Production Services Agreement Explained
The production services agreement is a contract used in film and television and multimedia production. They are used in other business too, such as the recording industry. The producers of a production, or studio, may choose to hire a third company to provide the services required to produce the work. These types of contracts are common in the industry, and established in the entertainment industry.
As an example, the company that owns a television station that is producing a weekly show may not have all the production capabilities in house or may not want to manage all the costs and logistics in-house. It may instead choose to hire a production company to run the day-to-day operations of the production. A production company is a contractor, independent of the network or studio, that comes in to provide the necessary support for a production.
The engagement of the production company is usually long term, sometimes a year or two (or more) and generally speaking , the production company handles everything from conception to shooting to post-production up until the completion of the production. It also includes, and this is where it is different from a work-for-hire, the costs associated with production, which are usually covered by the studio or the network. The fees for those services generally will include such things as pre-production, production, post-production, on-air promotion and potentially residuals and merchandising. The other side of the coin is that the production company will usually be responsible for providing the crew for the projects in question, hiring the subcontractors and providing the equipment necessary and/or arranging for the services and equipment so that the shoot can go smoothly. The production services agreement essentially outlines the entire relationship between the two entities. It lays out the parameters and manages the risks associated with the production. It consolidates all the relationships, the expectations and the risks into a single document and process.
Elements of a Production Services Agreement
Most production services agreements will contain some combination of the following components:
1. Scope of Services. Depending on the nature of the Production Services to be performed, the physical, geographic and/or technical scope of such services may be quite broad, or quite narrow. An agreement may simply provide "Services", or it may define more carefully the output of the Services, the intended end-user of those Services, or even the chain of distribution of the final Product.
2. Production Schedule. Production time schedules may vary in duration depending on the complexity of the Project, even within one single agreement. A particular service can have a different production schedule than another service during the same project. The schedule can also vary depending on whether the work is for a regular or rush Delivery. While delivery schedules will vary, depending on the type of Services involved, most Cast and Crew services will specify that the Producer shall be required to make "each payment due and owing to the Artist during the execution of the Project according to the Production Schedule".
3. Payment Terms. The Production Services Agreement will likely set forth various payment terms to be adhered to by the Producer and the Artist. A Producer may be obligated to pay the Artist a deposit prior to the commencement of services, and a portion of the remaining payments may be based on each schedule of services thereafter performed, with the balance to be paid upon approval of the final cut or approval of the finished work.
4. Deliverables. The Product of the Services is almost always the Deliverable under a Production Services Agreement, along with copies of any imposed additional requirements under the agreements.
Legal Implications of a Production Services Agreement
The drafting and negotiation of a production services agreement, and associated agreements, requires careful consideration of many legal issues. Below are just some examples of the legal issues that may arise in the context of a production services agreement.
Intellectual Property Rights
A production services agreement will need to clearly distribute rights in respect of all intellectual property created by a producer or production company in connection with the services to be provided under the agreement. In the absence of clear agreements in place in relation to intellectual property, issues relating to ownership, licensing, assignment and exploitation, or lack thereof, can become very complex. While it is generally understood that the producer or production company will be the author and owner of all intellectual property created in the execution of the production services agreement, written assignments of all material rights, title and interest in the intellectual property, from the writer, director and all other contributors to the production, should also be considered and obtained.
Confidentiality Agreements
These agreements should be carefully reviewed in the context of the production services agreement. The producer or production company will often expect that third party investors, financiers and distributors, may require that the producer or production company sign a confidentiality agreement. Such confidentiality agreements can often include clauses which require disclosure of the very fact that a confidentiality agreement has been entered into, as well as various other clauses dealing with the responsibility of the producer or production company, to ensure that those employees, agents and contractors, who have been made privy to classified information, maintain confidentiality for the period specified in the agreement. Compliance with a confidentiality agreement may be difficult. It is absolutely essential that the producer or production company and any other signatory to a confidentiality agreement, comply with the provisions of the agreement, as what may be perceived as a minor breach of a confidentiality agreement may result in an irreversible lapse of trust and jeopardize the ability of the producer or production company, to raise funds for the production and/or offer the film for distribution.
Indemnities
While indemnities can be difficult to negotiate, it is important that producers and production companies understand the limitations of any indemnities they are asked to give. Indemnities are legally enforceable obligations which commit the producer or production company to respond with money to certain future claims. The claims that may be triggered by an indemnity may be unpredictable and may or may not be valid. The producer or production company becomes liable to pay the amount of any indemnity, whether or not the claims actually arise and as such, the producer or production company may find itself bound to compensate the person who has required the indemnity. Producing television productions in Canada, where there is no culturally required funding, may increase the exposure of the producer and production company to stockholder litigation and even petitions in bankruptcy, which may trigger more stringent disclosure requirements and unwarranted exposure to these indemnities. The key is to ensure that those giving the indemnities understand precisely which indemnities they are consenting to and the extent of their liabilities under the applicable indemnity.
Advantages of a Strong Agreement
The value of a production services agreement extends far beyond the legal obligations contained within. More often than not, the very process of negotiating and developing the agreement proves to be invaluable. Without a clear agreement in place there is increased chances for misunderstandings on any number of issues, such as time of performance, budgetary constraints, and intellectual property rights. Such misunderstandings can turn into conflicts that can have a negative impact on the creative process, cause significant production delays, lead to costly litigation, and even result in the entire demise of the project. On the other hand, an open negotiation process fosters a sense of professionalism, trust and cooperation and brings substance to the critical components of the project, thus providing for a smooth execution of the project. The development of a mutual understanding among the parties also leads to a viable and productive working relationship. A clarified resolution to many discussed points of interest laid out in a written contract provides a sense of security when unexpected issues arise during production.
Common Issues and How to Tackle Them
As with any other type of contract, there are problems that can arise in interpreting or performing a production services agreement. The complexity of some productions can make resolution of issues difficult. A few common contract issues include:
PRE-AGREEMENT CONSIDERATIONS
– You want to produce your feature film in a country in which the services provider has not worked before.
– Searches need to be made to determine whether the topography of the location can provide the needed backdrop. Also, it’ll be necessary to determine whether the services provider is aware of, and can obtain, any needed local permits and licenses.
PRODUCTION ISSUES
- The producer unilaterally decides to make changes to the production schedule before the start of principal photography.
- It’s imprudent to change the original schedule without notice to the services provider , but it’s important to be explicit in the contract if there are strict requirements concerning the production schedule.
- The producer postpones principal photography beyond the outside date of the contract and refuses to agree on new dates.
- It’s important to limit the ability of the producer to postpone the production schedule, unless the cost of the delay will be borne by the parties’ equally. Rescheduling costs can place a significant strain on a budget.
- A producer wants the services provider to go beyond what was agreed upon in the contract.
- Although service providers may be willing to do extras for free in order to maintain good relations and receive future work, rescheduling or additional production personnel may be required and the service provider will be within its rights to request payment of an additional fee for the extras.
As is the case with any product, it’s important to remember the adage, "You get what you pay for." The better drafted an agreement is, the fewer problems there are likely to be.
Considerations When Drafting a Production Services Agreement
Having just completed a production services agreement for a project with multiple parties, I thought it might be a good time to give some tips on how to make sure you’ve covered all your bases in your production services agreement.
Insureds
Make sure the insureds listed are everyone who needs to be covered. Don’t just list the production company by name and assume that covers everyone. Make sure you’ve also listed the production executive producer, line producer, managers, directors and even (if appropriate for your particular project) cast as additional insureds.
Indemnification
The indemnification provisions should specifically identify the indemnifying party as well as the indemnified parties. The indemnifier should be responsible for all damages, injury, and losses, including all costs, expenses, and reasonable attorney’s fees incurred by the indemnified parties. Be aware that indemnification provisions are typically not enforceable in California under the laws of California if the indemnity is for injury to a person based upon the negligence of the indemnified party, except within limits defined in Cal Civil Code Section 2782.
Representations
The production services agreement should spell out the representations being made by both parties, including representations regarding ownership of the script, rights to the film, any necessary licenses, etc.
Confidentiality
Usually, if one side receives confidential information from the other side, that contains trade secrets or other proprietary materials or processes, then a confidentiality provision is required.
Credits
Make sure you’ve spelled out what credits are due to each party. This should include details about placement in trailers and bumpers as well as onscreen credits.
Powers – Interference and Approval
A hierarchy of powers should be spelled out as well as the final approval requirements of each party. Such approvals are increasingly being given to the financier rather than the lead bank in a consortium because they’re the money in the middle who can leverage the other consortium members to meet certain standards.
Assignment Subcontracting and Location
Assignment and subcontracting should be allowed but limited to the affiliates of the production company. Subcontracting usually also requires the subcontractor to agree to the same terms as the production services agreement. Filming should be allowed in various locations including the countries where the film is being produced, in addition to the primary location, or possibly even worldwide.
Final Thoughts: Consulting Your Lawyer
Given the number and variety of contracts that exist between producers and suppliers, the importance of legal advice and obtaining professional legal service for production services agreements is critical. Careful drafting and input from a lawyer with adequate experience in the industry will help ensure that important provisions are not missing, and that all parties are clear on their rights and obligations. As is the case with many agreements , the best time to deal with issues is at the beginning of the relationship with the other party, when the expectations for payment, delivery, hours, overtime, and many other aspects of the work to be performed can be agreed to in advance. Once things go wrong, however, and a dispute arises, the ability to resolve the matter with an oral agreement can be difficult to achieve and may well be legally unenforceable. Having a clear and detailed agreement, visible to both parties, can save a lot of money, time and trouble.