Fox's files show vid cutback
Execs deny Blockbuster pressure
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However, the execs denied they were pressured into an agreement by the giant retail chain.
Under questioning by plaintiffs' lawyers, Fox Consumer Products president Patricia Wyatt, testifying for the second day, said Blockbuster "bought fewer of some titles than we would have liked."
The plaintiffs introduced several internal Fox memoranda in which studio executives discussed the impact of Blockbuster's lighter buys on the studio's overall video business in 1998. Since the number of orders was less than budgeted, Fox attributed the shortfall to the lack of a revenue-sharing deal with the chain.
In an affidavit filed earlier in the case, Wyatt said, "As a result of the lack of a revenue-sharing deal, Blockbuster is reducing its purchases of Fox titles and is recommending reduced purchases to its franchisees."
Fox was the last major studio to sign a revenue-sharing deal with Blockbuster. The plaintiffs hope to use the evidence to show Fox was coerced into an agreement with Blockbuster that the studio knew would help increase the chain's market share at the expense of independent retailers.
The two companies eventually signed an agreement in November 1998 after a telephone call from Wyatt to Blockbuster chairman-CEO John Antioco in which final terms of the deal were worked out, Wyatt testified.
Sealing deal
"We had been negotiating for months and months, and we finally arrived at terms that we felt would be good for us," said Wyatt, who denied that Blockbuster's smaller-than-expected orders had a significant impact on Fox's bottom line. "It made it harder for us to make our numbers, but we never actually missed our numbers because we were able to increase sales to other customers."
Under questioning by studio lawyers, Wyatt described her conversations with Antioco during the negotiations as polite and businesslike.
"He told me, 'Look, Pat, we have most of our open-to-buy tied up now in these output deals (with other studios) and we just don't have as much available for conventional buying,' " Wyatt testified. "I thought that was very straightforward."
The Fox executive also was questioned about documents related to Disney's revenue-sharing arrangement with Blockbuster and other customers that turned up in Fox's files, including a copy of Disney's contract with Blockbuster.
Wyatt testified that she didn't know how the documents got into Fox's files, but said they had no bearing on the studio's negotiations with Blockbuster because its deal with the chain was effectively concluded by the time the Disney documents came to Fox.
Wyatt's testimony was followed by a videotaped deposition of Fox senior VP of rental marketing Pam Kunick-Cohen, a former Disney employee in whose files the Mouse House documents were found.
In her deposition, Kunick-Cohen said the Disney contract had been given to her by other people at Fox and that she believed it had originally come from executives in Fox's Canadian office. She said she didn't know how those executives obtained it.
Source a mystery
She also claimed a spreadsheet detailing the terms of Disney's revenue-sharing deals with Blockbuster and others had been provided to her by others at Fox and that she didn't know its original source. At the time the document was apparently faxed to Fox, Kunick-Cohen was on vacation in Italy, she testified.
She acknowledged that during the period Fox was negotiating with Blockbuster, the studio prepared an analysis comparing its proposed terms with those of Disney, based on Kunick-Cohen's recollections of the terms of Disney's deal from her work there.
"That was information that was in my head. You can't make that go away," she testified.
Plaintiffs lawyers also played the videotaped deposition of Warner Home Video executive VP and general manager of North America and Australia, Jim Cardwell, who was quizzed on the terms of Warner's output revenue-sharing deal with Blockbuster and the deals it offered independents through distributors. Warner was one of the studios named in the suit but settled prior to the trial.
The plaintiffs in the Blockbuster antitrust trial are down to their final two witnesses and could wrap up their case today, their lawyers said in court late Tuesday.
The final two witnesses called by the plaintiffs are expected to be an economist, who will appear as an expert witness, and Blockbuster chairman and CEO Antioco.
Defense lawyers said their own case will be relatively abbreviated, likely involving testimony from no more than seven witnesses, putting the case on track to go to the jury before the start of the July 4th holiday.
The new schedule represents an abrupt acceleration in the pace of the trial, which was originally expected to run four to six weeks. Both sides have pared back their lists of planned witnesses submitted to the court earlier in the case.
(Paul Sweeting is a reporter for Daily Variety sister publication Video Business.)
