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June 17 at 8:30am

Ancillary Rights, The Devil is in the Lawyer

By Ted Hope

by Andrew Einspruch

Filmmaker Andrew Einspruch recently attended the Australian International Documentary Conference and wrote a series of articles for the event, which he’s graciously allowed us to reprint here. These articles originally appeared in Screen Hub, the daily online newspaper for Australian film and television professionals.

“You learn the most when you have a success,” said Marcus Gillezeau of Firelight Productions. That’s because you find out what exactly you signed away and what you held onto in your contracts back in the beginning. He also said that there are only two times that people read their contracts – when something fails (so they can get out of it) or when something does well (so they can figure out how to get some of the money).

Gillezeau should know. His company is riding the success of Storm Surfers 3D, a feature film that follows on from their previous Storm Surfers TV series. As the award statues cluster on the mantle, more and more people want to get in on the action. He has become something of a self-made expert on ancillary rights, and shared some of that knowledge in a session at this year’s Australian International Documentary Conference.

Gillezeau started by putting this clause up on the screen:

All rights in all media now known or that may be invented in the future in all territories including the universe… and it’s territories and colonies… in-perpetuity.

Sound familiar? That phrase, or its moral equivalent, is in pretty much any contract you are asked to sign (like with your distributor). It is the starting point for most agreements. The assumption is generally that you are going to surrender all these rights to the person taking on your doco, with known and unknown exploitation potential.

Gillezeau said he turns this around up front. He starts by asserting that he, the producer, controls all the rights to everything using exactly that kind of language that he is usually asked to sign. “I say, ‘I control all of this.’ Then I ask, ‘Now, what do you actually want?’” he said. “You tell me what you can afford, and we’ll work from there. What exactly are you investing in? What do you really want and why do you want it? What do you really need? And if I do give it to you, what are you going to do with it?”

Ancillary rights, roughly put, is all the other stuff that is beyond the primary TV show or film. If you have ever seen a stuffed toy, spin-off book, or soundtrack album – those things are covered by ancillary rights. Gillezeau listed a number of things that can fall into ancillary rights, including:

    1. Sequels and spin-offs. TV series, movies, and live events If you went to the Top Gear Live Show, you helped the Top Gear guys exploit this right.

 

    1. Substantially similar subject matter . Be careful here. Someone might try to stop you from making something that should be within your right to do. Gillezeau said someone once tried to include a clause that said he could not make another surf movie.

 

    1. All-media rights (digital products)

 

    1. Home entertainment. This would include DVD, Blu-ray, video on demand and download to own.

 

    1. Closed circuit, airline, hotel and other windows .

 

    1. Web rights . This includes webisodes, making-of featurettes, the website, and e-trade.

 

    1. Over the Top (OTT) . Direct to TV’s through manufacturers like Samsung.

 

    1. Games . These can be for various platforms.

 

    1. Apps . Again, on various platforms.

 

    1. Trademarks .

 

    1. Publishing. Print books and e-books.

 

    1. Merchandising. All the merch, from T-shirts to toys, and beyond.

And you definitely want to protect these ancillary rights. How? A good place to start is to train yourself to read every clause in every contract. The main terms for the program or film are usually pretty straight forward, along the lines of you are buying the property for this many years and this many limited runs – that sort of thing.

It is the other stuff that gets tricky. You have to watch out for catch-all phrases in particular. It is common for the other side to put these in, and you have to parse exactly what their implications are. Gillezeau said that one American contract tried to sneak in a catch-all phrase that assigned them exclusive rights to all their webisodes. Besides overstepping what Gillezeau was willing to part with, other agreements already in place prevented him from even offering that kind of exclusivity. Another example was a phrase that meant the other party could put the thing onto Samsung TVs, and they weren’t responsible if that meant it was shown in someone else’s territory, violating other agreements.

So be very careful.

Another thing Gillezeau does is use the Definitions part of the contract to spell things out. He always has two clear definitions in there, one for Primary Property and one for All Media Rights.

He then carefully specifies what is what in those two categories, especially the latter. The All Media Rights definition details exactly everything that is going to be made when the show is being made (the game, the app, the book, the web site, etc.). The implication being that if it is not covered in that definition, it is not part of the All Media Rights covered by the contract.

Gillezeau said he makes sure there are very tight timeframes for things like options. Some contracts allow 180 days for a response to an option, and then a counter-offer may trigger another period of 180 days. Gillezeau limits that period to 30 days, tops, with 24 hours maximum (not seven days) to get back to him with a response to a final offer, plus language that says if no response is received, it is deemed approval. You don’t want an opportunity with someone else to get missed because someone with an option has the chance to drag things out. Like it or not, a broadcaster or distributor may want to encumber your property to protect something they have going on elsewhere.

That speed can be crucial. If the buzz on your product is skyrocketing, you have to be able to act. Toys, for example, take six months from concept to being on the shelf, which means Christmas toys have to be underway in May. You don’t want protracted negotiations to scuttle your chance to strike while the iron is hot.
Other things he keeps tight are performance and reporting clauses. If the reports are not timely, or the other party is not meeting their performance requirements, these clauses give you an out, letting you pursue other avenues.

You also want to protect your right to actually make the show. Contracts often have clauses that let the other party fire you. Gillezeau says he doesn’t accept those.
Gillezeau said he tries to set up clear ground rules for engagement. For example, he tells people is negotiating with that they must tell him up front what the deal-breakers are. Otherwise you are wasting time.

Your bargaining strength in all of this depends, of course, on how badly the other side wants what you have. The more they want it, the stronger your position with haggling over ancillaries.

You should also brainstorm what possibilities there are for your ancillary rights, then test those ideas for feasibility and viability. Gillezeau said to do a SWOT analysis on them to see what is likely to work. You probably aren’t going to have stuffed toys for Go Back to Where You Came From. But ancillary opportunities may not be obvious. A documentary about the author of Mary Poppins spawned a $90 million feature film. That’s a serious spin-off.

Gillezeau also said you should map all of your territories. He keeps a spreadsheet for each property that lists all the territories and what rights have been sold or retained in each, and whether they are exclusive or non-exclusive. That way, if an opportunity comes up, you know whether or not rights are there for you to grant in that location.

Rest assured that people will offer you bad deals. And why not? if they can get you to sign something that works in their favour, they may as well try. Gillezeau talked about one contract that offered a 50-50 revenue share for being able to show his YouTube clips on their channel. It looked good on the surface. But the contract that arrived said it was an exclusive deal. Oh, and the share was not on gross, but on net. And the company could charge expenses against the gross without any cap and with no definition of what expenses were allowed. Plus it was a French company, and a clause said that they would have to deposit 60% of the money they were supposed to remit with the French government until a particular form was filled out and lodged in a particular way. “This sort of stuff happens over and over,” said Gillezeau.

One interesting tip that Gillezeau made was using the Producer Offset to your advantage when creating material covered by some of the ancillary rights. If you create things like webisodes, making-of videos, apps, the web site – all of those sorts of things while you are making the primary product, then the costs of those items can be included in the producer offset budget. However, if you go back to make them once the product is done, you can’t qualify those materials for the government offset support.

Ancillary rights are a clearly a huge topic, but for the right property, they are a gold mine in the waiting.

 Andrew Einspruch is a producer with Wild Pure Heart Productions . His current project is the low budget feature film The Farmer.

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