube, TikTok, and content like that that comes to you for free (plus advertising), where you can have as much of it as you want. So to me, it’s really, really hard to compete with that, unless what you have is so compelling that someone will pay for it. And the problem, I think with Quibi, is they never really had the chance to show that they had great product.
When you’re a new business – and I’ve seen this with production companies over the years – the ones that survive tend to have a gigantic hit right out of the box. It’s largely fortuitous, it doesn’t mean you’re smarter than anybody else. I had one client many, many years ago, that got a decent amount of funding, and made a great deal with one of the studios to distribute its films. The first movie that they made was The Sixth Sense, which was a phenomenal hit, and the two founders of that production company probably each cleared tens of millions of dollars on their first movie. Quibi didn’t have that opportunity.
So, I think it’s just hard to compete with that kind of content. Can it be done? Yes. Would I risk my own money? Probably not, at least right now. I would be supportive of anyone who’s willing to, though. I think Jeffrey is an amazing businessperson, an amazing creative force. I’m sorry to see it didn’t work. I’m sure there will be other people who will try.
Q: Okay last question: having been in the industry so long, do you feel like you still feel like you can just enjoy watching a movie?[Laughs] Yeah. In some ways, I feel like I have a greater appreciation for it. We’ve all been to lots of movies that are great. We’ve also been to terrible movies. I’ve been fortunate enough to go to premieres of movies that turned out to be hugely successful. And premiers where you try to sneak out before the lights go on, because you really don’t want to see the director. The reality is, the people – 100, 200, 300 – that worked on the big success and the big flop, both worked their tails off. They both gave it everything they had. If it didn’t work, it wasn’t for lack of effort.
So, I appreciate that. I want to like movies, when I see them. I’m probably more forgiving, in some respects – I can enjoy it. Maybe, when we have dinner after, we can kind of pick it apart. But in the moment, I completely enjoy it. If anything, my experience has made me a bigger fan.
Interview by: Will Walker, Online Content Chair for Entertainment for the Harvard Journal of Sports and Entertainment Law and a second-year student at Harvard Law School (Class of 2022).