SCREENWRITER: YOUR FIRST CONTRACT AND THE FAMOUS DEFERRED SALARIES

Excellent article with many useful tips. I do offer email
consultations (including reading contracts) regarding
this type of matter. Feel free to contact me via email through 
www.jordantate.net
Jordan.

SOURCE:
http://www.scriptsecrets.net/tips/tip192.htm

    BIZ TIP TUESDAY:
    YOUR FIRST CONTRACT


The good news: A producer loves your script and wants to buy it!
The bad news: He doesn't want to pay you much (or anything) up front, but assures you that this can be your big break into the business! Your name up there on the big screen!

You need a lawyer. Anyone who represents himself has a fool for a client. There is no such thing as a standard contract - everything is negotiable. The contract a producer offers you is stacked in the producer's favor... it was drawn up by HIS lawyer. You need your own lawyer to balance it out. But lawyers can be expensive - how can you tell if this deal is worth the expense?

Here is some quick, lay-advice on contracts. I am not a lawyer, but I've sold enough scripts to know what a bad deal looks like, so here are some things to watch out for...

SIGNATORY OR NOT?
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The big game changer on your first contract will be the answer to the question: WGA Signatory Company... or not? Many writers believe that no matter what the budget of the film they will get WGA minimums, but you will only be paid WGA minimums if the company is WGA signatory - and *many* companies are not... including most of the low budget and indie companies you may come into contact with at the beginning of your career. If the company that wants to buy your screenplay *is* WGA Signatory, then your deal will follow the MBA (basic WGA contract) and you should try for any "bumps" (explained later in the tip) or bonuses that your lawyer can squeeze into the contract. Even a basic WGA contract is negotiable (upwards) - which is why Akiva gets paid much more than I do. Always try to get the best deal that you can - which is one of the reasons why you need a lawyer (or an agent) negotiating your deal. Actor Peter Coyote says if they haven't said "No" you haven't asked for enough money.

But most of this tip is aimed at the non-signatory companies you might sell your first script to - and their minimum payment for a screenplay is $1. They can pay whatever they want, and will try to pay as little as possible... because the screenplay is one of the very first expenses - and may be out of their pocket before they have the film funded. If that is the case, you'll want an option deal on your script for enough money that it means something to the producer - there is a tip in rotation about options with some details on that process. But you will still want a reasonable deal for the sale of the screenplay, which is the subject of *this* tip.

Because there are no minimums for non-sig companies, you need to get *everything* spelled out in your contract. I do not know the ratio of non-sig companies to signatories - but there are a lot of them out there, and just because a company seems big and established does not automatically make it signatory. A WGA member can not sell to a non-sig company (unless they create a signatory LLC on the side), but a non-WGA writer *can* sell to a non-sig, which may give you an advantage. Non-sigs are non-sigs for a reason, and are not going to go signatory just because they love your screenplay. Though I think it's just wrong that a company that will hire SAG actors and maybe even a DGA director will not want to pay WGA rates, that happens often in the indie and low budget world. But just because a company is not signatory is no reason for the writer to get ripped off. Even if it is your very first script sale, they can't make a movie without a screenplay - you are an important part of the equation.

DEFERRED SALARIES
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Are worthless. If a producer offers you no (or little) money up front against a percentage of the finished film's sales, run away! There are garages full of completed films that have no distributor and will never earn a cent. My friend runs a large film crewing agency - he crews about 3,000-4,000 films a year. Less than 500 of those get ANY form of release. The rest don't get theatrical or video or cable or shown in drive-ins or on airplanes or in prisons or even video release in foreign countries. Nobody ever sees them and they never make a cent. They LOSE money! If the film is made and NEVER RELEASED not only do you make nothing off a deferred salary deal, your script is dead forever (unless you have a clause returning it to you). You have just sold your script for a percentage of profits that don't exist! You sold your script for nothing. My friend with the crewing agency tells his people not to work for deferred salaries, and that's my advice, too.

On any film where you are not paid up front, you are a PRODUCER - you are investing your screenplay into the project. If they have the cajones to offer you a deferred salary, are they also offering you a producer credit and gross participation in the profits?

They are going to spend actual money to rent equipment, buy raw stock, pay lab fees, hire actors. The crew will be getting paid (my friend at the crewing agency will see to that) so why should the writer be the only guy not paid? If they can afford to pay for equipment, they can afford to pay for the script. If they CAN'T afford to pay for the script, the film is probably so low budget that it has no chance of being released (so that deferred pay means nothing). Movie distributors want stars (some level), and professional production values. The film is sitting on the shelf at Blockbuster next to some big Hollywood blockbuster - the consumer needs some reason to rent THIS film over the one that stars Bruce Willis and his asteroid. (#2 has to try harder). If this film is offering NOTHING, it will not be picked up... and end up in someone's garage forever.

These days, everyone with access to a video camera wants to make a "no budget" movie, and all they need is a script. So they want your script on a deferred deal... Hey, even the crew is getting deferred salaries on these films. Problem is, movies made for nothing are even bigger gambles. I know a guy who has made seven "no budget" films, and not a single one has any form of distribution! No DVD, no nothing! My advice on a "no budget" film is - if this guy can find no money and an all volunteer crew to make a movie, so can you. Do the film yourself, and if it makes any money or gets distribution, it's *your* movie. Yes, some of you will not want to go to the trouble of making the movie yourself, but give it some consideration - you jump from unproducer writer to *writer-producer* and probably make a bunch of connections along the way.

Exception to no pay: If you're doing it for love. If this project's value to you is NOT as a commercial venture. Know that when you enter into any deal, the money in your contract is all you will ever get. Those "monkey points" are worthless. The back end deal just means the writer takes it in the back end. Any money contingent on something else happening is no money at all. If you want to DONATE your script to a film - that's your call. You can screen the film in your garage, and be happy.

WHAT YOU SHOULD MAKE
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On a low budget (including non-WGA) movie a screenwriter should make about 2%-3% of the film's budget (you may make more or less, but that's the ballpark). When most indie films increase budget, most of that increase is going to a star, not the whole film - and producers aren't about to cut into the star's money to raise your pay. But try to stay in that 2%-3% range *excluding* the star's salary. If the producer has no idea what the budget will be, work out a deal for a reasonable base rate or 2.5% of the budget, whichever is greater.

Greg Goodell's Independent film budgeting book says to budget 5% for script purchase and development overhead (I think it's on page 72). That percentage is echoed in every budgeting book I've ever seen. If your producer thinks 3% is too much to pay, have him look it up (he'll probably be using that budgeting book anyway, since it focuses on low budget films). Paying a writer 3% of the budget is completely reasonable.

You should have your lawyer try for additional "bumps" based on the film's performance in ancillary markets. These "bumps" will be bonuses if the film sells a large number of DVDs or has a successful foreign theatrical release or shows on additional cable networks. Instead of a % of *each* DVD, which will be difficult because the producer wants to sell their movie to a distrib without all kinds of book keeping costs passed on to the distrib... but a bonus if the film ships an amazing number of units on DVD is easy. Find out how many units a successful similar film sold (Video Business mag online or one of the others might have this info) and then build in a bonus payment when sells, I don't know, 50k more copies than the example film. Basically what you are doing is not getting any extra money if the film sells a normal number of DVDs, but sharing if the film is a big hit on DVD. My contracts have "bumps" for HBO, Showtime, USA Network sales and for over a certain number of videos & DVDs sold. These "bumps" cost the producer nothing - but if the film is successful, I participate in all of that cash pouring in... as I should. I made up the story.

You should also get "net points" - also known as "monkey points" - a percentage of any net profit. You should get somewhere between 2% and 5% depending on how important your script is to the over-all deal. "Monkey points" are usually worthless - creative book keeping makes sure that even the biggest hit film never makes any actual profit. Remember that the first HARRY POTTER movie grossed hundreds of millions of dollars... but seems to be still in the red according to a recent article on studio accounting - No "monkey points"!

One issue with non-sig companies and points is that means they have to really do book keeping and have open books - and they hate that. It's paperwork. I'd try for it, but no movie ever makes a profit, so don't make this your big fight.

A TON OF MONEY!
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Once that contract is signed you get a massive check, right?

Wrong.

The average low budget (non-sig) contract is similar to the average WGA Signatory contract in that you will not get all of your money at once... and you may not even get all of the money in your contract. The screenwriting payment is broken up into pieces. Usually there is a fee paid on the signing of the contract - and make sure this fee is a reasonable amount. If this is in the form of an option, make sure that the option is enough to make your script a priority to the producer... and enough to cover at least some of the time it took you to write that script. The actual script fee is often paid on first day of principle photography, but you want to get some money just from signing the contract, in case the film never gets made. Plan on the film not getting made when you make your deal - because only one in ten purchased scripts makes it to principle photography.

You will also get a fee for each rewrite - there will usually be two rewrites and a polish in the contract. You want to make sure that these portions of the fee pay for the time it will take you to do a major rewrite on the screenplay. You also want to make sure that these rewrite fees are *not* subtracted from your total payment if they choose not to have you do the rewrites. If 25% of your total fee is for rewrites, you don't want to end up with only 75% of your agreed upon fee because they didn't have you do the rewrites... or had their girlfriend do them for free. Always try to create an incentive to keep you on as the writer!

You will probably get the larger part of your total script fee as a "production bonus" when the film actually goes into production - you want to make sure that you get the production bonus even if other writers are involved. On a signatory film the writers split the production bonus - but it is also a great deal more money than we are talking about on a low budget film. If the producer does want to split the production bonus, you need to make sure that without it you are paid a reasonable rate - at *very least* two times what it cost you in time to write the script (unless you are a really slow and lazy writer) - and no less than what you would be paid weekly during the pre-production, production, and post production of the film - you don't want some PA (go-fer) getting paid more than you on the film! The secret key to screenwriting is "one for you and one for me" - make at least enough money to pay for the time it took you to write the script you sell, plus write another script to sell. You want to be getting ahead, not just "breaking even".
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Most contracts will have a "buy-back" clause in the event the film never goes into production. Make sure your lawyer puts a buy-back clause in your contract! You don't want to have any scripts in limbo - you don't own them, but the producer has no plans to make them. Because many scripts never make it to screen, without some sort of buy-back, you may end up with dead scripts all over town. I have a couple of scripts I sold when I first started out that had no buy-back clause, and I do not own the rights to them. A few years ago I had a meeting with one of the producers to get the script back, and the SOB told me I could buy it back for what I get paid *now* plus 25%... not what I was paid for it a couple of decades ago. He would make almost 100 times what he paid me if I did that... and I can not sell the script to anyone else unless I buy it back. Once you get into the WGA this isn't a huge problem with WGA signatory scripts, because the MBA has a built in buy-back clause: after the project has been dead for 5 years you can buy it back for what they paid you. That may still be an issue if you made a lot of money from that script sale - you may need to weight the benefits of having that script to sell again. Because some scripts actually take 10 years to get to the screen, companies tend not to be interested in some sort of reduced rate buy-back clause in the contract... but have your lawyer give it a try anyway.

On a non-WGA project I would try to get the credit locked in - and "single card" (means you get the whole screen for a moment). On a WGA contract, credits are decided by the WGA (so whatever it says in the contract doesn't matter).

CAN I TRUST THESE GUYS?
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Last: There are two types of low budget, and two types of criminal activities. Organized and small time wackos. Organized crime are guys like Eric Roberts in THE DARK KNIGHT, they make money, they wear suits, they are businessmen. They have offices. You can depend on them. They've been doing this for years. They play by the odds and don't take any chances. Small time wackos are guys like Heath Ledger's joker - they rob a liquor store because they need a heroin fix... or maybe just for fun. As Michael Caine says - "Some men just want to watch the world burn." They are undependable, have no idea if they will live out the day.

Everything is a long shot. You don't want to work with the wackos. There are plenty of organized low budget guys out there with offices, distribution deals in place, and plenty of past credits. The thing that separates a REAL producer from someone who just claims to be a producer is...

What have they produced?

That should be the very first question you ask after they tell you how much they loved your script - "Great! I'd like to get a feel for the kind of films your company produces, can you recommend one of your films for me to rent?"

Then really go out and rent the movie. It will give you a very good idea of what you're getting in to!

I'd find a lawyer who knows this stuff, because I'm just some dude who writes scripts.
If I were a lawyer, my parents would be *happy* about my career choice.