TEN PRACTICAL CONSIDERATIONS FOR

PRODUCTION COMPANY IN FILM CONTRACTS

Brian M. Rowland, Esq. ,-- www.brianrowland.com

1. CLEARANCE.
a. Distribution rights -- worldwide and in all formats known or yet invented.
b. Publicity rights of actors should be secured and be unconditional; perpetual and
worldwide. Must comply with unions. If adult film, must have sufficient proof
that actors are 18 or over and comply with any other applicable laws. Use of
guild and union personnel tends to insure a certain quality and level of
knowledge, use of such personnel may impose additional expense on the
production company with a resulting higher budget. Budgets for low budget
independently produced pictures are tight and may prevent employment of
guild and union personnel. The question facing the independent production
company then is whether the quality of the picture will suffer as a result of the
use of non-guild personnel.
c. Location rights (actual names, products, and locations from the appropriate
property owners).
d. Underlying materials; must secure rights in any material which is a contribution
to the film; e.g. music, art, trademarks, etc.

2. DIRECTOR AGREEMENT.
a. Secure services and quality level through cooperation, production schedule,
exclusive provision of services.
b. Work for hire and grant of rights in work product to Production Company, price
paid is price total and no additional fees or royalties to come due; should outline
payment schedules and any profit sharing (separate and distinct from royalties).
c. Indemnification from director for claims brought based on director. conduct,
negligence, failure to secure third party rights, etc.
d. Director to support promotional activities.

3. WRITER AGREEMENT.
a. Specifies how many drafts required.
b. Transfer of writer copyrights.
c. Credits to be given writer.

4. PRODUCER AGREEMENT.
a. Who actually produces.
b. Who receives credit.
c. Payment schedules for production.
d. Penalties if over budget or not delivered on time.
e. Indemnification from producer for claims brought based on its conduct,
negligence, failure to secure third party rights, delay damages, lost profits, etc.
f. Technical Specs of Film: requirements for film stock, videotape format, other
photographic needs. Editing requirements. Etc.
 5. FILM WEB SITE.
a. Secure the name as soon as possible to avoid those who learn of the project
“cyber-squatting” on the film name. Domains are cheap, pick up the .net, .us,
.org., .biz., etc, as well as the .com and prevent others from doing so.
b. Web site development agreement. Many development factors to consider,
primary issue to consider: work made for hire agreement to retain all rights in
artwork and other copyright material the web designer creates for the site.

6. FILM FINANCING.
a. Securities concerns: (1) the raising of funds wherein the investing (or lending)
party expects a return from the labors of another, is a security; (2) securities must
be either registered or exempt from registration; and (3) whether registered or
exempt, all offerings must comply with anti-fraud statutes. Securities are
governed by state and federal law. Violation of certain provisions of Florida’s
blue sky laws (Chapter 517, Fla. Stat.) is a felony. Investors have certain
rescission rights. Obtain competent legal counsel before raising any funds for a
film project! A securities offering is a serious task and preparation of offering
materials can cost between $10,000 and upwards to $30,000 or more.
b. Financier control – ideally, none. However, it may be a fact of life that a financier
wishes to oversee the project. This should be dealt with in writing.
Considerations may include whether financier has control or merely the right to
criticize and give input.

7. PRE-PRODUCTION AGREEMENT. Issues may include, “(1) creation of a production schedule,

including not only the period for principal photography, but also the period prior to
production (pre-production) -- and in some instances even the period prior to pre-
production (which is termed pre-pre-production) in order to avoid triggering
various obligations which may arise on the official start of pre-production -- and the
period following completion of principal photography (post-production) when the
picture takes its final shape through editing and the addition of elements such as
soundtrack, music and special effects; (2) the creation and analysis of a budget for
the picture; (3) the application for, and procurement of, a completion bond which
insures against the risk of the picture being produced at a cost exceeding the budget;
(4) general insurance requirements for the picture, covering not only general liability
and property damage, but also errors and omissions insurance which covers the
risks derived from the literary material on which the picture is based; (5) clearance
of the use of actual names, products, and locations from the appropriate property
owners; (6) the negotiation of an agreement, if needed, for the use of production
facilities; (7) any contracts required for physical components to be used in the
production of the film, such as lighting, wardrobe, and props; and (8) once the film is
completed, the copyrighting of the picture and any of its elements such as music.”1

8. ATTORNEY/CLIENT ISSUES.
1
Introduction to Motion Picture Contracts, KENOFF AND ROSENBURG, 1.01, 2007 Matthew Bender & Co.
a. Payment. The types of attorney-client arrangements range from payment on an
hourly basis to a percentage participation in the client's fixed and contingent
compensation from the production. Sometimes, a flat fee arrangement is worked
out. This often occurs when the attorneys' fees become a fixed line item in the
budget of the film. At the other end of the payment spectrum is profit
participation by the attorney. This is risky for the attorney, especially if the
production is never completed, or if completed, not distributed, the profit
participation may also result in the greatest remuneration in the case of a highly
successful picture. Flat fee arrangements are risky if the amount of services
required on an hourly basis greatly exceeds the amount of the flat fee. In order
to reduce this risk, some attorneys seek a hybrid agreement which combines a
lower flat fee with a small percentage (1%-2%) of contingent compensation from
the film. He lower the fee, the higher the “points” (percentage of revenue paid to
the attorney).
b. Ethical Issues.
i. Malpractice. Inexperienced attorney should be wary of malpractice as
this is a highly complex and multifaceted area of practice requiring both
considerable legal experience and industry experience;
ii. Excessive Fees. A new attorney may be charging an excessive fee if they
charge “industry standard” rates and have little or no experience;
iii. Conflicts of interest. Conflict Risk is greatest when the client expects the
attorney to represent the client in the transaction itself or when the
attorney’s financial interest otherwise poses a significant risk that the
attorney’s representation of the client will be materially limited by the
attorney’s financial interest in the transaction.
1. An attorney representing a party and taking a contingency fee
may be serving two masters. Contingency fee per se is not a
conflict, but it can create conflict if attorney is unable to properly
consult client due to greed.
2. Attorneys who represent actors or other artists have conflict issues
when (if) serving as agent and attorney. Difficult for attorney to
advise “client” as to propriety of an agreement or course of action
if attorney also earns a percentage as agent off of the client’s
proposed agreement or activity.
3. As agent, attorney may arguably be in business with the client
(depends on terms of agent agreement and duties of attorney) – or
at least, attorney has a financial interest. In entering such
agreements mere waiver of conflict of interest by client may not be
enough. Rule 4-1.8 of the Rules Regulating the Florida Bar,
provides that if the client is not represented by independent
counsel, the transaction and terms on which the lawyer acquires
the interest must be fair and reasonable to the client and must
be fully disclosed and transmitted in writing to the client in a
manner that can be reasonably understood by the client.
Comments to the Rule provide that not only should the client be
 informed in writing of the need for independent counsel, the
client should be informed as to why independent counsel is
desirable.
4. Other conflicts may arise when attorney represents corporation
but answers to individuals as officers, directors or managers of the
corporation. Film industry is big money, ego charged industry
and it is easy to forget who the actual client is.

9. EXPLOITATION.
a. Generally … a film is comprised of a variety of rights that may be exploited in a
variety of media, including theatrical, non-theatrical, network television, pay
television, syndicated television, home video, and foreign distribution. Certain
other rights, such as merchandising, may be separately exploited. Sometimes, a
single distributor is used to distribute the picture worldwide in all media.
However, careful consideration must be given to whether it is appropriate for the
same distributor or distributors should handle all media and all territories.
b. Merchandising. Consideration should be given to all the merchandising
possibilities of the characters and other elements in the film. Product placements
and commercial tie-ups may generate revenue. Another area of exploitation is
“novelization” of the screenplay, so an agreement with a publisher should also be
considered.

10. AUDIT RIGHTS. All contracts wherein one party entrusts another to account for
revenue and pay according to royalty rates or commissions must have audit rights
for the party expecting payment. Audit rights should last a number of years after
completion and should be written so that the party with audit rights may conduct an
audit on a reasonably frequent basis. Tip: If an audit shows an underpayment of a
certain amount (e.g. $5,000), then the cost of the audit shifts to the party being
audited. Audit rights should be specifically set forth in writing.