Pet Peeves in Negotiating Entertainment Deals

I've edited a treatise on what to do when negotiating contracts in the entertainment industry. This article is about what not to do. What started me thinking about this was when an attorney insisted that an option contract between my producer client and his playwright client contain a provision that the playwright be invited to the opening night party. Then I started thinking about the other things that almost drive me over the edge when I am negotiating with other attorneys in our business.

When the relationship between the parties is just commencing, who in their right mind wants to even consider the possibility that the playwright and producer on opening night would be on such unfriendly terms that the playwright would not be invited to the party? And if the parties do have such a major disagreement, what playwright in his right mind would want to show up at a party where he would not be welcome? And how will the playwright's attorney enforce this agreement? Do you go to court to force the producer to invite the playwright to the party?

I have always said that if the response to an offer is so outrageous that it isn't in the ballpark, you can't respond to it. For the record, I told my producer client that I could not respond to the other attorney because the counter offer was so far out of reality. My client called the playwright and after speaking with him, the playwright was as upset as we were that his attorney would insist on his being invited to the opening night party that he fired his lawyer and the deal was made. The rapport between the playwright and my producer client is terrific, and the playwright will be invited to the party.

The playwright's attorney had also tried to reduce a not-for-profit theatre's share from 1.5% of the gross weekly box-office receipts to 5% of the net profits. The justification was that the attorney insisted that this was the standard. This is nonsense. Not-for-profit theatres that cause a play to become a commercial success share in the gross. Does it really make a difference whether Joseph Papp made “Chorus Line” a great success or some unknown, never-heard-of, theatre group made it happen?

The fact is that what is standard is based on precedent, is constantly changing within small limits and depends upon whose standard you are talking about. I am particularly troubled when the “standard” the other party is pushing is so outrageous that one cannot respond to it. For example, a payment of $5000 for a 1-year option to produce a play Off-Broadway is not standard and when someone tells me it is, I call his or her attention to the fact that a play can be optioned for Broadway for $5000 for 6 months.

Another example is that investors in plays expect certain things or they do not invest. An investor in an Off-Broadway play knows that if the play is any kind of success, he or she can expect the production company to end up with a 40% share of the subsidiary-rights income for a period of 10, 12 or 15 years. If an attorney representing a playwright insists that the production company only share in the subsidiary rights income for 6 years and only be entitled to 30% and not 40% of the subsidiary-rights income, the attorney is not doing the playwright client a favor. The play will not be financed and thus not produced.

The rationale for this 30% and 6-year rights period is sometimes attributed to the recommendations of the Dramatists Guild. The guild contract is sometimes used for Broadway plays, but I have never known of an Off-Broadway play that was produced with the guild Off-Broadway contract. In fact, a knowledgeable guild associate of mine has claimed to know of no play ever produced with a guild Off-Broadway contract, although a few have been signed.

The bottom line is that some terms are worth fighting about in a negotiation and some are just inconsequential. I delivered an option agreement to an attorney, similar to one that I had prepared hundreds of times. I received a letter back with 96 objections to the terms of my option agreement. Who has the time to address 96 objections in a six- or seven-page document? Things like this only happen when somebody doesn't know what they are doing and they want to impress their client as if they do know. After too much time on the phone, the objections in this instance were reduced to 74. I then informed my client that it really didn't make any sense to make a deal with someone who knew so little about the business and cared so little about wasting our time.

I've edited a treatise on what to do when negotiating contracts in the entertainment industry. This article is about what not to do. What started me thinking about this was when an attorney insisted that an option contract between my producer client and his playwright client contain a provision that the playwright be invited to the opening night party. Then I started thinking about the other things that almost drive me over the edge when I am negotiating with other attorneys in our business.

When the relationship between the parties is just commencing, who in their right mind wants to even consider the possibility that the playwright and producer on opening night would be on such unfriendly terms that the playwright would not be invited to the party? And if the parties do have such a major disagreement, what playwright in his right mind would want to show up at a party where he would not be welcome? And how will the playwright's attorney enforce this agreement? Do you go to court to force the producer to invite the playwright to the party?

I have always said that if the response to an offer is so outrageous that it isn't in the ballpark, you can't respond to it. For the record, I told my producer client that I could not respond to the other attorney because the counter offer was so far out of reality. My client called the playwright and after speaking with him, the playwright was as upset as we were that his attorney would insist on his being invited to the opening night party that he fired his lawyer and the deal was made. The rapport between the playwright and my producer client is terrific, and the playwright will be invited to the party.

The playwright's attorney had also tried to reduce a not-for-profit theatre's share from 1.5% of the gross weekly box-office receipts to 5% of the net profits. The justification was that the attorney insisted that this was the standard. This is nonsense. Not-for-profit theatres that cause a play to become a commercial success share in the gross. Does it really make a difference whether Joseph Papp made “Chorus Line” a great success or some unknown, never-heard-of, theatre group made it happen?

The fact is that what is standard is based on precedent, is constantly changing within small limits and depends upon whose standard you are talking about. I am particularly troubled when the “standard” the other party is pushing is so outrageous that one cannot respond to it. For example, a payment of $5000 for a 1-year option to produce a play Off-Broadway is not standard and when someone tells me it is, I call his or her attention to the fact that a play can be optioned for Broadway for $5000 for 6 months.

Another example is that investors in plays expect certain things or they do not invest. An investor in an Off-Broadway play knows that if the play is any kind of success, he or she can expect the production company to end up with a 40% share of the subsidiary-rights income for a period of 10, 12 or 15 years. If an attorney representing a playwright insists that the production company only share in the subsidiary rights income for 6 years and only be entitled to 30% and not 40% of the subsidiary-rights income, the attorney is not doing the playwright client a favor. The play will not be financed and thus not produced.

The rationale for this 30% and 6-year rights period is sometimes attributed to the recommendations of the Dramatists Guild. The guild contract is sometimes used for Broadway plays, but I have never known of an Off-Broadway play that was produced with the guild Off-Broadway contract. In fact, a knowledgeable guild associate of mine has claimed to know of no play ever produced with a guild Off-Broadway contract, although a few have been signed.

The bottom line is that some terms are worth fighting about in a negotiation and some are just inconsequential. I delivered an option agreement to an attorney, similar to one that I had prepared hundreds of times. I received a letter back with 96 objections to the terms of my option agreement. Who has the time to address 96 objections in a six- or seven-page document? Things like this only happen when somebody doesn't know what they are doing and they want to impress their client as if they do know. After too much time on the phone, the objections in this instance were reduced to 74. I then informed my client that it really didn't make any sense to make a deal with someone who knew so little about the business and cared so little about wasting our time.