How to choose the right contract for profit participation from your leading stars

Are you a producer or director looking to build a project around a specific actor? Perhaps you’re wondering what the best way to contract with your star would be, to ensure you get the best outcome possible? Is profit participation on the table? As the entertainment attorney Los Angeles trusts, Blake and Wang PA are perfectly placed to help you make the right contractual decisions-so let’s take a deeper look into the world of independent film production and star actor agreement.

Choosing the right contract

Firstly, so you’re fully armed with all the information, we should probably point out that the Screen Actors Guild (SAG) do offer boilerplate contracts indie filmmakers can use for their cast. Stop and think a moment, however, before you rush off to use one as a done deal. This is, after all, one of the top actor unions in the country. Is this really who you want to manage every intricacy of the contract you are about to use?

That is not, for a second, to disparage the SAG at all. They are an incredible organization that has worked tirelessly to protect performers’ rights. They have been of huge influence in ensuring safe film and TV productions with higher workplace standards. However, allowing an actor-focused union to draft the contract you will be using to protect your interests as a film maker is not in your own best interest, the same way that allowing someone else’s lawyer to draw up the agreement would not be. While it’s a quick and easy solution, it’s not going to be the best for you.

A key missing area on SAG boilerplate contracts

So, what’s missing from the SAG boilerplates that you consider? Firstly, there are no options open for equity share/ profit participation. If you’re hoping to attract a Big Name by building a project around them, then this will likely be a glaring absence. It’s also key to formulate profit participation carefully, as getting this wrong could lead to increased residual and Pension Health and Welfare obligations.

Creating a better solution

The most common way of defining profit participation for your actor comes in the form of adjusted gross receipts. Don’t let the terminology frighten you! You may well be conditioned to avoid sharing ‘gross’ with actors if at all possible, but it’s important to realize that not all gross profit is created equally.

Adjusted gross receipts, or AGR, allow you to take into account the costs of production and are, in fact, defined on the production side. In short, distribution and sales fees are removed from the figures.

Deciding on a percentage to offer

So what percentage would be ‘correct’ to offer? Generally, you’re looking at a range from alow 2.5% to a high 15%. Obviously, the higher amount is more typical for a big name celebrity who’s working at scale, or for considerably less than their usual bankable figure.

But a percentage in itself is meaningless. A percentage of what, exactly ? Here you need to make sure your production company has strictly defined its revenue-sharing definitions. And that, of course, is not something that comes with a ‘Legal Zoom’ or similar template LLC. You may not have read all the way through the proforma that came with the filing service materials, but you didn’t miss anything of value, either. Expect nothing much but old, and often outdated, code provisions. In short-don’t assume you’ve got the definition of AGR somewhere. Ensure you sit down with proper legal counsel and craft it, with precise thought to your goals.

With a specifically crafted contract created with your best interests in mind, and a clear idea of both the percentage you wish to offer your Name, and the definition you are using to outline your AGR and revenue sharing definition, you’ll be in a far stronger position to offer a deal that will work for both of you.

Blake and Wang PA didn’t become one of the entertainment law firms San Francisco loves for nothing. We have decades of experience in helping indie filmmakers like yourself create, ratify and administer contracts across a host of projects. No matter what future you envision for your project, let us help you create a solid foundation today.

WGA show runners may struggle to pitch to networks through agents: an in-depth look at the situation

The process of deciding whether to pitch your project through a specialist entertainment lawyer, a management firm or an agency can be a tricky one. For WGA show runners, it’s been further complicated by some recent demands from the WGA itself. Today, Blake and Wang PA simplifies the issue for you, keeping you on top of industry changes as always.

Are you a WGA writer?

If you’re considering looking for representation for your TV project, whether or not you are signed with the WGA could play a heavy part in your decision-and even limit your options.

The WGA, or Writers Guild Association, has been locked in an ongoing dispute with the Association of Talent Agents for a while now. The WGA is insisting that members fire agents if they have not signed a new Code of Conduct. The key change prohibits the agent from packaging work on behalf of production companies. It also seeks to curtail agencies from creating their own production companies.

What does that mean for you if you are a WGA writer?

Needless to say, none of the larger packaging agencies have bitten on this one. Without a Code of Conduct, you’re not allowed to work with them, either. However, there is some stellar news: there are fantastic smaller agencies that have signed you can work with, and they’re definitely worth consideration.

There’s even better news-the changes to the code of conduct still allow you to work with management firms and entertainment law firms like ours for representation, and that may even be a better fit then an agent.

Why did they take this decision?

Speaking honestly, the measures now put in place are designed specifically to target the ‘big four’ talent agencies: WWM, UTA, CAA, and ICM. They’ve been at the center of many debates with the WGA. With some incredibly big-name performers and directors in their stables, they bring a lot of value to represented projects, after all. Smaller agencies tend not to have the same large talent book in-house, and have to pitch projects to other cast or agencies to assemble the needed talent before approaching the networks or production companies.

The nexus of the issue lies in the ‘big four’ being paid by production companies and networks for packaging services. This bypasses the commission system through 3rd party payments.

What is your opinion on the matter?

It is slightly unrealistic, on the writer’s side, to expect their agencies to fully finance project development. That said, packaging is indeed a conflict of interest. Is it a necessary one, however? Well, the only real person who will be able to foot the bill for the production, at day’s end, is the producer. Writers staying out of the business side of the industry, wanting to be courted by others, will create cost issues under the WGA’s current vision of TV development.

 For WGA writers, the new Code of Conduct changes have created a sticky atmosphere. Fortunately, there are still smaller agencies who have signed the Code of Conduct you may choose to work with. Additionally, don’t forget that there are always management companies and, of course, entertainment lawyers in San Francisco or Los Angeles like Blake and Wang PA.

We’re always happy to hear from you, so feel free to get in touch today. As always, we do not offer the summary above as legal, tax or accounting advice, and urge you to seek legal counsel for your own projects.Top of FoBottom of Form

Pitching season and pilot season-are they still relevant?

If you’ve hung around the business long enough, chances are you’ve heard the terms. ‘Pilot season is coming, it’s time to get your work out there!’ Or maybe you’ve been advised not to pitch outside of ‘pitching season’. Is this open industry secret something you really need to consider, or has the globalization of the modern industry diminished the importance of ‘pilot season’ for the aspiring producer? Blake and Wang P.A take a closer look.

Does ‘pilot season’ even matter anymore?

The short answer for this one is ‘Yes’. ‘Pilot season’ and ‘pitching season’ are both critical times of the year. Even more so if you’re interested in scripted network TV. That’s not to say there hasn’t been industry changes-reality TV tends to accept year-round pitches. Netflix and Amazon are also more open to starting programs year-round instead of in a fixed season. It even seems that Peacock, Disney + and HBO Max will follow suit in order to stay competitive.

If your eye is on major networks, however, and even (though to a lesser extent) cable networks, there’s still a program schedule for scripted programs you’ll need to fit. If you want to make the very best possible pitch with the greatest chance of success, you need to work with this. Making a successful pitch will roll you into pilot season, after which the execs will make the decision on what gets fully developed.

What about pitching season?

No matter how major the network, they’ll start hearing pitches from January on down. Late May to early June, however, is undoubtedly the most hectic time of year for pitches. It’s all tied to Up fronts, which are held in the 3rd week of May annually.

Series, both scripts and concepts, are traditionally pitched from June until the December Holidays. During the Holiday season proper, execs will sort the short-listed concepts to see what gets a pilot order. Come January, we will roll back into pilot season and start the cycle again. A good pitch will get your pilot green lighted.

What if I’ve already produced content?

You may be wondering what to do now if you already have content in the bag. Sizzle reels will be considered overall as part of your series concept, so they don’t change anything at all. You can continue to plan around the dates we outlined up above. If you’ve already shot your pilot independently, it’s a little different. We’ll also look at this in further detail in a separate article. It’s important to realise independently shot pilots, while still unusual, are no longer seen as the remarkable risk they once were. With a great producer, a smart concept could easily take this route to skip much of the traditional process and give Network eyes a finished pilot to consider. One they didn’t have to bankroll, which is always attractive.

Despite the changes made to the industry by streaming services and their non-stop need for new content, pitching season and pilot season are still key milestones the independent TV producer needs to consider. As entertainment lawyers based in New York and Los Angeles both, we’ve represented many successful series concepts and pilots to the networks. Whether you’re aiming for major networks, cable or streaming platforms, the Blake and Wang P.A team have the expertise and experience you need for a successful pitch and pilot season. Why not consider letting the team help you to succeed?

As always, we’ve provided this information to help keep you informed on the state of the industry. It shouldn’t be confused with legal counsel, tax advice, or accounting advice, and we always advise that you hire legal representation to assist you.

Entertainment Insights–How the section 181 film tax deduction works

Many people assumed the Film Tax Deductions that expired back in 2016 may never return, but, the new Section 181 Tax Deduction was passed as part of the Tax Cut sand Jobs Act of 2018, which is great news for anyone looking for private investor financing for a feature film, television series or a live stage production.

 Since the purpose of the old Section 181 Tax Deductions was to create tax incentive for investors involved in entertainment productions made in the United States, likewise, the new version creates 100% deduction for any money invested in a film,television series or stage production that is produced in the US, and qualifies under the original qualification standards of Section 181.

This means, for every $1.00 invested in a film or a television series, the investor can write-off 37 cents from their tax return. Like the original, the new Section 181 Tax Deductions can be taken when a producer sets up a qualifying securities offering, in which the private placement memorandum (PPM) and other provisions of the securities offering have been drafted by a recognized entertainment lawyer in Los Angeles, San Francisco and New York, like ourselves, to incorporate the new depreciation rules found in the 2018 version of Section 181 Tax Deductions of TCJA.

Investors that are subject to United States federal income tax can benefit from the new Section 181 Tax Deduction under the Tax Cuts and Jobs Act 2018.

Entertainment Insights–Difference between the New and Old Section 181 Tax Deductions

As Section 181 Film Tax Deduction expired at the end of 2016, many assumed it would never return, until the new Section 181 of the Tax Cuts and Jobs Act emerged with same benefits specifically referencing the original Section 181 Tax Deduction.

Though it is based on the premise of the original text, the new Section 181 Film Tax Deduction is different in a couple of ways that make it even better for investors and producers.

To begin with, there is no cap to the Section 181 Deduction any longer, and even projects budgeted over $15 million can take advantage of the deduction.Although all producers and investors can benefits from it with the help of an entertainment law firm in New York, Los Angeles, and San Francisco, the studios and networks might be the biggest beneficiaries of the deductions,as every film and television series produced in the United States for the next 5 years will be able to take advantage,if the production qualifies under the original qualification standards of Section 181.

The way that the deduction is taken by the production company is now different as well, and rather taken as an expense, it is a form of depreciation. The provisions are complicated for anyone but,the top entertainment attorney in Los Angeles, New York, and San Francisco,like us,who is familiar with the tax law, to create the same benefit for investors as under the original Section 181 Tax Deduction.

Finally, there are no special-zones where certain geographic areas get a higher-cap anymore since the cap has been removed altogether, benefiting investors and producers.

Copyrights for Film and Television

Of the many issues top entertainment law firms in Los Angeles, San Francisco and New York like us assist with, the two I will focus regarding rights are, the idea of ‘derivative work’, and the US Copyright Act requirement for a ‘signed writing’.
In film and television we usually talk about
1) the “underlying work,” such as a book, short story, comic book, etc.,
2) the script, and
3) the film or television production itself.
Not based on previous work, the ‘underlying work’ is considered to be original, and is copyrighted solely in the name of theauthor(s) or the company that commissioned it.Each subsequent work based on the original are ‘derivative works’, and therefore must be licensed from the original author(s).
If a script is based on a story, then the script is a ‘derivative work’, and your rewrite of the script is a derivative of a ‘derivative work’. To proceed, you would need to license the rights, with the help of an entertainment attorney, Los Angeles based, from both the original and the first script authors.
Coming to the second issue, the Copyright Act specifies that a ‘signed writing’ is needed to transfer rights, without providing any specific template. Electronic communication has brought issues regarding ‘signing’, too.The federal ESIGN Act clarifies this, making it a federal law, that digital signatures are considered to be as binding as paper signatures.
Often times, emails are ‘signed’ by the sending party, but they can be altered, which raises concern. Similarly, text messages, Facebook and Twitter posts areconsidered signed writing in some ways, but not expected to be formal contacts by the parties sending them.
The best advice is to be cautious, and never rely on an email or text message to be final disposition of the underlying rights. Every project has the potential to become valuable in the future. Have a formal contract drafted, or have an existing reviewed by the best entertainment lawyers in Los Angeles or New York like ours. It is not just the transfer of rights and the division of royalties and profits, but there are other legal issues that should be taken into account as part of a rights agreement.