Integrity of Film Franchise Gets Terminated in Bankruptcy Auction

He said he'd be back. He just didn't know it would be as the result of a bankruptcy.

In a southern California bankruptcy court this week, a U.S. judge granted ownership of "The Terminator" movie franchise to a California-based hedge fund called Pacificor, LLC.

Halcyon Holding, the previous rights holder of the film series about an apocalyptic time traveling, hell-bent-on-assassination cyborg lost the right to assemble more killer robots last summer when it had to file for bankruptcy.

As we have discussed in other bankruptcy news posts, movie rights can be worth a lot of money if handled correctly. Some people have made generational fortunes by holding the rights to just a single Hollywood character. George Lucas, for example, passed on a studio paycheck for his "Star Wars" films in exchange for the rights to the characters and creatures in his far, far away galaxy. Today, Lucas makes money than the President every time Verizon advertises its "Droid" phone.

The bankruptcy judge granted rights to Pacificor because he felt it would best serve the previous owner's creditors.

However, for a Hollywood-area judge, the ruling was somewhat vexing to the region's more film-friendly bidders, like Lions Gate Entertainment and Columbia Pictures. Both studios, which bid as a team on the rights, would be able to more quickly turn the franchise around and make money from it.

The fear of a purely corporate entity possessing the rights to a popular science-fiction franchise will not take long to permeate the fan boy message boards and tabloids. Without question, the company will market its new robot toy to several studios for the eventual production of a follow-up to 2007's "Terminator Salvation." And why not? It made almost $400 million.

But here's the problem: they will do what every non-industry executive producer does.

That is, they'll sell the idea to the studio with best track record of successful third-party licensing deals- companies that make video games, lunchboxes and t-shirts for cats. They will completely take over the production process with cost-cutting measures like MTV video directors and casting rejects from failed UPN pilots; and then show up on opening weekend with a deposit envelope from the local branch of their bank.

In the process, production difficulties will stigmatize the film, script leaks will happen, buzz will dissipate into movie fan site rants and pans and the franchise will implode not unlike most of the people in the film. And then a Pacificor intern in charge of the franchise will negotiate the rights to a failed screenwriter working at soon-to-close coffee shop on Vine for $50.00 and an free extra shot of caramel in his double-tall. That's just how it happens.

The hedge fund, which backed Halycon for its purchase of the rights, beat a Columbia and Lions Gate joint bid of $35 million, which also included a couple of million bucks for each of the potential sixth and seventh films. However, a fifth one needs to be made before that can happen. Pacificor won with a bid of $38 million.

The deal happened as part of a credit bid, which is a common process in a bankruptcy auction. The process involves the creditors willingness to forgive the debt in return for ownership or control of a product or in this case, a movie franchise.