Pay or Play

by Anthony J. Spotora, Esq.

So who ever said you can’t get something for nothing? Like so many other appealing facets of ‘Tinsel Town,’ many artists, talent agents and studio exec’s might tell you that sometimes, you can in fact get something for nothing or at least, for a lot less than one might think.

An industry standard and ever-important term in many entertainment contracts is that of the “Pay or Play” provision. By definition, a Pay or Play clause means that the person being hired (typically, an actor or director – we’ll call them the “artist”) is guaranteed payment regardless of whether or not they actually work.

To validate this definition, several courts having analyzed these clauses have also found that, once an artist becomes “pay or play,” compensation is generally required even if the project is abandoned or the artist’s services are terminated (unless, of course, the artist is in material default). So, essentially, the artist could be compensated for having done nothing or, a lot less than originally bargained for (although the artist might argue that, pursuant to the terms of their agreement, such is exactly what was bargained for).

But, what of the infamous Hollywood deal bound by a handshake? Both parties obviously know the universally accepted definition of “Pay or Play,” so even a verbal agreement should be free from issue when it comes to payment, right? WRONG! Whether verbal or written, additional terms that are vitally important for discussion and agreement are those relating to when the “pay or play” rights can and will be triggered.

Take this example: A studio is in negotiations with an artist to secure her services for an upcoming television mini-series. After the parties agree on all deal points, including the amount of the artist’s fixed compensation, the studio’s concession that the artist be “pay or play” and, the artist’s approval rights over a male co-star, the artist approves three actors but none of them are available. With the date of principal photography fast approaching, the studio casts a co-star that the artist disapproves. Consequently, the artist withdraws from the project and demands full payment of her fixed compensation because she was “pay or play.” What happens?

(cont. from e-newsletter) Some would argue that the artist is entitled to her fixed compensation – plain and simple! They would contend that the artist did not default on the terms of the contract and would have performed in the mini-series but for the fact that the studio did not adhere to her right of preapproval for the co-star. Opponents would alternatively argue that the artist is not entitled to be paid because her “pay or play” provision was never triggered. This argument would be based on the premise that the purpose of “pay or play” is to give the artist security that she will be paid whether or not the studio elects to utilize her services, not whether or not the artist chooses to perform.

The point here is that this contract term needs to be carefully and thoroughly defined. Aside from the ambiguities that can stem from even the written word, keep in mind that some dealmakers actually perceive some advantage in negotiating vague terms. They realize it’s a gamble of course; but they find strategically sufficient reasons to take the risk when they can get away with it.

Therefore, while “pay or play” may be as commonly a recognized term in the industry as any Hollywood lingo, this contract provision can present traps for the unsuspecting dealmaker that may come at a great cost!

You have a great business idea. In fact, in the 5 years you’ve had this idea, you can’t believe no one else has come up and out with it. Just to be sure, you have even vaguely mentioned it to a few trusted minds to see if they would respond affirmatively and, they did. One year, you went so far as to speak with a few professionals about pursuing such an idea and were sure to stress to each that you didn’t really have the know-how or financial resources to back the idea up, but if someone else would take it to market, you are certain it would be worth their time and, of course, their money. So what gives?

No matter how many times this dilemma is posed, the answer is virtually always the same: In order to get someone to invest in you, you must first invest in yourself. Would you put your neck on the line for someone that wasn’t willing to do the same for themselves? If the answer is “yes,” call us. We have a number of people that would love to talk with you. If the answer is “no,” read on. . .

Now, what you invest (both in terms of time and money) can range dramatically and, should be part of a well thought out plan that depends, in large part, on your final goal. For example, if you wish to limit your personal liability, although you already know that a family member will fund your concept, perhaps you will only seek to establish a legal entity from which to operate your business and may further dabble in the idea of securing various intellectual property rights. Alternatively, if you are seeking a loan from a bank, you might wish to approach the financial institution with a more mature company that has established some credit and therefore, some credibility that will afford it a lower-risk image, along with a detailed business plan. Or, perhaps you’re interested in working with independent investors who will take a piece of your company in exchange for some capital or, less likely, a note, but to gain their interest you need a full blown private offering memorandum, at a minimum.

Whatever your chosen course of action, and even if that action includes your having a hand at any or all of the selected process, it is important that your business plan has a ‘business plan.’ WHAT?! ANOTHER PLAN?! Yes, another plan. However, this one is more of a term of art that is focused mainly on strategy, supplemented by time and money management. Think of it this way: how can you know where you’re going, if you don’t know how you’ll get there?

(cont. from e-newsletter) Here are just a few key factors to consider when determining if and how you can bring your concept to market, be it a product or a service:

1. Is there a demand, need or room in the market for your concept?
2. Should you incorporate?
3. Are there patents, trademarks and/or copyrights that should be secured?
4. Do you need a business plan or a private offering memorandum to attract financing?
5. Do you need to develop a business team to help effectuate your goals and give your enterprise more credibility and therefore, be seen as a less risky venture?
6. Do you need a confidentiality agreement to protect your idea from those that you share it with?
7. Who will be your target market audience?
8. How will you market and advertise your business and/or product and how can you differentiate it?
9. Are manufacturers and/or distributors necessary?
10. What other sort of agreements will you need? (i.e., licensing agreements, lease agreements, independent contractor or employee agreements, etc.)

Seeing your idea streamline through commerce can be a very rewarding accomplishment! Whether your idea realizes itself into a product that sits on store shelves and sells by the truckload or materializes into a store front that provides products and/or services to the public, it is most certainly something you can be proud of. However, and except for the few charmed people we have all come across where everything good always seems to fall right into their laps, most of us have to work hard to get what’s coming to us. . . or do we? Perhaps with some planning and an investment in ourselves, one day we will find ourselves working smart, instead of hard!

So you’re a talented songwriter and damn it, you deserve a big publishing deal! In fact, anyone that questions your artistic abilities can just look in your desk drawers, or on your closet floors, or in your car’s glove compartment and maybe even its trunk, and they will find CD treasure after treasure just full of your music, clearly denouncing any question as to your talents. Now, if only a well-connected, successful, efficient music publisher would listen to your music with the same enthusiasm in which you created it, it’d be a done deal! You’d be set!

So, how-oh-how do you get to that music publisher so he or she can offer you the deal you have worked so hard for and that you most certainly deserve? How do you find that person that will share in your passion that transcends into your music, who really understands each song, who will do everything he or she can to sell and/or license those songs over and over again?

Well, think back for a minute to all of the networking events you’ve attended; to the places where you wrote those songs for countless hours; to the pitch meetings you landed; to those encouraging meetings you held with your manager. Now, think of the one thing each of those places or events had in common → you!

Your publisher is your greatest untapped resource and quite likely, it is you! Who better knows your music? Who better can you entrust it with? Who better to really work hard for the money? Who better to run your business, than you? Likely, nobody!

Upon inspection, you would find that many, if not most successful songwriters in any large publishing company are, more times than not, persons that first became successful music publishers on their own. (cont. from e-newsletter) They simply learned, some for the sake of survival, how to pitch their music; how to develop and manage their catalog; hot to secure and protect their copyrights; how to build not only a business plan, but a business team and; how to create a presence or ‘buzz’ for themselves in the infamous ‘industry.’ And, once they had done so and in turn, established for themselves an operable entity, they then also stood in a much greater position to enter into a coventure relationship with a larger, more productive and more lucrative company.

Taking this strategic and time-tested approach to building your career can prove invaluable! It is simply reasonable and not only common but, common sense, that a large publishing company is much more likely to coventure with an established, smaller company than it is to bring on a beginning writer where they would have to assume a greater risk and the consequent burden of making the relationship successful.

Also, you may wish to keep in mind that most publishing deals nowadays are co-publishing deals whereby the writer receives 100% of the writer’s share of income and also a portion of the publisher’s monies. Does this sound like a deal that favors the writer? Well that’s only because it does! Maybe not such a terrible idea after all, this be-your-own-publisher idea, eh!?

If you’re still finding this to be a daunting task and need inspiration, just read the biographies of songwriting legends like Carole King and Jerry Leiber who followed a similar path. You’ll see that it may be more fiction than fact that days existed where songwriters worked in isolation, tapping their foot to the beat of their own drummer while their songs were being shopped all over town. Rather, an aggressive, strategic and well-thought out approach that is focused on shaping those musically-inclined dreams into reality is not only time-tested, but reasonably, provides more probable results.

Are there any guarantees? Well of course not! You didn’t need anyone to tell you that. However, while common sense is sometimes not all that common; common sense here will tell you that creating your own publishing company and working hard to develop not only its operations but, its value, stands a much better chance of tendering you the riches and success you seek than does waiting for someone to show up at your door and offer it to you. Don’t get me wrong. . . it can happen; but I might rather choose the former approach . . .at least until someone comes a-knockin’!