For producers, negotiating the particulars of a contract has little appeal. Nonetheless, all producers eventually have to turn their attention to the legal documents assuring funding, production, and distribution of their program.
Unless the producer can make the program using only its employees, written production and other agreements are essential, particularly today where so many means of program distribution and use (and revenue streams) are possible. Establishing the legal framework before production begins assure the fairest result in negotiations, because once production is underway the stakes – and negotiating leverage – begin to shift.
The issues to be addressed and resolved in any program agreement will differ from deal to deal. This article provides only a checklist to keep in mind before an agreement is reached. The exercise of thinking through the issues also helps formulate the production and distribution plan before production begins.
PRODUCTIONS USING ONLY EMPLOYEES
If a producer simply uses its own non-union employees to produce a program and does not engage any outside assistance, an agreement may not be necessary since any work created by its employees would be considered a ‘work made for hire’ under u.s. copyright law. The copyright in that case resides with the employer, not the employee, unless there is an agreement to the contrary. It is good practise nonetheless to disclose to employees when they are hired that all works created by them within the scope of their employment will be owned by the employer. Some companies require that employees sign something to that effect.
The development of new technologies brought with it lawsuits by employee-creators claiming a right to additional compensation for exploitation of their work in media not contemplated or existing when the work was created. Different courts have ruled in favor of differing parties depending on the language of the agreement and the intent of the parties at the time. To stave off claims, disclosures to employees or employee agreements should also make it clear that the employer’s rights also extend to use of the work in any media or using any technology or device now or hereafter known.
Producers often hire outside assistance for specific assignments. For example, you may want an experienced announcer or known talent, writer, musician, or director. While in some cases the person hired will simply be asked to perform services, it is difficult to predict how production will progress or what contributions each person will make to the program. In any event, your first priority is to produce the best program possible, so you will obviously want to incorporate the best ideas offered by those working on the program.
If you are the producer, you will want each person or company whose services you want to use to agree in writing that the work or contributions will be ‘works made for hire’ and that the copyright and all other rights will be owned by the producer. As extra assurance, the contract should also assign all copyrights and other rights to the producer just in case the work or contribution is later determined for legal reasons not to be a work made for hire. While including both provisions is a bit of ‘belt and suspenders,’ it is highly recommended to avoid any question about who owns the copyright.
Because copyright vests in the author or creator at the moment the work is created, it is particularly important that agreements be reached and signed prior to the commencement of production. Think about how negotiating leverage might be affected if the parties delay signing the contract until after the script is written. While the parties may still enter into a ‘work made for hire’ arrangement after the script is written and production is underway, incentives to persuade the creator/owner to sign the agreement may have to be increased. A work made for hire agreement is even more important when financing arrangements for production require the producer to warrant that he or she owns or has obtained certain rights to the program or program elements as a condition of the financing. Producers cannot so warrant until the contract has been signed.
If you have identified a funder or investor, you may need an agreement delineating your respective rights and responsibilities. Coproduced programs require coproduction agreements, which can get very complicated when distribution rights, including media, territories, and net revenues, are divided between the coproducers.
ISSUES COMMON TO MOST AGREEMENTS
There are a number of issues common to most agreements to produce, finance or distribute programs.
Purpose. At the beginning of every agreement, it helps to describe the intent of the parties, that is, what you intend to accomplish. Anyone later asked to interpret the agreement will have some direction.
Production Responsibilities. What rights and responsibilities are to be assigned to each of the parties?
Production Budget. Who will prepare the production budget? How much will it cost to produce? How will those costs be allocated among participants? What are the projected costs for each stage of production, i.e., pre-production planning, program development, production (shooting, recording, editing, facilities, locations), post-production, distribution, promotion and advertising? Who will be responsible for preparing a line item budget? What accounting or financial reporting should be required, and at what intervals? What are the expected cash flow needs for each stage of production? What happens if the program runs over-budget? Do you want the right to terminate the agreement? In that case, who owns what rights to the audio recorded or footage shot through the date of termination?
Production Schedule. What is the anticipated production schedule? How many shooting days will there be? What are the projected dates and locations? What delivery dates do you want to establish for scripts, selected recordings/footage, rough cuts, fine cuts, the finished program? It is not uncommon in coproduction or financing agreements to withhold ‘greenlighting’ – final agreement to proceed with production – until the production budget, cash flow and production schedule are agreed upon.
Program Specifications. In which format will the program be produced? What technical specifications must the completed program satisfy? What production and post-production techniques will be used? Will dubbing be necessary? Who will have the right to edit the program after completion for other uses, e.g., as excerpts, to meet the program clock of distributors in other countries, or into other programs? What limitations or restrictions, if any, will be placed on editorial changes to the program? Will prior approval of the edited programs be required?
Personnel and Facilities. Who is responsible for production? What specifically are those responsibilities? Who will hire production personnel? What positions (director, line producer, musicians, composers, narrators, animators, cinematographers, camera operators, etc.) will be hired? What facilities and equipment are needed? Who will furnish production facilities and equipment? Are prior approvals or notifications of the hiring of key production personnel required? Will key man insurance be required for any person hired to work on the production? In agreements with talent, you should also secure waivers of any moral rights from members of the production team, which they arguably might have in the program in countries that accord moral rights, particularly if the program will be distributed outside the United States.
Who will administer the payments of all costs and expenses incurred in the production of the program? Who will make arrangements to obtain any licenses or permits that may be required during production of the program?
Rights Clearance. A critical function in the production process is obtaining and clearing all underlying rights for materials included in the program for all media and relevant territories. This includes rights to the script, underlying literary material, still photos used in the program, music, stock footage, and any other element. It may even include the rights to use certain background props.
Ownership of Rights. One of the most important issues in any contract is copyright ownership. Copyright owners by law have the broadest rights and protection. Will the copyright be owned by one party or jointly by two or more parties? Under U.S. copyright law, a copyright in the program may be owned jointly, in which event each owner has all the rights of a copyright owner, unless those rights are otherwise restricted by contract. While ownership of the copyright may not be split into unequal shares, the joint copyright owners may agree by contract on a division of distribution rights, uses, revenues and profits in any manner they wish. The agreement should also specify the copyright notice to be included on the program and assign responsibility for registering copyright with the U.S. Copyright Office and enforcing copyrights in the program.
Fees, Revenues, Profits. If payment of money between parties is involved, as in funding agreements or coproduction agreements, what are the milestones or deliverables which will trigger payments? How much will be paid upon delivery of production budgets, production schedules, scripts, rough cuts, fine cuts, finished programs (including residual summaries, music cue sheets and music synchronization licenses)? Will revenues or profits received from distribution be split? Will certain expenses be recoupable before revenues are shared? If more than one program is involved, will costs incurred be cross-collateralized against revenues received from other programs? Will only net revenues be shared? How is net to be defined? Adequate financial reporting is essential to assure profits are shared or royalties are paid according to contract. Although it is not without cost, make sure you get the right to audit the books of the party responsible for collecting revenues to be shared with you.
Credits, Residuals, Music Cue Sheets. What on-screen or on-air credits will be accorded the parties involved in the production of the program? Distributors of the program will want assurance that they can rely legally on the credits included in the program provided by the producer. Who will be responsible for the payment of any residuals or participations due to talent, musicians, directors, music publishers or others as a result of revenues received from exploitation of the program in other media?
Distribution Rights. How will distribution rights and territories be divided? Among the rights that should be considered are theatrical rights, terrestrial broadcast (including cable and satellite re-transmission), direct broadcast satellite, basic cable, pay-cable, pay-per-view, video-on-demand, home audio or video (including cassette, CD, videodisc and DVD), on-line rights, interactive media (CD-ROM, video games), book publishing, merchandising, and, again, all other distribution rights or uses in any media or using any technology now known or later devised. Geographical territories can be divided to meet the needs of the parties. Be aware that distribution in some countries will require adherence to the laws and regulations of those countries.
Publicity And Promotion. It is important to secure the right to advertise, promote and publicize the program and to use excerpts of the program to do so. You may also want the agreement of talent to make promotional appearances.
Insurance. Contracts may call for production insurance, comprehensive liability insurance and insurance omission to cover any liability or loss incurred during production and to cover other expenses. Insurance also protects the producers’ considerable investment.
Representations, Warranties, and Indemnification. Producers or licensors of programs are expected to make certain representations and warranties about the program and its content. Issues covered usually include privacy, copyright, defamation, program rights, the authority to enter into the agreement, tax liability, rights to musical compositions, payments of residuals, outstanding liens or encumbrances. The agreement should also include provisions whereby the parties indemnify each other against breaches by the other.
Term. What will the term of the agreement be? If a program is being licensed, will the term of the agreement coincide with the term of rights to the program? How many uses of the program are licensed during the term of the agreement? Is an option to renew desirable?
Termination. Understandably, parties negotiating a deal are not as interested in thinking through what might happen in the event of termination. While events may sometime dictate what will happen when an agreement is terminated, it is critical that the parties try to anticipate what they would prefer. Sometimes the remedy you want can be fairly straightforward. If a program is being licensed for distribution and the distributor breaches the agreement, the license can simply terminate. The situation is more complex in a production contract. What happens to the materials produced to the date of termination? Will the non-breaching party be given the right to complete production? In that event, will the breaching party be entitled to any share of net revenues thereafter? Does copyright ownership vest in the non-breaching party?
Miscellaneous Provisions. There are a number of so-called ‘boilerplate’ provisions that should be included in any agreement, including provisions addressing the severability of the provisions of the contract, notices to be given under the contract, the need to execute additional documents to effectuate the terms of the contract, governing law, dispute provisions (choice of courts, arbitration, mediation), the rights of parties to assign their rights and obligations under the contract, relationship of the parties (i.e., independent contractors), and the survival of certain provisions of the contract even after termination or expiration of the agreement.
This overview is intended to remind producers of the some of issues that should be addressed. Each deal is different and requires an agreement suited to the deal.
© 1998 Paula A. Jameson. All rights reserved worldwide. Paula Jameson is a partner in the Washington office of Arter & Hadden. She is the former Senior Vice President, General Counsel & Secretary of the Public Broadcasting Service and former House Counsel and Director, Legal Department of Dow Jones & Co., Inc.