First a refresher on bankruptcy – Chapter 11 means VidAngel still serves its customers and Chapter 7 means VidAngel is shut down.
We’ve reached an agreement with the studios to appoint a chapter 11 trustee in exchange for:
1) Withdrawing the studios’ chapter 7 motion
2) Under Bankruptcy law, the studios can elect whoever they choose if they don’t like the trustee that is appointed, but under this agreement, they only choose from four people we’ve agreed on in advance.
We decided to do this because we think it will allow an objective third party help us get through the chapter 11 reorganization process with more favorable results for the future of VidAngel. And it will save money that would have been spent on legal bills.
We are turning our sights to successful reorganization with the help of a trustee rather than spending unnecessary time and money fighting the studios’ motions. We’re optimistic about our prospects for reorganization.
VidAngel has taken some pretty brutal uneducated attacks in the last week from those on social media who HATE skipping/filters: “criminals”, “theft”, “pirates”…
In response I remembered a few comments from the Judge, who ruled against VidAngel, that might offer some context into how civil disputes actually work (and perhaps a little less judging🤞).
“And, again, I could be wrong and the Ninth Circuit could be wrong. I have no ego about that, but, if we’re going to play by the rules, you have a ruling, you appeal it, and a decision is made.”
“They [VidAngel] think that the Family Movie Act generally allows them to do that. And they may be right. The Supreme Court may take up this issue and they may decide it.”
“Obviously, the verdict didn’t come out the way you [VidAngel] would have liked, but at least it’s been my observation that you all are fighters, that you all are fighters and are reflective, thoughtful, and you will persevere through this.”
“And you will take this matter, whether it’s appealing this trial or appealing to the Supreme Court or appealing to your legislature, I have no doubt that you have perseverance and intellect that will get you far in your respective careers. So I wish you all the best.”
If the judge who made the ruling himself isn’t 100% about his own ruling, I am pretty sure we can ignore all the self-righteous comments accusing others of being criminals or thieves.
He might be right in the end. We might be right in the end. In a case of first impression, we won’t know until we finish moving through the court system. This is a civil disagreement NOT a criminal case.
During our court proceeding in Los Angeles, I made the point in my testimony that where I come from, people talk before they sue each other. We’ve tried to talk many times, and Disney has been unwilling to join in a conversation. So, on behalf of around 8,000 owners and tens of millions who want to skip a few things in Disney/Fox/Warner Bros. movies, I’ll continue this conversation publicly.
Let’s review a few quick facts…
1) VidAngel indisputably made your company and other Hollywood studios a profit. I think that’s why most of them did not join Disney in suing us.
2) You sued us for $125 million for it, and Federal District Court Judge Birotte commended both sides for an incredibly passionate fight. You won $62 million. We lost. At least for the moment.
3) Disney knows a trial and litigation (probably costing tens of millions to fight) in four courts could have been avoided by selling VidAngel a license.
The following is a proposal that could make everyone whole in this case if it were really about copyright protection and not about marginalizing the filtering market out of existence.
Mr. Iger, please take a close look at the raw data in this letter and ask yourself, “Does spending this kind of money to fight the filtering market make sense financially?”
VidAngel Made Money for Disney
Per an expert report at trial, unchallenged by alternative data or analysis, Disney et al would have been $229,752 poorer had VidAngel never offered their content on its service. These numbers are profits. VidAngel paid much more for the DVDs. I realize these numbers are nothing for Disney but we had barely tapped the market when Disney sued VidAngel.
A full 65% of the views for Disney et al content were views that would not have happened without VidAngel. Netflix, Amazon, Sony, Universal, Paramount and other studios who did not sue VidAngel also made profits from VidAngel’s success. 70% of the views for non-plaintiff content were views that would not have happened without VidAngel. There are so many reasons why people want to skip small bits of popular movies and TV shows.
An independent,peer-reviewed study conducted by UCLA Professor Doug Lichtman and Dr. Benjamin Nyblade found that there is a real and substantial market for filtered content, 98% of its customers used VidAngel to filter, and allowing families to select what they want to mute or skip does not decrease their enjoyment of the movies they watch. Remarkably, being able to choose to skip or mute a very small percentage of a movie makes all the difference to them. AndNRG reports that 40 percent of Americans would want to use VidAngel.
I don’t know if your legal team has communicated to you that building this new market for Disney came at great expense to VidAngel. We spent millions building technology and marketing to this new audience. You reaped profits, while we reaped losses. We happily invested to build a new market because we believe it will be very profitable when built.
5) VidAngel went to great expense to audit its movie purchases and systems to protect Disney’s interests
6) VidAngel asked you for a business solution to avoid the expense of the lawsuit
Although VidAngel’s service indisputably made it money, Disney litigated against us in 4 federal courts before getting a judgment of approximately $62.5 million. At this point, VidAngel can keep going to the Supreme Court, hoping that the Court will protect Disney from itself. Or if this were not about filtering, we could say, “You won. We lost. How about a truce?”
It is more important to VidAngel that the option to skip exists than that VidAngel owns it.
Last week we filed a motion in the bankruptcy court to transfer our filtering assets to the Skip Foundation, Inc, a 501(c)(3) organization. This foundation will become the Wikipedia of skip technology as a free global resource. If the transaction is approved by the bankruptcy court, our patent and 10,000 titles with all skip data will be free for any company or any individual in the world to use as they see fit under copyleft and Wikipedia style licenses. And the entire world can contribute to the Skip Foundation’s library of content “skips” just like with Wikipedia. Those contributions could benefit VidAngel and Disney.
Disney, Netflix, Amazon and others could adopt the technology freely and implement the technology on top of their existing streaming contracts without an agreement of any kind with VidAngel.
Here’s What We Propose
We understand you want to protect your Intellectual Property. You understand that VidAngel’s customers want to skip a few things in your movies in private. If the financial minds rather than the power minds within Disney prevail, this could be a solution.
We are prepared to consider giving Disney our Dry Bar Comedy series in satisfaction of the judgment. Dry Bar Comedy is the fastest growing comedy brand in the world with over 1.5 billion views to date. It is making millions. It is growing so fast because the creators are embracing the data behind the skips of families. You could publish its family friendly comedy on Disney+.
With the so called “debt” settled, VidAngel could freely transfer the “filtering” assets to the Skip Foundation and emerge from bankruptcy. “Filtering” would survive as “skipping”, regardless of VidAngel’s future fate. And Disney could profit from both the skip data and Dry Bar Comedy.
This proposal would settle the judgement, respect Disney’s IP, and grow Disney profit. VidAngel would be free to focus on The Chosen, VidAngel Studios, and generating profits for its own investors, while enjoying the benefits of the Skip Foundation.
I won’t hold my breath for your response and we are already preparing our appeal, but it doesn’t hurt to ask. The IMP and Sony Betamax cases changed the industry, but they dragged on for almost a decade. Change is coming. You can fight it or profit from it. What do you say? Are you open to meeting?
We find today’s ruling unfortunate, but it has not lessened our resolve to save filtering for families. VidAngel plans to appeal the District Court ruling, and explore options in the bankruptcy court. Our court system has checks and balances, and we are pursing options on that front as well.
2:18 PM MST UPDATE: About 2pm LA Time – Jury sent a request for an exhibit that contains the Family Movie Act. Both sides argued as to the better exhibit to give to the Jury. The Judge decided to send two exhibits back to the Jury room. Both sides got to review the document before it was sent back to the bailiff, who then gives it to the Jury.
There is a very meticulous process for receiving and sending information to the Jury room.
This morning the judge reviewed jury instructions and the verdict form with both sides. After hearing the parties’ motions for adjustments to the jury instructions, Judge Birotte welcomed the jury back to the trial. He read them the instructions, after which Ms. Blanca Young presented Disney’s closing argument and Mr. Mark Eisinhut presented VidAngel’s closing argument. Finally, Ms. Young offered a 10 minute rebuttal. Following the argument, the bailiff was sworn into office to ensure that no one interacts with the jury until their verdict has been reached.
We are now waiting for the jury to deliberate. Thanks to all for your support and prayers.
Four witnesses testified yesterday, after which the parties “rested” and the judge asked us to return at 8:45am on Monday morning. Here’s how Friday went:
Liz Ellis completed her testimony following a relatively brief cross-examination and short re-direct.
Called David Quinto to testify next. He explained his history representing intellectual property owners and then described how he analyzed the Family Movie Act. He also explained the events that led up to the enactment of the FMA and the various notifications VidAngel had sent to the studios. Kelly Klaus attempted to impeach him by saying that he had a reputation for being “aggressive” and suggesting that the pre-litigation letters he sent to the studios asking them to advise VidAngel of any complaints they had concerning its service were “set-up” letters. Quinto responded by testifying that it is a lot less expensive to avoid conflict than to engage in it.
Jeffrey Harmon testified next, describing his life growing up in a small town, his family’s desire to watch clean content, and the prohibition he and his siblings had on watching pg-13 content until they were 17. He further testified concerning the harms that watching unfiltered content can cause, his personal interest in watching clean content, and the honesty of his brother Neal who spent 7 years re-paying investors in a failed venture even though he had no legal obligation to do so. He also testified that Harmon Brothers provided marketing services to VidAngel at cost.
Finally, plaintiffs’ expert Robin Russell testified again, this time to rebut testimony given yesterday by VidAngel expert Jeff Kinrich. Her criticism focused largely on Mr. Kinrich’s failure to account for black-out periods in his analysis of the studios’ lost profits.
Following her testimony, the parties rested. The court then heard argument on proposed jury instructions before directing counsel to return at 8:45 a.m. Monday for further discussion of the jury instructions and verdict forms, to be followed by instructions to the jurors (ordered to report at 9:30) and closing arguments. After that, the jurors will begin their deliberations.
Day 2 of the trial consisted of three testimonies. We heard from William Barnett, Jarom McDonald, and ended the afternoon with a testimony from Neal Harmon.
*The court issued an order excluding witnesses from the trial, which prevents them from having access to the testimony of other witnesses before they testify. Unfortunately, this means we can’t give you access to the daily transcripts yet. But the process is meant to achieve justice so we, of course, will respect it.*
For those of you in the area, we would love to have you join us this week. Today, June 13th will be in Courtroom 7B and is scheduled to begin at 9:00 A.M. and will go until 3:00 P.M. You are not required to stay the whole day – please feel free to come whenever your schedule allows.
For those of you not in the area, we are grateful for the support you have given from wherever you are! We appreciate all of the uplifting comments, good vibes and prayers that have been sent our way.