By Dinah Perez, ESQ

Dinah Perez, Esq., the author of the article, is available for consultation. She may be reached through http://www.surfview.com/seattdp.htm or by e-mail at Entlaw@msn.com.

LEGAL EASE
"The Power of the Spoken Word"

by Dinah Perez, ESQ

           Many individuals mistakenly believe that oral contracts are not binding.  Hollywood would come to a standstill if that were the case, since it takes attorneys weeks, if not months, to negotiate the language which is eventually committed to a written contract. People have been led to believe that oral contracts do not exist because such contracts are difficult to prove, and, at best, are legally binding only upon certain circumstances. This article attempts to educate the reader as to when an oral contract may be effectively used and how to facilitate proof of its existence.

          For entertainment related purposes, oral contract are binding when the object of the contract can be accomplished within 12 months, and when you are buying or selling something whose value is less $500. For example, an actor who orally assents to perform in a production is committed to do so even though the actor expects the terms of the oral agreement to later be converted into a written form. Main Line Pictures won its trial against Kim Basinger because it proved the existence of an oral contract. Basinger argued that there should have been a signed written contract. The fact of the matter is that many actors, Basinger included, never get around to signing their contracts, or sign after the fact, since their performances are usually completed before the contract is committed to paper.

           So, what does it take for an oral contract to be binding? An agreement, assuming that the subject matter of the contract lends itself to an oral contract (see above). All parties have to come to an agreement on all the major deal points i.e., in hiring of an actor there must be agreement as to compensation, number of days the actor will be required, part which actor is to play, and credit. An oral agreement will not exist if any major deal points are unnegotiated because a "meeting of the minds" is lacking. Therefore, be sure to negotiate all of the deal points that are regularly negotiated and considered important for that type of contract.

           Whenever hiring a union employee it is a good idea to refer to that union's collective bargaining agreement since the agreement might preclude an oral agreement. The Screen Actor's Guild (SAG), for example, requires a written and signed Nudity Waiver if you are hiring union member and the part requires nudity. The actor can agree to be in your film on an oral basis, but the actor must acknowledge and assent to the nudity in writing. Also, the Writer's Guild of America requires a written contracts for writing assignments or the option or sale of a screenplay, treatment, teleplay. . . . In other words, modern law may recognize the existence of an oral contract, but a union may not, and the union's collective bargaining agreement always rules. Therefore, know what the union requires prior to entering into negotiations with a member of any union, and adhere to those requirements.

           Having an oral contract and proving its existence in a court of law are two different things. Without a doubt, oral contracts are difficult to prove. I always recommend that my clients secure a written agreement whenever possible. If the situation does not lend itself to a written agreement, then create a paper trail i.e., after a pitch meeting send the executive a letter thanking them for their time and reiterating the purpose of the meeting; when you are hired, or are hiring someone, send a letter accepting or confirming the acceptance of the position. In summary, you can create a legally binding entertainment industry oral agreement if you follow the checklist provided below.

1. Negotiate and agree to all the major deal points.
2. Make sure the contract can be fulfilled within twelve (12) months.
3. Only sell/buy something for which you will be paid, or are paying less than $500.
4. In cases where you are dealing with a union member, make sure the collective bargaining agreement does not preclude or restrict the oral agreement. If it does, then adhere to the union rules.
5. Confirm the oral contract in writing.

Always resort to the written agreement, or contact an attorney, if you are in doubt as to whether an oral agreement is going to be binding.

This article is not a complete review of the subject matter and, as such, the reader should not make decisions on the basis of the above without consulting with an attorney. 

Dinah Perez, Esq., the author of the article, is available for consultation. She may be reached through http://www.surfview.com/seattdp.htm or by e-mail at Entlaw@msn.com.

LICENSING PRE-RECORDED MUSIC  
By Dinah Perez, ESQ  

Music is a powerful storytelling tool, since it has the ability to convey and heighten the emotion in a scene.  Nonetheless, independent filmmakers, generally out of necessity, under budget for it.  Worse even, they spend the money they did budget, on dealing with unforeseen expenses associated with the production or post-production process. 

Filmmakers who decide to reproduce pre-recorded music on their film’s soundtrack have to be prepared to spend time and money acquiring the music’s synchronization right (these licenses are referred to as "synch licenses").  The endeavor is time consuming because it requires contacting and negotiating with various parties.  It is also expensive since securing the right, to use a particular piece of prerecorded music, includes paying fees to the record company, publisher(s), the American Federation of Musicians, American Federation of Television and Radio Artists and/or Screen actors Guild.  The information below is basic information.  It is not an exhaustive discussion on the topic of music licenses.  I suggest that filmmakers use the below information as a jumping board.  If the licensing process gets too complicated, then I always suggest that filmmakers either hire an attorney attorney knowledgeable in the licensing of music, or a music supervisor. 

  Step 1: Contact the Record Company  

The approach the filmmaker takes to licensing pre-recorded music will vary depending on whether he/she is licensing prior to production or during post production.  Filmmakers are likely to license the music prior to production when the film has a scene, for example, in which an actor is performing the music.  They are likely to license music during post production when the music is part of the underscore.  In either case, filmmakers should contact the record company’s film licensing department to ascertain their procedure and the name of the party authorized to negotiate the licenses required.  The record company will want to read the screenplay if the license is required prior to production, and it will want to see a rough cut of the film if the licensing request is during post production.  The record company insists on reading the screenplay, or viewing the rough cut, in order to determine whether it wants to be involved, and whether the project is something the artist would consider, since many artists have control over how their music is exploited. 

The record company will not consider the licensing request unless the filmmaker can afford the licensing fees.  It is highly unlikely that an independent filmmaker, with a limited music budget, will be able to license music by major artists like Mariah Carey, Madonna, Barbara Streisand, Bruce Springsteen, since the record company fees alone can cost as much as $20,000 - $50,000.  Furthermore, the record company will refuse a request for a film festival license, which generally ranges $200 - $300 (one year worldwide), if the filmmaker cannot afford the fees for the additional licenses. 

The filmmaker may be able to convince the record company to make special payment arrangements.  The "step deal" is one such payment arrangement.  In a step deal, the filmmaker makes an up front payment based on the film’s budget and he/she makes additional payments when the film’s grosses reach certain specified sums.  Structuring the license this way may make the filmmaker’s licensing request feasible assuming that the filmmaker can come up with enough money up front. 

Record companies all have artists they want to expose to the public.  When short on cash, filmmakers should take advantage of the record company’s desire to promote up-and-coming artists.  The filmmaker can enlist the record company's assistance, in the search for affordable music, by contacting the record company and expressing an interest in licensing music by an up-and-coming artist.  The record company will read the script, or view the rough cut, so that it can make suggestions which work with the film, and are within the filmmaker's budget.  Licensing fees are dramatically reduced when the record company views the film as an opportunity for their talent.  The filmmaker may well end up licensing a unique piece of music, from an artist that has hit potential, for a mere $2,000 to $5,000. 

Timing is important when the filmmaker’s financial resources are limited.  Filmmakers should contact the record company as early on in the process as possible.  It is going to take approximately a week for the record company to read the screenplay or view the rough cut of the film.  If the record company forwards the screenplay or rough cut to the artist for approval, then the filmmaker can count on an additional minimum two week delay. Filmmakers will need to allow for more time if the record company is suggesting talent and music.

   Step 2: Contact the Publisher

The filmmaker will have to contact and, subsequently, secure a license from each of the publishers.  The most tedious part of the licensing process begins here, since each piece of music can have multiple composers and publishers.  ASCAP, BMI and/or SESAC are organizations that represent publishers; they can provide the filmmaker with publisher information if he/she can supply them with the exact title of the song and the name of the author(s). 

Publishing licenses are also not inexpensive.  A one year film festival license can cost as little as $500, but a license for a major piece of music can cost upwards of $50,000.  If the music budget is limited, then I suggest that the filmmaker either find a less expensive piece of music to license, or that he/she attempt to structure a step deal (see above).  The filmmaker can find a more affordable piece of music by enlisting the publisher’s assistance.  Most major publishers will read the script, and/or view the rough cut, in order to make licensing suggestions that are within the filmmaker’s budget.  Again, filmmakers need to allow sufficient time for this process.

   Step 3: New Use Fees 

The American Federation of Musicians ("AF of M") requires a "new use fee" whenever prerecorded music is incorporated in a film.  The new use fee is the equivalent of a session fee for each musician who performed on the song when it was originally recorded.  The new use fee is supposed to vary depending on the number of musicians performing on the recording and the size of the film’s budget. If the budget is a "high budget" in excess of $12,750,000, then the fee is in $219.37 per musician (the fee can technically be higher, but Colleen Howell of the AF of M assures me that she always charges this lower " Schedule A" fee).  The "low budget" new use fee is $141.84 per musician for theatrical motion pictures whose estimated and actual budgets are less than $10,600,001 or $12,750,001 respectively.  Films produced for cable qualify for this "low budget" new use fee rate if the budget does not exceed $1,804,000.  Filmmakers need to specifically request the "low budget" new use fee and, therefore, should contact Sue Collins for the application.  In addition to the above new use fees, filmmakers will also have to pay a ten percent (10%) pension fund contribution. 

New use fees can inflate the music budget since a fully orchestrated symphonic piece of music, for a "high budget" and "low budget" film, can cost in excess of $25,000 and $15,000 in new use fees respectively.  The AF of M does give preference to films that are not profit driven and, therefore, does not charge a new use fee to films whose only venue is film festivals. Furthermore, the AF of M will waive the new use fees where non-profit (401(c)3) projects are concerned. 

Singers on the prerecorded music the filmmaker is licensing may be members of Screen Actor’s Guild ("SAG") and/or the American Federation of Television and Radio Artists ("AFTRA").  The filmmaker will, as such, have to pay new use fees to these unions as well. The calculation of these fees is not straightforward, therefore, SAG and AFTRA ask that filmmakers with questions regarding new use fees contact them directly. 

The AF of M is supposed to provide the filmmaker with a copy of the original session sheet. The session sheet lists every musician that performed on the recording.  Do not agree to pay the new use fee unless they provide the original, since the AF of M cannot pay the musicians unless they know their identity.  AFTRA and SAG may not have the original session sheet available but they will identify the performers. 

Filmmakers who have never used prerecorded music are unaware of the need to pay the new use fee.  Licensing agreements usually include a clause which states that the filmmaker is responsible for paying all union fees, but the clause goes unnoticed, misunderstood, or ignored by many.  The novice filmmaker usually does not find out that he/she is responsible for paying new use fees until the union contacts them; this always creates a problem since the union generally contacts the filmmaker after the film is in distribution -- too late for the filmmaker to choose an alternate piece of music, include the fee in the film’s budget, or incorporate the cost in the distribution deal.  Filmmakers should contact the AF of M, AFTRA or SAG, as soon as they identify the music they wish to license, since knowing the extent of the new use fees beforehand may influence the filmmakers choice of music, may allow him/her to include it in the budget, or make arrangements for payment. 

  Conclusion

A filmmaker with a limited music budget must be realistic and flexible when choosing prerecorded music.  If licensing music is beyond the filmmakers financial reach, despite the above suggestions, then he/she should consider hiring a composer to write a comparable piece of music.  There are a lot of up-and-coming composers who, for the sake of experience and a film credit, are willing to work for a small stipend. I will be discussing the legal issues associated with hiring a composer in my next article.

This article is not a complete review of the subject matter and, as such, the reader should not make decisions on the basis of the above without consulting with an attorney. 

Dinah Perez, Esq., the author of the article, is available for consultation. She may be reached through http://www.surfview.com/seattdp.htm or by e-mail at Entlaw@msn.com.

This is not to say that the script is completely unimportant, but the reality is that the most brilliant script is unlikely to secure distribution if it is packaged with what distributors or sales agents perceive to be unbankable talent. Yet,  a mediocre, and, dare I say an inferior script, is more likely to secure a distributor or sales agent if the package has bankable talent. 

The package is  crucial because it affects your ability to secure a distributor or sales agent, and, consequently, your ability to secure financing: banks use distribution contracts and sales agent estimates to determine whether to lend production financing, and private equity investors are more apt to invest when they recognize the cast members. 

The filmmaker not only needs  a distributor or sales agent, but he/she needs one with a good reputation. Securing a credible distributor/  sales agent is key since, among other things, bank financing hinges on the strength of the distributor and its payment history, and the sales agents' track record for accuracy.  Lesser quality distributors and sales agents  rarely fulfill the banking industries strict requirements. You have to  do a little due diligence before committing to any one distributor/sales agent -- verify with the bank(s) that the distributor/sales agent in which you have an interest is acceptable to them. 

Hopefully, it has become apparent to you by now that producing a movie is an artistic, as well as, business endeavor, and that you have to approach casting in that manner.  So, make a list of all the actors you want to cast and then research their bankability domestically and internationally. You will find that the definition of bankability varies from distributor to distributor and sales agent to sales agent.  This makes it difficult for you to know whose opinion to trust, but it is advisable to trust the opinion of the distributors and sales agents that have a credibility with the banks. 

The hard work commences once you have completed your casting list since, this is when you start contacting actors and their agents and/or managers. Convincing an actor 
to commit to a film  before the financing is in place is no easy task --  it is not   for the faint at heart or easily dissuaded.  It takes perseverance, chutzpah and, most importantly, contacts. 

Your likeliest path  to success is one which lets you initially sidestep the gatekeepers. Agents like the immediate gratification of the pay-or-play offer and, as such, are unlikely to assist you unless they are a personal contact.  The manager, although more of a visionary and long term planner, may be reticent to commit the talent for fear that a  better film might come along.   Therefore, make list of everyone you know who may know the actor, or everyone you know who knows someone who may know the actor. Believe it or not, the six degrees of separation approach has been known to work.  If it turns out that you are indeed "contactless," then you have no choice but to venture into the world of the gatekeepers.  Find  a unique way to appeal to the agent or manager: be passionate; befriend the assistant since he or she can be your best friend, or enemy; be 
respectful; and, be persistent without being a pest. 

You are going to need what is commonly known as a letter intent from the talent once the talent agrees to be attached to your film.  Anyone can say that they have talent attachments  film and, as such, distributors, sales agents, banks, and private equity 
investors require the letter as proof of those attachments.  The best letter of intent is one which states in incontrovertible terms that the talent is performing in your film. Talent and their representatives will be reluctant to commit to such terms without a pay-or-play offer since, they do not want to be attached to a film which may never get made. Furthermore, actors have been sued over oral contracts to perform in films and letters of intent and the actor and his agent and manager are aware of this. Do not get discouraged if the actor initially declines your request for a letter.  A letter which states that the talent is interested in performing in your film pending his or her availability is noncommital, but at the same time provides proof to the distributors/sales agents. Many actors are willing and do provide such a letter. 

You can start shopping your film to potential  distributors, sales agents and banks once you have letters of intent from your talent.  You will be surprised how much more smoothly the process flows once talent is attached.  It gives the film credibility and a 
certain level of cache, and you are on your way to making the almost 
impossible a reality. 
 

This article is not a complete review of the subject matter and, as such, the reader should not make decisions on the basis of the above without consulting with an attorney.  

Dinah Perez, Esq., the author of the article, is available for consultation. She may be reached through http://www.surfview.com/seattdp.htm or by e-mail at Entlaw@msn.com.