How "Obsession" would fare as an A-Corp

This month the breakout horror success Obsession has made global headlines with record box office numbers. At the same time, it’s also revealed stories of very unequal economic outcomes that are all too common in creative industries. Today we want to talk about what those are, and what A-Corps do and don’t do to address them.

Obsession’s financial structure and indie movies

Obsession is a new horror film made by a former YouTuber. It was made for $750,000 and then acquired out of the Toronto International Film Festival for around $15M by Focus Features, the specialty label owned by Universal, with Jason Blum's Blumhouse attached as a producer.

When indie films are made, they are almost always held in single-purpose LLCs — vanilla legal structures that allow certain people to own equity in the underlying project. Those equity rights are tightly held. When distributors and producers come onboard a film, it’s these equity rights — along with preferential treatment — that they’re buying.

In some cases these equity rights extend to members of the cast and crew. If the production is unionized, the cast and some above-the-line creators receive residuals through their guilds — though these are tied to reuse and reruns, not box office, and “below-the-line” crew typically receive minimums and benefits rather than a share of a film's success. For non-union indie projects, all of it is a negotiation.

How Obsession’s economic outcomes are unequal

As Obsession has set box office records for an indie film, attention has been drawn to how much the cast and crew benefits from it. The Art Director for the film, for example, has come out sharing that they were paid a $300 day rate for the film, netting them a total of $6,741 after taxes, and no participation in the windfall that’s followed.

These sorts of situations are not uncommon. Some staff are paid in cash, others in equity, with that line decided by the producers and sometimes financiers of the film, and transparently agreed to by the cast and crew when signing onto the project.

The difference in economic outcomes isn’t dishonest, per se, but it does reveal the power discrepancy between finance and creative workers, and ownership of project equity.

How A-Corps would impact this

What if Obsession was instead housed inside of an A-Corp. How would it be different?

By default, A-Corps would not change the outcome we’re seeing in the headlines now. It does not make crew participation mandatory. However, it does make creative ownership easier to access and more likely in two important ways:

First, as an A-Corp, at least 51% of the voting control would have to stay with the artists who made the film — its writer, director, and creative team — at all times, no matter who invests. This is locked into the statute; an operating agreement can't sign it away. A financier can still put up capital, but they can't take control of the work in exchange for it. The project would have to be set up from the very beginning to put creative ownership at its core.

Second, as an A-Corp, Obsession would have been able to cheaply and in a straightforward, universal way offer its cast and crew an economic participation pool using fractional shares — and to do it without anyone giving up creative control, because economic rights and voting rights can be held separately. 

As A-Corps become more common, this ownership distribution step could become a new standard step in the creative process.

The importance of setting standards and norms

Let's be clear-eyed about why this matters. The reason the Art Director didn't share in Obsession's success isn't that the legal tools to include her didn't exist. They do. It's that the people holding the equity had little reason to use them, and weren't expected to. 

This is what standards change. When creative ownership is the default a project starts from, rather than a favor someone has to think to grant, the question shifts from "why would we share this?" to "why wouldn't we?" Defaults are quiet, but they move what people expect, ask for, and feel entitled to.

This is also why the A-Corp can be especially helpful in establishing new standards and norms for the creative community. Improvements many of us wish for in the creative world — better collective outcomes, better control of our work, more predictable sources of funding — become much more possible through collective action. This isn't easy. But what makes collective action much more likely? Standards and norms.

When we look into the new creative era we're stepping into, we see a world where the assumptions we make about how we work together, the value of our work, and how that value is distributed are very different from the 20th century story we're used to. Agency and power have never been more widely distributed. The capacity for networks and scenes to operate independently and according to their own values has never been bigger.

The A-Corp does not solve every problem. No legal structure ever can or will. But it can serve as the foundation for a new philosophical approach to making culture and how we operate as a creative community. Where having a stake in the work you make isn't a luxury, it's a basic right.