Sometimes an opportunity comes to you that isn’t immediately lucrative. For whatever reason, the people behind the project don’t have a budget that will cover the cost of bringing the project to life. So what do you do? Do you pass on it, take less money, or work out a deal that has back-end appeal should the project generate income?
Every deal is different. Sometimes it’s best to pass on the project, but sometimes, passing on the project is one of the worst things you could do.
Over the years, I’ve heard countless people shout, “Show me the money!” If there isn’t enough money in it to hold their interest, they opt out. That’s fine. In fact, i don’t believe that anyone should ever do anything for “exposure.” After all, it’s in the news all the time: people can die from exposure.
“If you believe that,” you may be asking yourself, “why are you writing about projects that don’t have budgets that cover all aspects of production?”
Let me share a story with you about a movie that was made 35 years ago. The movie didn’t have much of a budget and Universal Pictures had very little hope that it would be any kind of success, much less generate enough income to cover the costs associated with filming and distributing the film. The director was told by Universal Picture to secure a big name actor for the movie since the rest of the cast was made up of unknown actors and one comedian with television following that had built up over a three years.
The budget for the movie was $2.5 million USD … a paltry amount even by 1978 standards.
The director approached the big name actor who eventually signed on to the project. Originally he was offered 2.5% of the film’s profits plus $35,000 USD.
Then he was offered 15% of the gross receipts plus $35,000 USD.
Out of friendship for the director, the big name actor acquiesced and agreed to do the movie for $50,000 USD for 2 days’ work … to be paid up front before he stepped in front of the camera. He passed on the points and percentages.
The movie was made. The movie was released. The movie earned over $141 million USD at the box office and on home video. The movie became one of the most profitable films in the history of movie making.
And to think that Donald Sutherland could have raked in (15% of $141 million USD) just a shade of $12 million PLUS his $35,000 acting fee if he’d agreed to 15% of the gross receipts to be in “Animal House” with John Belushi of SNL fame, Kevin Bacon, Stephen Furst, James Widdoes, Karen Allen, Tim Matheson, Peter Riegert, Stephen Bishop, and others. Even the director, John Landis, acted in the movie (he played the part of the uncredited cafeteria dishwasher).
To be perfectly clear here, I’m not suggesting for a minute that anyone should jump at the chance to get involved in an under-budgeted project with the hopes that it will generate millions of dollars.
What I am suggesting is that if you want to be involved in an under-budgeted project, then you should consider having warranties, indemnities, negotiations, buyouts, escalator and reversion clauses. If the people behind the project are serious about having you work with them on their project, they’ll be open to options.
1. Warranty that the materials you provide to the people behind the project are materials where you either hold the copyright or you have cleared the copyright for use in their project.
2. Indemnify against a breach. Don’t ever agree to indemnify against a claim or an alleged breach. That way you won’t be left holding the bag if there’s a claim or an allegation that the people behind the project decide to settle out of court.
3. Do not agree to an assignment of copyright, but rather agree to an offer to license your copyrighted materials. Retain mechanical sales royalties, broadcast mechanicals royalties, and any other royalties to which you may be entitled. Just because someone is at the top of the project pyramid, doesn’t mean they know what you’re entitled to as an independent contractor. And don’t be fooled into believing anyone who says their lawyer(s) know what he/she/they are talking about in trying to leverage this into getting you to sign a contract without proper legal representation you’ve retained for yourself.
4. Make sure that if you agree to a buyout license, that there’s a reversion clause tied to it. This clause allows the project the freedom to use your work in different ways for a set time for a set amount of money, after which (thanks to the reversion clause), all rights revert to you.
In the end make sure that you have a lawyer you’ve retained to go through a contract that’s handed to you OR have a lawyer draft a contract that you can hand to others with whom you’re negotiating.
One last point needs to be made here, and it’s one that needs to be heeded at all costs.
If a prospective client hands you a contract with retrospective terms included, put the contract down, back away from the prospective client, turn and get out of there right away. usually such a contract is handed to independent contractors once the work has been done and the invoice has been handed in. The claim is usually that they can’t pay the invoice until you’ve signed their contract.
Because you already have a signed legal document known as a contract, you’re entitled to be paid in accordance to the terms of that signed legal document. A retrospective contract hopes to make the terms of that contract void and nullify the terms of the signed contract, which puts all the power and control over your work into the hands of the people behind the project.
Simply refuse to sign the retrospective contract (but take a copy with you) and upon leaving the premises, contact your lawyer.