An interesting and increasingly relevant issue here for media companies - when does induldging in "corporate synergy" violate compensation agreements with contracted talent.

Peter Jackson, director of all three films in New Line Cinema's monumentally successful Lord of the Rings trilogy is alleging in a new lawsuit that New Line cheated him out of tens of millions in compensation through the studio's self-dealing when it came to bidding for the rights to ancilliary products related to the film.

Via CNN.com:

Jackson sues over 'Lord of the Rings' - Director Peter Jackson takes studio to court over millions in allegedly missed fee opportunities.

June 27, 2005: 10:54 AM EDT

NEW YORK (CNN/Money) - Oscar-winning director Peter Jackson has filed suit against the movie studio behind his "Lord of the Rings" film trilogy, claiming the studio may have cost him tens of millions of dollars.

Jackson has accused New Line Cinema, which financed and distributed the "Lord of the Rings" film franchise, of committing fraud in the way it dealt with ancillary revenues generated by "The Fellowship of the Ring," the 2001 movie and the first of the J.R.R. Tolkien novels that Jackson brought to the big screen.

"We don't agree with plaintiff's allegation and intend to contest the case vigorously," a spokesman from New Line told CNN/Money.

Lawyers for Jackson told The New York Times, which first reported the lawsuit, that the director was underpaid by as much as $100 million.

New Line and CNN/Money are divisions of Time Warner (down $0.03 to $17.07, Research).

Jackson's lawsuit shines a spotlight on conflicts between major media companies like Time Warner and Walt Disney Company (Research) and Hollywood's creative talent.

In his lawsuit, Jackson accuses New Line of granting the licensing rights to "Lord of the Rings" books, DVDs, and merchandise to other Time Warner companies without allowing bids from other entertainment companies. As a result, the total revenues related to the film were lower than they would have been had there been open bidding for these ancillary rights, Jackson claims.

Because Jackson's compensation from the movie was tied to gross revenues, he says New Line's alleged self-dealing cost him money.

"That allegation is untrue, most (licensing rights) did not go to companies in the Time Warner family," New Line's spokesman said in response.

Original article appears here.

-- MDT