What Are Film Contracts?
Film contract are legally binding documents between independent filmmakers, studios, and third party companies. Contracts, including licensing and distribution agreements, are required for nearly all production, financing, and distribution arrangements. The right contractual agreement clearly states the obligations of each company to avoid disputes, disputes that are damaging to the production business and more importantly, to the film, which will not get made without settled disagreements.
Because of the complex nature of filmmaking, the film industry, which generally includes filmmaking, distribution, exhibition, marketing, and merchandising, is driven by contracts . For example, actors, directors, producers, and other personnel sign separate contracts for talent services to define the film company’s and the individual’s rights and responsibilities. Similarly, filming locations, production services, studio and shooting facilities are often contracted separately.
The same applies to distribution, which involves exploitation rights. A film is not considered complete until it has been marketed and exhibited to earn revenue through these rights. Exhibitions rights are included in production agreements, creating a distribution chain and value. The resulting contracts create the basis for pre-agreed working relationships, the most common being:
Components of a Film Contract
Regardless of the specific type of contract, most film contracts will include the following:
Parties: This portion of the contract identifies the parties involved in the project. In the case of an actor appearing in a movie, it may be the actor agreeing to act, as well as the film studio that is hiring him or her. An example of this would be the movie "The Expendables", which features many different actors who had to sign on to the movie as parties to the film contract.
Project Details: The next part of the contract will list out the specifics of the project. For the actor, this will include where the filming will take place, and when. It will also lay out particular details such as what the actor’s role will be, and what he or she is expected to do as part of it.
Compensation: This is a major part of any contract, and will determine what the actor is going to paid for their time and effort. In films, the negotiations about compensation can be lengthy and involved, as many times A-list actors demand exorbitant compensation packages. The contract should lay out when they will be paid, whether in one lump sum or installment payments, and under what circumstances they must be reimbursed for costs related to the film (such as travel).
Rights: This will outline how the film can be distributed (through theaters, video, etc.) and whether it can be shown in foreign countries, if that is part of the deal. Depending on the scope of the parties involved in the deal, this may also include the rights to the characters involved in the film or the story itself. For example, a contract with a set number of sequels may include a requirement to hire the same actor, or else they will regain the rights to the character they are playing, and therefore be entitled to make the sequels on their own. This has happened with some of the movies based on novels by Anne Rice, as she retained the rights to the characters even though they were based on her novels and turned into movies, unless the movies met certain requirements.
Different Types of Film Contracts
Contracting for the Future
We understand contracts are intimidating and sometimes complicated. This is especially true when it comes to film. Contracts can range from standard contracts which set the stage for limited filmmaking releases, that use very basic rights in the United States to contracts that are security interests in films. The reason behind all of this is that the United States protects intellectual property. Additional protections would be impossible if it weren’t for contracts. The purpose of a contract is to protect the maker’s rights. By protecting the creator’s rights you ensure you will be able to reap the fruits of your labor. Now, the creator is usually the writer, producer, director or actor, but in the context of this blog we will discuss the director. Directors have various contracts. Those contracts include:
- Producer-director agreement – Fundamental to the filmmaker’s (i.e. director’s) role is the contract that establishes the relationship between the director and the producers.
- Director-employer agreement – The second type of contract is the director-employer agreement. In this context, the director is an employee of the studio. This is the most common type of contract for directors in the United States.
- Director-agent agreement – The third type of contract is the director-agent agreement. As a general rule, directors are self-employed and provide their services to studios through their agent. This relationship is governed by contractual provisions.
- Director-publicity agreement – Publicity agreements are rare; however, when they are used, they are typically entered into by the director and the producer. The scope of the contract is broad, encompassing all forms of publicity, print and television commercials, poster promotions, and even personal appearances by the director.
There are many more types of contracts that pertain to directors, but for the purpose of this blog I focused on four of them. Each of the contracts helps to define the scope of what is required of the director and protects the director’s rights while still allowing the producer their time, and you the audience, exposure into the world of film.
Typical Legal Issues in Film Contracts
The most common legal issues that can arise in film contracts are disputes over intellectual property rights and breach of contract. When written correctly, intellectual property rights should remain with the creator of the work and be non-transferrable without the express consent of the creator. However, it can be unclear whether the term "non-transferable" applies only to the individual work or includes the expanded rights to derivative works, etc. Given the high stakes in film production, it should always be spelled out explicitly what is meant by non-transferable, and how the initial creator might retain future rights to his or her original work.
A breach of contract claim can arise when any party to the contract does something that is explicitly prohibited by the contract or, conversely, fails to perform something required by the contract. For example, if there is a contract between a producer and a talent agency to hire two actors in a film, this contract should not permit the producer to hire other actors for those roles without the express consent of the talent agency, and if such actors are paid more than those originally hired, this payment should come from the funds held for the producers, not be charged to the costs of the film.
Another area where filmmakers often find themselves at odds is in the cast/crew agreement. If an actor has a contract that states he or she will be paid $1 million for a role, there can be a temptation to pay the actor less money later down the line on the basis that the actor was required to perform extra duties like producers’ right hand. This contention might hold water, but would require careful analysis of the contract terms. In keeping with the example above, if the contract only requires the actor to perform in the film and to do so as a member of the cast, it will be much harder to claim he or she agreed to anything beyond this basic expectation. If the cast/crew contract is silent, the dispute could become unclear. Thus, the terms of the contract must be very clearly defined.
Negotiating a Film Contract
In order to ensure a positive outcome for all parties, it is in the best interest of the filmmaker to begin negotiations by establishing an agenda for the discussion, creating a list of negotiable points, and developing logical arguments for each point. Next, the filmmaker should be aware of, and frankly comfortable with, their own film financing and distribution plans. Relatedly, the filmmaker should have an understanding of the other parties’ financing and distribution plans. Anticipating possible concerns each side may have regarding the objectives of the other party allows one to be more proactive and prepared during contract discussions.
In negotiating a film contract, the filmmaker should be conscious of not promising to "fix" matters they did not cause. For example, if the distributor had originally committed to provide $100,000 in advertising and publicity funds to assure a national release but now the distributor is balking, the filmmaker may be able to convince the distributor to live up to its commitment by promising concessions other than money. Such a concession may involve agreeing to do part of the publicity work that the distributor was originally going to do, or doling out the money in installments instead of an up front lump sum.
Another strategy includes adjusting the rights granted to the distributor so as to align the distributor’s interests with that of the filmmaker. For example, instead of granting the distributor all territory rights, grant North American rights to the distributor , while retaining European rights for oneself to maximize revenues.
Filmmakers need to commit to being responsive to the feedback and suggestions of distributors from the very beginning of the contract negotiation process. For example, if the filmmaker is unwilling to bend on the fees that he will pay to the distributor to process and service the filmmaker’s film, the filmmaker has to come to the negotiation prepared to explain in a rational manner – without appearing defensive or territorial – his rationale for not negotiating this point.
After all parties agree to a set of terms and conditions, the filmmaker will need to sign an agreement in order to continue with the filming of the film. To reassure a fining party of the filmmaker’s good faith and seriousness, in the filmmaker should pay a non-cancellable, non-refundable deposit (which is usually partially applied to the filmmaker’s overall fees) of $5,000 or more to the filming party after all parties have signed this agreement.
The filmmaker should start negotiating the terms of a film contract in advance, be familiar with the types of terms and conditions they are willing to negotiate, understand the other parties’ financing and distribution plans, and be prepared to rationally explain to the other parties their reasons for not conceding on certain points. If done successfully, the filmmaker will be able to draft an enforceable agreement and will have a greater chance of success in the film industry.
The Importance of a Lawyer for Film Contracts
The most important asset a filmmaker has is the script. After the script, however, the filmmaker’s network of lawyers is the most important asset. On a film set, I often hear the phrase, "there’s no such thing as a movie without a lawyer." In indie and pro-ams, this may not be completely true (most filmmakers just press ahead without any legal advice at all). Having a great script will get you a lot further than having a lawyer (or having one-unfortunately indies generally don’t have much money to spend on lawyers). Filmmakers need to create a professional network, both for filmmaking and business affairs. A good lawyer may be able to make your vision work in the real world, or save you from bad decisions even an indie can’t afford. Should you have a lawyer review a contract? Absolutely. This sounds self-serving, but you don’t know what you don’t know. Anyone can look at a contract, but a lawyer is specifically trained to spot things that you, with your artistic mind, may not be looking for.
Having a good lawyer will save you money in the long run. No, it’s not going to be cheap. It may be a few hundred dollars (preferably on a "fixed fee" basis!). Even if a lawyer costs $1,500 to draft or negotiate a contract, it could save you between $5,000 and $100,000 down the line if your project goes sideways.
The bottom line? With respect to contracts, you get what you pay for. Check out a few lawyers before settling on one. Do proper research and testing. Ask other filmmakers (people who’ve actually used the lawyers). Ask anyone you respect in the industry. Do they like them? Not like them? Have they worked well together? Test the lawyers on a small project (it’s always nice to see their rates at work). Finally, do you feel comfortable with them? Do they speak your language? Stay away from lawyers who don’t speak English. Likewise, don’t hire academics whose ideas are never practical; they won’t be able to help a filmmaker look at the realities of a situation.
As with everything else in filmmaking, a good slate and a good lawyer is one of the main predictors of overall success.
Filmmaking in the Digital Age and Contracts
For many in the industry, the rise of streaming platforms such as Netflix, Hulu, and Amazon Prime has been a boon to production. As audiences become used to the convenience of on-demand content, the film community has been able to tap into a whole new segment of viewers. However, with these new opportunities also come new contractual considerations for filmmakers.
For example, the Netfix License Terms and Conditions document is a set of rules and conditions that governs how content owners and rights-holders, producers, and distributors can license their films to Netflix, a streaming service that allows subscribers to instantly watch a wide variety of movies and television series via the Internet on devices such as televisions, computers, tablets, and mobile phones. The document sets forth the terms under which Netflix can stream the content on its service, and includes provisions such as restrictions on how long Netflix can continue offering the content after the license period has expired, limitations on the number of copies of the content that Netflix can store on its servers, and requirements that Netflix catalog the content and meet certain technical specifications when making it available for streaming.
In the Netflix License Terms and Conditions, Netflix is classified as a "Digital Distributor" who in turn licenses the content to its customers. The Terms and Conditions also include warranties, representations, and indemnities that content owners and rights-holders must make to Netflix regarding the content, including warranties regarding ownership and licenses of the content, infringement, and collateral rights.
On one hand, participation in online distribution platforms can increase a producer’s revenue stream under the right circumstances. For each filmmaker, the decision will depend on the terms proposed. The key is to compare such a deal against all other available options.
Analysis: Successful Film Contracts
While there are certainly notable exceptions, the majority of successful films have contracts that reflect industry standards, address material issues and specific to the production in question (as opposed to being a template form). One such contract is the one entered into by Barry Levinson for the 1997 film Wag the Dog, where he received a net profit percentage from the "Adjusted Gross Receipts" of worldwide theatrical exhibition, home video rights and pay-per-view television exhibition. However, of note to this type of calculation, is that the settlement states that "[i]n computing net receipts, credit shall be given for the value of free and clear licenses on words, tunes and musical compositions contained in the Picture under syndication contracts with television networks . " As this language suggests, those agreements are factored into the computation of profit and share of revenues. A similar net profit structure was entered into by Robert Zemeckis for his 1997 film Contact, except that the contracts were devoid of reference to outside streaming rights and net profits are derived from domestic and foreign "Home Video Receipts" (net of all costs and expenses). Conversely, a contract entered into by Jerry Bruckheimer for 1999 Devil’s Own, while it did factor in income from commercials, cell phone caps, airline in-flight videos and video games, did not mention the rights to the Picture and music in all television media for home use or broadcast and franchising and merchandising rights.