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First Things First:

Why You Should Always

Enter Into A Collaboration Agreement

By Jesse Rosenblatt, Esq.

I can’t tell you how many times I’ve seen someone in a legal mess because they didn’t enter into a collaboration agreement before starting their project. This information isn’t new, but it’s so often overlooked that I feel it’s worth covering again. Hopefully the information below will resonate with you so that moving forward you can avoid often costly mistakes. The most important thing to be taken away from this article is the following:

When collaborating with someone on a project (e.g., a script, book, song, etc.), always have an experienced entertainment lawyer craft a written collaboration agreement which all parties sign before any work on the collaboration begins!

Just taking this simple suggestion can save you a ton of potential headaches throughout your career. Don’t delay.

What Is A Collaboration Agreement?

Briefly, a collaboration agreement is a contract entered into that spells out the specific terms and conditions of the parties’ working relationship, including, the disposition of the completed work, allocation of responsibilities and division of revenues derived from the exploitation of the work. Simply stated, the collaboration agreement clarifies the nature and scope of the relationship, including the ownership, business and creative controls over the work that’s jointly created. Think of it as a prenuptial agreement for creative collaborators, because just like marriages, unfortunately many collaborations end in separation, if not outright divorce.

The provisions of a collaboration agreement typically cover things like:

Ownership Percentages In The Work (e.g., Is It 50%/50% Or Some Other Allocation?)
Specific Responsibilities Of Each Collaborator
How Are Monies Received In Connection With The Work Disseminated? (e.g., In What Percentages?, How Are The Collaborators’ Expenses Dealt With?, etc.)
What Happens If One Collaborator Withdraws For Any Reason? (e.g., Can The Other One Continue Working To Finish The Project?, May The Remaining Writer Bring On Another Collaborator?, How Are The Ownership Percentages Revised As A Result?, etc.)
How Will The Collaborators Be Credited In Connection With The Work?
Are The Collaborators Members Of Any Applicable Guild/Union?

What Happens If The Parties Have A Disagreement? (e.g., How Are Disputes Resolved?, Will There Be A Third Party Who Resolves Them?, If So, Who Is He/She Or How Will He/She Be Selected?, etc.)
How May Rights In The Project Be Disposed Of? (e.g., Does This Require A Unanimous Decision?, May Either Party Dispose Of Their Own Rights Or Even All Rights?, If A Collaborator Wants To Dispose Of His/Her Interest, Does The Other Collaborator Have The Right To Block The Sale (Or A Right Of First / Last Refusal)?, Is Any Third Party Authorized To Dispose Of Rights On The Collaborators’ Behalf?, etc.)

Without a signed collaboration agreement in place, questions may be raised about the ownership and control of the work, as well as the ability to dispose of any rights in the work. It is also vital in determining what happens in the event that the collaborators separate for any reason.

Forms of Collaboration

Collaborations can take many forms, even ones that you may not intend. The two most common forms of collaboration I see are:

Two People Intentionally Collaborate From The Beginning Of A Project

This is exactly what it sounds like. You and another writer come together to create a single collaborative work and the presumption (in the absence of a collaboration agreement to the contrary) is generally that 50% of the work is owned by each of you and that both of you will share equally in any revenues from the project.

This is all well and good, assuming both parties share the same expectations about each facet of the project. However, once there’s a disagreement, a standstill or one collaborator wants to walk away for any reason, problems begin, often leading to a stalemate which freezes the project indefinitely. At that stage, unless both parties can find a way to reach an agreement with respect to each other’s rights and obligations going forward, there is often no way to proceed effectively to finish or exploit the work.
A Solo Writer Inadvertently Lets Someone Become A Collaborator In Their Project

This can happen in a variety of ways. Letting a friend casually contribute notes/suggestions/additions/alterations, etc. to your work can create a collaboration. Incorporating a producer’s (or other third party’s) notes when conducting a rewrite can create a collaboration.

As just one common example of how this may play out, let’s say a producer is interested in your screenplay. The producer may say that they want to see a rewrite from you before deciding how they want to proceed, and, to shape the project more to their liking, the producer contributes notes/suggestions/additions/alterations to your script. Once you incorporate those notes, you have inadvertently given that producer a rights interest in your project.

Now, even if that producer elects not to option or purchase your script (or if they option it but don’t ever exercise their option), technically that producer still has rights in your material, since you incorporated and expressed their ideas in your work. There’s now the potential that if you want to option/sell your script elsewhere, this producer may fly in (often out of nowhere once they get wind of your impending deal) and demand to be compensated for their work and/or involved in the project somehow.

Whatever the case, once someone’s intellectual property finds its way into your work, that collaborator has an argument that they have an ownership interest in your project. This dilutes your absolute interest in your own work and can potentially inhibit your project from ever seeing the light of day. If a third party is excited by your work and anxious to make a deal with you, it can be problematic (and potentially expensive) to have to seek out a signed document from your collaborator granting you all of their rights. It’s also unlikely that the excited third party will wait around while you sort things out and negotiate with your collaborator. Without the ability to grant 100% of the rights in your project to a third party, you may have great difficulty finding anyone willing to offer you a deal.

What Can Go Wrong If You Don’t Have A Collaboration Agreement In Place?

Without a signed collaboration agreement in place, all of your efforts may be lost down the road if you’re unable to come to a resolution with your collaborator and your project is stuck in limbo. Your collaborator may have the ability to veto any of your decisions, since by default, sharing equal control means decisions about the work must be unanimous. There’s even the potential that the project may end up involved in a litigation if you or your collaborator wish to salvage it. In any case, the time and money spent up front to sign a collaboration agreement which addresses and provides ways to avoid these issues is almost always a preferable alternative.

To avoid the majority of issues that may arise among you and your collaborator, it’s a great idea to sit down at the beginning and negotiate all of the terms of your collaboration agreement. This will force you to discuss each element of your working relationship and to make sure that if there are any differences in your expectations, you are aware of them before the collaboration starts. If for any reason you are unable to reach a resolution on any facet of your relationship, you can step back and rethink working together before any work is done. This saves you wasting a lot of time and energy working on a project with someone only to learn much later that there are differences of opinions as to how things should proceed. Once tempers flare over disagreements, it becomes exponentially harder to reach a resolution on any matter.

For the record, there are places online or in books where you can find forms or sample collaboration agreements. I strongly recommend you avoid using them. Each project has its own set of circumstances which can lead to different terms and arrangements. An experienced entertainment lawyer should be able to assess the issues between you and your collaborator(s) and, in a relatively short period of time, craft an agreement that spells out each party’s expectations and obligations. The cost for the guidance of such an attorney is a small price when compared with the potential costs (financially and emotionally) that might arise from your project being blocked from proceeding, whether as a result of an informal disagreement or costly litigation.

Once a well-crafted collaboration agreement is in place, you can freely proceed on your collaboration with a clear conscience, knowing that if for some reason things go awry, there is a mechanism in place to sort things out and permit you to part ways in a reasonable manner. This should save you any time second guessing what your collaborator is thinking or expecting.

If you would like further information on collaboration agreements or would like someone to prepare one for you, please feel free to contact me at any time. I wish you all the very best of luck for your ever-increasing success!

Jesse Rosenblatt is the founder of the Law Office of Jesse Rosenblatt, an entertainment law/consulting firm servicing corporate and individual clients across all segments of the entertainment business. He has over 10 years experience working and negotiating with many of the most powerful players in the entertainment industry.
For more information, please visit www.jesserosenblatt.com or contact Jesse at jesse@jesserosenblatt.com.

© 2009 Law Office of Jesse Rosenblatt, PLLC. All rights reserved. This article contains information of a general nature that is not intended to be legal advice and should not be considered or relied on as legal advice. Any reader of this article who has legal matters involving information addressed in this article should consult with an experienced entertainment attorney. This article does not create an attorney-client relationship with any reader of this article. Law Office of Jesse Rosenblatt, PLLC does not represent or warrant that this article contains information that is true or accurate in all respects or that is the most current or complete information on the subject matter covered.

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Seeking The Magic Number
by
Jesse Rosenblatt, Esq.

A burning question on any first time writer’s mind is – “How much will I get paid for my feature film screenplay sale?”

It’s a valid question, though a difficult one to answer. You’ve spent months, maybe even years, writing your script. You want to get paid! And you need to make sure you’re protected and don’t sell yourself short. Often times, writers are willing to forego monetary compensation in exchange for the hope they’ll receive credit on a completed film to help launch their writing career. While I certainly understand that perspective, and in some cases it’s a valid point of view, please remember – if others are getting paid well for their contributions to the project, you should too. Every great film starts with a great script.

I want to make clear that the typical structure of a screenplay deal is not an outright purchase but rather an option/purchase agreement. Let me briefly explain what this is for those of you who are unfamiliar with the concept: an option/purchase agreement is one where the prospective buyer (a producer, production company, studio, etc.) agrees to pay you some money (generally 10% of the potential purchase price or less) in exchange for a period of time (typically called the “option period”) where your script is off the market and the producer can develop it. At any point during this time period (which is often a year), they may decide to exercise their option to purchase your script and acquire all your rights in it. This generally means they must pay you the full purchase price set forth in the agreement less the amount of the option payment you’ve already received.

Rather than discuss these option/purchase agreements (a topic deserving an entirely separate article), I’m just going to focus on the actual purchase price amount for your existing screenplay (not one you’re now being paid to write or rewrite).

There is no universally applied standard for the purchase price of your screenplay (although you may use the WGA – Writers Guild of America – Minimum Basic Agreement as a guideline, whether you’re a member of the WGA or not). The amount you will receive for your first feature film screenplay sale will vary from project to project. There are several factors to consider, including:

•   the demand for your script;

•   who the writer is (taking into account whether the writer is in the WGA, the writer’s stature in the industry including his/her track record, etc.);

•   the anticipated budget level of the film;

•   if the script is based on any other underlying material;

•   who the party producing the film is; and

•   how many writing elements/steps the purchaser will require you to deliver (e.g., a treatment, a first draft and subsequent drafts, rewrites and polishes.

1) Fixed (or Flat) Purchase Price; WGA Minimums

For a writer seeking their first script sale, practical realities and other issues may lead smaller production companies to seek to buy your screenplay for a purchase price as low as a few thousand dollars. Whether or not to accept such an offer depends on your assessment of who the party making the offer is and your confidence in your ability to find another buyer willing to offer more.
If the party seeking to acquire your script is a mini-major or major studio/production company, you can expect the purchase price they’ll pay you should be at least WGA scale (e.g., the WGA’s stated minimum for its guild members), even if you’re not yet a WGA writer.

If you’re a member of the WGA, the union spells out mandated minimums to be paid for the purchase price of a screenplay by guild signatory producers.

These prices currently fall between about $40,700 (for low-budget productions – i.e., less than $5,000,000) and about $113,600 (for high-budget productions – i.e., above $5,000,000).   The WGA minimum schedule can be reviewed at
        http://www.wga.org/uploadedFiles/writers_resources/contracts/min2008.pdf.

2) Purchase Price Tied To Production Budget

On projects set up with well established production companies or studios, often deals for screenplay purchases are done as a percentage of the budget, rather than a flat or fixed amount. So, you may expect to receive a purchase price equal to around 2.5% – 5% of the “in-going production budget” (which is typically defined as the final budget number for the film, including above and below-the-line items, less a bunch of costs, such as overhead, completion bond fees, contingency, interest, bank/financing charges and any contingent compensation). But if you try and apply this percentage of budget approach to a low-budget feature, the purchase price amount you come up with may just seem too low (for example, for a $750,000 feature, the screenplay purchase price at 2.5% of the budget would be only $18,750 – over $20,000 less than the WGA minimum).

The purchase price is often further refined with a stated “floor” amount – maybe $25,000 – and a “ceiling” amount – maybe $150,000 – so there is a fixed minimum and maximum the purchaser knows they’ll have to pay and you know you’ll receive. The idea here is that the studio or production company is protected from overpaying and you are protected from selling your script for a price that’s too low (so if the film becomes a major production with a much larger budget, your compensation will increase accordingly).

As a general rule, no more than 5% of a production’s total budget is allotted to acquiring all of the underlying literary properties (though in the case of very low-budget or very high-budget productions this percentage may not apply). This budget item must cover the payment for any books, articles, etc. on which the script is based, as well as all payments to all writers for the initial screenplay and any subsequent drafts, rewrites, polishes, etc. As a result, the production company must be mindful that if the “ceiling” amount is too high, this may be a hindrance in getting the movie made (since this line item in the budget will be too costly). So the purchaser will generally do their best to keep the “ceiling” amount as low as possible.

3) $__________ Against $__________

I’ve also heard it said from time-to-time that the “typical” range for new writers selling their first screenplay to an established production company or studio is $100,000 “against” $250,000 (but obviously take that with a grain of salt, particularly based on the current economic climate in the industry). This means you get paid a guaranteed fixed fee of $100,000 for your screenplay drafts (including the original draft delivered, and any additional writing steps included in the option/purchase agreement), though this fee may be actually payable in stages, with a chunk upfront and the remainder upon starting/completing writing steps. Then, only upon some condition taking place (which condition will be stated in your option/purchase agreement), you would get the other $150,000, which is often referred to as a production bonus. The condition triggering this production bonus payment is usually one of the following:

•   the film going into active development;

•   the film proceeding to production; or

•   you being the sole credited writer on the final produced film (though in this case, if you receive shared credit, you would typically only receive half of this amount, or $75,000 in my example).

The reason the production companies and studios like these structures is that they purchase many more scripts than they actually ever produce and so this protects them from overpaying for material that ends up unproduced.

4) Purchase Price As It Relates To Writing Services – Which Amounts Are “Applicable Against” The Purchase Price?

In the event that you are negotiating not only a screenplay option/purchase, but also the terms for you to render additional writing services on the same project (e.g., additional drafts, rewrites, polishes, etc.), these may be negotiated at the same time (though the terms of each may appear in separate agreements). That said, you will need to negotiate which writing services are required from you and which optional writing steps the purchaser may elect to require from you down the road. Whatever the case, it is always important to make sure you know which of your writing steps are going to be “applicable against” your overall purchase price. This means that the purchaser will deduct the payments for those writing steps from the overall purchase price – so when you receive your purchase price, it will be less than the amount originally stated, since you’ve received additional sums along the way as you complete writing services).

As a rule of thumb, optional writing steps are almost always applicable. But once you go beyond the required steps and optional steps set forth in your agreement, if the purchaser asks you to render further writing services, you must make sure the payments for these steps are not applicable against your overall purchase price (because otherwise, you could be in a position where you cap out and working more does not yield you any more money).
Sometimes, a purchaser will request a writer enter into an “all services deal” once the film heads into production – meaning the writer is paid a flat payment which covers all required writing services from that point forward until the film is released. These should never be applicable against your purchase price and you should make sure some limits are placed on them so you are not stuck writing for ages if the project is dragged out.

5) Contingent Compensation (or “Back End”)

In addition to the purchase price, you can also hope that your option/purchase agreement will entitle you to contingent compensation in some form, often referred to as a “back end.” It is not uncommon for a writer selling their first screenplay to be entitled to an amount equal to 5% of the producer’s “net profits” (or however else this concept may be defined by the party purchasing your script). This may drop to 2.5% if you receive shared credit on the finished film. Be aware that your agreement will likely grant you a percentage of the limited pool of “net profits” received by the producer rather than those of the film production as a whole.

Generally, “net profits” are monies leftover after the producer (or the production company or studio producing the film) deducts all of their expenses (whether actually paid or not). The list of deductable expenses is quite lengthy and frankly, most writers believe that you will never receive a penny from your “net profits” allotment.

In an effort to give yourself the best shot at ever seeing some money from this, I suggest you try to tie the definition of “net profits” in your agreement(s) with the same definition in the agreement of the producer and/or director, since they will likely have greater negotiating leverage based on their past precedent. The above approach is often referred to as a “favored nations” or “most favored nations” definition, whereby your definition is ‘tied’ to that of someone else (usually the producer). This way the pool of money from which you all may receive contingent compensation will be defined, calculated and paid the same way. Since production companies/studios have several negotiated versions of the same definition for “net profits,” you want to do your best to protect yourself from getting gypped out of money (if any is actually left after permissible deductions) which other above-the-line personnel receive.

If you’re feeling confused by all of this, you’re not alone. I urge you not to try and parse through these concepts without an experienced attorney at your side. In the event that your definition is not as beneficial as it should be and your script turns out to be a blockbuster film, this could potentially cost you millions in the long run.

In addition, you may try to negotiate additional compensation in the form of box office bonuses, which only become payable if and when the film hits certain threshold levels of theatrical box office gross receipts. In some cases, you may even be able to negotiate a bonus which is contingent upon budget level (so if the budget ends up exceeding a certain amount, you’d receive additional compensation).

In conclusion, there’s no easy way to answer the question posed, since the amount paid for any screenplay is totally determined on a case-by-case basis. Armed with the information I’ve outlined above, and hopefully a great lawyer, manager and/or agent, you’ll reach an agreement and sign a contract for your first screenplay option/purchase. Congratulations!

Going forward, the amount of your compensation from this (your most recent agreement) with be referred to as your “quote.” The next question you’ll call to ask me is “How can I raise (or “bump up”) my quote?” Generally, as your career builds and you work on more projects, your quote should grow organically with each new deal. But three common ways to help speed up the process are:

•   Have one of your screenplays green lit so the film proceeds into production and you receive credit on a completed film;

•   Attract heat by selling a pitch, treatment or spec script (e.g., one written on your own with no impending buyer ready and waiting for it) in a “bidding war” where there are multiple interested parties; or

•   Receive screenplay credit on a project that nets awards or has an impressive performance at the box office.

You should now have some parameters by which you can gauge your expectations. But remember, you’re a writer, not a lawyer/manager/agent – so make sure you surround yourself as early as possible with experienced and capable representation who will make your career and your success a priority. You want a team with integrity who can fight for what’s in your best interest – but only after first trying to reach a mutually amicable agreement. And let them handle all the heavy lifting. You should never try to negotiate the terms for your agreements on your own. It’s your job to write and be seen as the friendly creative force – not the negotiator.

I hope you found this helpful for providing some context to your question. I wish you all ever-increasing success!

Jesse Rosenblatt is the founder of the Law Office of Jesse Rosenblatt, an entertainment law/consulting firm servicing corporate and individual clients across all segments of the entertainment business. He has over 10 years experience working and negotiating with many of the most powerful players in the entertainment industry. For more information, please visit: www.jesserosenblatt.com