The Production Contract

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Once you have done a realistic budget breakdown, you are in a good position to negotiate or finalize your contract with the sponsor. You may have made an informal agreement with them, but it's better to have a short memorandum in writing that records the basic terms of the agreement. This is much safer in the long run. It's also wise to exchange contracts before you begin shooting, though a surprisingly large number of people plunge into the film on the assurance of a mere handshake. I wouldn't unless I knew the sponsor extremely well or unless there was some compelling reason for starting in a rush, such as a necessary but onetime film event. And remember one essential rule: This is a negotiation process, and you get what you bargain for.

As I mentioned earlier, you may be dealing with the production contract before script or after script. In the following discussion, I am assuming that the script has been approved and paid for and that we now need a production contract to enable us to go ahead. This may run to three pages or thirty, but in reality, there are only a few points to consider, with all the rest being elaboration. I have set out below the main elements of most contracts and have tried to bring to your attention some of the points that you should consider in detail.

Definition of length and purpose. The contract will generally define in its first few paragraphs the kind of film you are doing, its object, its maximum length, and the gauge in which it is being shot. So it may read, "This is a one-hour, 16mm color film on the treatment of deafness for use in specialist schools," or it may say, "This is a half-hour videotape on frog jumping for educational television." These first few paragraphs may be surrounded by "whereases" and "wherefores," but that's just legal jargon that you need not worry about. The main thing is that you understand clearly what you are contracting to deliver.

Time and manner of delivery. The sponsor will try to get you to commit to a specific delivery date. Here, you have to be careful because of the immense number of things that can go wrong, causing you to miss the deadline. I prefer to put in a definition of intent rather than commitment: "The film maker will endeavor to deliver the film by such and such a date," or, "The filmmaker understands that the film is due for presentation on 15 July 2003." Avoid being penalized for late delivery. This is important, since even with the best intentions in the world, there may still be delays. Normally, the sponsor understands why the film is delayed and is sympathetic, but not always. So watch out.

The contract may also specify how many prints are to be delivered. I usually designate one, with any others to be paid for by the sponsor. I also ask for the CRI (the combined reversal internegative, used in making multiple prints) to be paid for by the sponsor.

If you are doing a videotape, the sponsor will probably require not just a VHS or three-quarter-inch cassette but a one-inch or a beta master. You should also double-check whether copies have to be delivered in any foreign formats such as PAL or SECAM, if you are working in the states.

In some contracts, the sponsor asks for all the rushes and the negative to be handed over at the conclusion of the film. This is fine in most cases, but if you have film that may be valuable in the future as stock footage, then try to hang on to the negative.

Personal responsibility. Some contracts may demand that certain people do specific jobs; this usually concerns the writer and the director. The clause is fair enough, especially when the film is the very special baby of one of those two. However, you should allow yourself an escape hatch in case of unforeseeable factors such as illness.

Film cost and payment schedule. The agreement should state clearly both the overall sum that the sponsors will pay for the film and the times of payment. In most cases, payment will be made in stages, and you should try to ensure that those payments come at convenient times. A typical payment schedule on a $100,000 film might look like this:

1. $10,000 on signing the contract

2. $10,000 on script approvals

3. $30,000 on commencement of shooting

4. $20,000 when shooting is completed and editing starts

5. $10,000 on approval of fine cut

6. $10,000 on completion of mix

7. $10,000 on delivery of print

Sometimes the number of stages is reduced to only three or four, which might be (1) signing the contract, (2) commencing shooting, (3) approval of rough cut, and (4) delivery.

One vital matter is to try and get the contract signed and some money paid before script approval. Unless you do this, the sponsor can hold you over the barrel with his approval, asking for more and more script changes before a contract has even been signed. This means in practice that you are doing a tremendous amount of work without any formal guarantee or agreement, and the tension will drive you crazy. Here, I talk from bitter experiences, having suffered through six drafts of a 110-page script for German television before the contract was signed. A good rule is first the signatures, then the work.

There is, of course, a rationale behind the timing of the payments: You should have all the necessary money at hand when you need it. Your big costs are going to be shooting and editing, so you need money in advance to cover these stages. You also need money for your own salary and living expenses; hence, I like to receive about 20 percent by the time the script is approved.

One common bugbear is the sponsor who procrastinates on approvals. This can happen on approval of the fine cut or of the final narration. Unless you are careful, you can find yourself in an exasperating situation, waiting weeks for payments while the sponsor plays around with small changes. One way around this is to put in specific dates as well as film benchmarks for payment. Thus, you could specify payment of ten thousand dollars on approval of the fine cut or on February 5, whichever comes earlier. The sponsor may or may not agree with this point, but it's worth battling for.

Can you ask for extra payments besides the principal sum? No. The contract usually stipulates a total fee for the delivery of the film, and once that sum is on paper, that's it. Hence the importance, as I have stressed before, of very accurate budgeting.

If I am doubtful about the number of shooting days or if the sponsor argues for the inclusion of something that I am not sure about, I try to put in a clause covering additional payments. The clause might read, "The sponsor (the TV station) will pay for any additional days shooting at the rate of one thousand dollars per day and will also pay for any film stock used on that day at cost." I am not fond of this kind of additional clause, and neither is the sponsor. But sometimes it may be the only way to safeguard your neck and your pocket.

For videotapes, you have to watch very carefully to see if the sponsor wants you to employ all sorts of cute video effects. They may, as I have mentioned, turn out to be horrendously expensive, and you want to be sure your contractual sum covers this. If you think the sponsor may suddenly suggest to you the idea of high-cost DVEs (digital video effects) when you are nearing the end of the film, then protect yourself with an item regarding extra payments.

Approvals. The contract should stipulate someone who can act as the sponsor's agent and give approval at various stages of the film. Try to make sure this is someone who understands the film and whose judgment you value. In most cases, the person giving the approval is the person with whom you have been dealing from the first discussions of the film, but not always. Sometimes the sponsor decides that some top executive has to give approval. From then on it's all a matter of luck. Get somebody who is intelligent and sympathetic and understands a little about film, and you're home safe. Get the opposite — and it happens — and you're in trouble. So keep your fingers crossed, or better, insist that the person giving approval is someone you know.

Insurance. I have listed insurance as an item in the film budget itself and one of the responsibilities that you, as filmmaker, have to take care of. Sometimes, however, you can get the sponsor to take care of insurance or at least to share responsibility. Many companies and television stations have insurance policies that may cover your filming. Your task is then to make sure the company includes your film on their insurance list. Even if that is not the case, the sponsor may have so much at stake in your film that it will take out insurance on the film itself, up to the making of the master. This will still leave you to insure crew and equipment, but it will save you quite a lot of money.

Ownership. The best position is for you to try and own the film. You need to establish from the start what rights you have in the film, and ultimate ownership is best. Contrariwise, the TV station will usually try to ensure that they own the film because, of course, it's worth money. Even though you are the contracted producer-director, you may be able to argue that the sponsor should share eventual ownership with you. There are also questions of ancillary rights and extra payments for foreign sales. The Directors Guild of America, for example, has stringent clauses regarding residuals that directors must receive on certain distribution deals relating to their films.

If you enter into a coproduction deal with a PBS station, then the station itself will probably have a standard contract. This usually calls for joint raising of the production funds, for an equal share of the profits, and for each PBS member station to show the film four times within three years.

Miscellaneous contract clauses. The above items take care of the most important points, but there is no limit to the things people will dream up to put into a contract. So what else can arise?

Contracts are drawn up by lawyers who try to protect their clients from every catastrophe, real or imagined. Their answer is to put in the necessary, the unnecessary, and then some. There may be a discussion of publicity. You may be asked to take stills. You may be requested to refrain from immoral conduct. You may be asked not to hold yourself out as an agent of the sponsor. You may be told that though the film is being made and edited in England, it will be governed by U.S. law. You may be told that all notices to the sponsor have to be written in red ink and hand delivered to the office before ten o'clock in the morning.

I have already stressed the points that are vital for you, the filmmaker, and they are covered above. As for anything else the lawyers write in, look it over carefully and try not to laugh at the more nonsensical points. Then use common sense. If you feel that an obligation is unfair, reject it. You may have to explain your objection at some length, but don't accept the clause just because someone has written it in.

Remember one thing: At this point, the sponsors want you to make the film as much as you do, so don't be afraid of arguing controversial points with them and looking after your own position. If you don't, no one else will.

Finally, if a lot of money is involved and you feel uneasy about your obligations or uncertain as to what you are really committing to, get yourself a lawyer—not one who merely sells real estate but one who understands something about the entertainment business. It's costly, but the advice will probably pay for itself in the end.

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  • Iona
    How to negotiate a contract with a sponsor and PBS?
    9 years ago

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