It’s sales time – do you know where your film library is?

“It’s in vaults in Queens and New Jersey,” says Julian Schlossberg, whose Castle Hill boasts 350 titles.

“In various warehouses and labs,” answers John Hyde, whose MCEG Sterling controls about 400 titles by ownership or long-term license, as well as about 150 titles it sells for companies administered by MCEG.

“It’s in the filing cabinet,” says Mark Amin, head of Trimark Pictures, only half-seriously, adding, “It’s the contract that really matters, the copyright.”

“I don’t know,” admits Shane O’Neil, who became head of Odyssey Pictures in October and discovered a company in disarray.

Despite the volatility of the film business, a film library is one of the few things a company can count on, especially when it comes to supplying the needs of new media technologies.

“What is going to be delivered in these systems is the movie,” an analyst at Paul Kagan Associates says. “It will survive any technological upheaval.”

Kagan has studied the value of libraries owned by major studios. Estimates have Warner Bros, topping the list at more than $2 billion for the more than 1,200 titles in its vaults.

Indies face challenge

While the major studios keep vaults on their lots and lease space in atmospherically perfect salt mines to preserve the thousands of film prints, negatives and soundtracks they have amassed over the decades, independent film companies face several challenges when it comes to maintaining the value of their film libraries.

According to John Hyde, whose MCEG Sterling does appraisals of other companies’ film libraries (in the case of bankruptcies, for the purpose of going public or to value a library as collateral for a loan), there are two essential features of a film library:

* The contracts that show where and when the films have been licensed and what their availability may be.

* The elements, meaning at the very least the original negative and the original soundtrack (preferably unmixed). “The negative is all you have,” says Hyde, “to reflect the copyright.” Hyde emphasizes “the value of a film library is dictated by the elements available.”

As a consultant to many indie companies, Hyde stresses the importance of safeguarding all of a film’s elements. That means everything from foreign language soundtracks to music and effects tracks, stills and one-sheets, TV commercials, textless backgrounds for composing foreign titles. “Everything you need to produce a marketable product,” Hyde explains. “The elements are the conduit to turning a copyright into an economic entity.”

When companies go bankrupt or are acquired by other companies, the film library may be in a shambles. “It’s really detective work,” says Hyde, who explains that a specialist in his company pores over old invoices and faxes, tracking down film elements that have strayed to all points of the globe.

What happens when a film library is neglected? Witness the experience of Robert Hesse, a consultant to Communications & Entertainment, which in 1989 acquired the library of a low-budget film company called Double Helix. The library was sold, passing through several hands over the years, and due to payment defaults, reverted back to ComEnt and its foreign sales division, Odyssey Distributors.

Hesse journeyed to the 1993 Cannes film market with several films to sell from the Double Helix library.

“We were at our booth setting up the one-sheets for our biggest film,” he recounts, “and we see the guy in the booth next to us putting up one-sheets for the same film. Then a guy across the room says we’d better back off because he happens to be the producer of the film.”

Legal entanglements

Hesse says the more they looked into the films they had presumed they owned, the more elements turned out to be missing and the more legal entanglements they discovered. “Under every rock was a snake,” Hesse says. “And standing next to every snake was a lawyer.”

Eventually, the entire Double Helix film library, which had been carried on ComEnt’s balance sheets for several years as a $3 million asset, had to be written down to zero.

Odyssey president O’Neil, presently embroiled in a battle with management of the parent company concerning charges of mismanagement, says he has no idea where the Double Helix library now resides.

Schlossberg says he keeps tabs on his Castle Hill titles through data that is “semi-computerized.” “We haven’t lost a film yet,” Schlossberg says.

Trimark keeps two sets of records, one in the company offices, the other with Trimark’s outside legal counsel. All the information is written to a database, which at a single command, tells what media has been licensed for each territory for any particular film. “It’s complicated,” says Amin, “because one territory can have 10 different contracts, with different windows for each.”

MCEG Sterling employs a computer program from ESS that has been customized to keep track of every element of every picture from the outset. After a film has finished its theatrical run, digital masters are made, then the negative and the internegative are placed in storage.

MCEG’s oldest films, derived from its acquisition in 1987 of Manson Intl., go back no further than 1955, says Hyde, so film preservation is a matter left to labs, while the company’s servicing department conducts regular quality checks of the tape masters.

Castle Hill, however, owns many classic pix from the ’30s and ’40s, which necessitated transferring pix such as Hitchcock’s “Foreign Correspondent,” Lubitsch’s “To Be or Not To Be” and Rene Clair’s “I Married a Witch” to safety film from deteriorating nitrate film.

Schlossberg says color-fading of film prints still is a threat. “We go through the library once a year to check,” he says, while simultaneously looking over the 1-inch tape masters for creasing.

A film library can generate income with little effort. For Schlossberg, John Ford’s “Stagecoach” keeps rolling along. “It does as well every year as most independent films” that are newly released, says Schlossberg.

But fresh titles are necessary to maintaining the value of the library, either by the acquisition or production of movies.

“You must keep replenishing,” says Schlossberg, who likens a film library to a “brontosaurus lumbering along crying ‘Feed me! Feed me!'”

What is a film library worth? As a rule, a newly produced film’s revenue diminishes with age. A classic film though, may be next to priceless. Schlossberg recently turned down an offer of $750,000 for the negative of “A Night In Casablanca,” which he owns. “How many films did the Marx Brothers make with all four of them together?” he reasons.

However, putting a dollar value on a film library is an inexact science, at best.

“You never know,” says Schlossberg, citing as an example a black-and-white film in Castle Hill’s library called “Tomorrow,” with Robert Duvall starring and a screenplay by Horton Foote. It was not a particularly active part of the library until Foote and Duvall won Oscars in 1984 for “Tender Mercies.” By capitalizing on the Academy Award, Schlossberg says, “We made hundreds of thousands of dollars on ‘Tomorrow.'”

“Those are the exceptions, says John Hyde. “You might come across an old picture with Tom Cruise or Sharon Stone or Kevin Costner in their pre-stardom days and you can get a little extra for that, or for cult films with followings.”

But generally says Hyde, film libraries are valued according to an estimate of the films’ future performance based on what that film, or others like it, have done in the past.

The only time a film library’s value may rise dramatically is when new technology comes along to provide fresh licensing opportunities. In the past, it was homevideo, pay TV, laser disc. Looming ahead today is interactive media, the 5-inch digital video disc (DVD) and the prospect of movies-on-demand delivered over telephone wires.

At NATPE recently, several film companies reported approaches from telcos offering big bucks for films in bulk.

“Strategically,” Hyde says, “I think companies should hold enough until the price is right.” He recalls that in the early days of video, titles sold for a 20% royalty fee, whereas today the deal turns on a 20% distribution fee.

Trimark has formed its own interactive division so that the business of turning its movies into CD-ROM entertainment – if indeed, it becomes a business – will stay in-house.

Schlossberg is cautious when it comes to selling interactive rights or licensing his library to the DVD. “It’s too new,” he says. Schlossberg says he held onto video of many titles until the height of the video boom in the mid-’80s and got top dollar. Likewise, he’s planning to hold onto his film library and see how the new media business turns out.

Schlossberg says time is on his said, adding “I believe in hardware, just as long as I have the software.”