Television series and films are often developed, produced and exploited by multiple production companies working together. The co-production agreement is one option to outline the working relationship between the partners. While every situation is unique, there are recurring aspects of the relationship that should be discussed among the partners and reflected accurately in the co-pro agreement. Clearly outlining your relationship at the outset can save time and money later on. To assist, the following are summaries of ten of the key considerations, specifically in the context of a Canadian domestic co-production:
You may choose to incorporate a single purpose production company (“SPPC”) to produce and exploit the project. The co-producers must decide in what proportion they will split the SPPC’s ownership, sometimes referred to as the “co-production split,” which includes the project’s copyright. For more information on assigning concept rights to a SPPC, please refer to our earlier blog on the subject. In an international co-production agreement governed by a treaty, the split governs ownership, copyright, work, financing contribution and exploitation profits.
Who calls the shots? The director or the Directors? The SPPC’s Board of Directors have ultimate control. The co-pro agreement can set out how many Directors will sit on the Board, and how many each producing partner can designate. If one partner can designate most of them, they have control. The co-pro agreement can set out the officers (president, etc.) and require the parties enter into a shareholders’ agreement consistent with the co-pro agreement’s terms.
3. Decisions and Approvals
When the partners have an equal number of Directors on the SPPC’s Board, it may be especially helpful to distinguish between which producers have final approval on business and/or creative decisions. It could be structured so that one partner has business approvals, while all partners share control of creative decisions.
4. Budget, Financing and Delineation of Work
Among other roles delineated to the partners, are controlling budget and cash flow, responsibility that the tax credit applications are submitted, and maintaining the bank account. Key budget discussion points include how the producers’ fees will be split, who will be entitled to corporate overhead fees and/or provide and be reimbursed for providing production services and facilities. Will the partners agree that specific people will take on key roles in the production, from writer to director?
5. Distribution and Exploitation
Once you have developed and produced the project together, what about exploiting it? Perhaps only one partner will get to choose your sales partners / distributors. How will net profits be calculated and split? Also to consider is the exploitation of ancillary / secondary rights including merchandising, which may be based on the co-production split or another pro-rata allocation of profits.
So long as they fulfill their end of the bargain, what on-screen credits will be given to each company, and their key players? Will one partner be given the right to approve all other credits?
Speaking of not fulfilling your end of the bargain, what happens if your partner doesn’t follow through on his or her obligations? The co-pro agreement should contemplate the rights of the non-defaulting co-producer, perhaps requiring that the defaulting producer, after a period to cure the default and subject to buy-out provisions, assign their rights to the non-defaulting producer who may proceed with a substitute producer.
8. Dispute Resolution
As an alternative to taking your partner to court over a dispute, the co-pro agreement should set out an alternative dispute resolution process involving mediation and arbitration.
9. Term / Termination
When partners are developing a project from scratch together, the co-pro agreement’s term might be open ended. However, if one party brings the concept or script to the other(s), there may be a set time limit to reach certain milestones (obtaining financing, commencing principal photography) with the alternative being that the rights in the concept revert to the party who brought in the idea. Don’t forget to deal with what happens to the IP created jointly during development…!
10. Future Productions
Whether it’s the TV show’s next season or the film’s sequel, contemplate those future productions now. If one party intends to produce and exploit additional productions based on the concept, perhaps that party must give the other written notice of its intention, and a time-limited option to participate on the same terms as the original co-pro agreement.
A final all-encompassing note for now is to properly identify the project in detail, from its working title and description, to other mutually approved elements, which also helps to proactively avoid future disagreements.
These notes merely touch on some of the issues to consider when planning a domestic co-pro agreement. There are other considerations and situations, including when there’s an international co-pro agreement, which will be the subject of a future blog.
Edwards PC, Creative Law is a boutique law firm provides legal services to Music, Film, Animation, TV, Digital Media, Game, Software and Publishing industry clients. For more information and blogs, please visit www.edwardslaw.ca
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* This blog is for general informational purposes only and is not to be construed as legal advice. Please contact Edwards PC, Creative Law or another lawyer, if you wish to apply these concepts to your specific circumstances.