Subsidiary Rights — Ralph Sevush/David Faux
Subsidiary Rights
Faux began by discussing the terminology of Subsidiary Rights: common understanding being — corporate — wholly owned subsidiary — this thing that exists for the benefit of the other thing. They both went on to discuss that in any main production of a play/musical — certain rights are triggered; and that these rights exist purely due to the main production; successful productions have other descendants: for instance, a successful play may result in publication, which is a subsidiary right: another production elsewhere at a higher level of prestige, a movie, etc.
Probably one of the most troubling things that Sevush pointed out is that there are works can get encumbered to the point that they are unproduceable. This led Sevush to caution that playwrights must pay attention to what is happening at the front end of the process. For example, a play gets produced in 2 LORT theaters at 5% each and has an equity showcase at 5% and a director has attached some % to it; by the time the show gets to NY there is already upwards of 15%-20% taken off the top. This may result in not enough of a %age left to make a producer interested in the show: and so it never gets produced. That is frightening.
Often subsidiary rights have to do with proximity to the event or direct lineage of benefits (subsequent to). That is, if a show is doing great and someone in the audience says, hey we should make a movie of this, there is a connection between the production and the movie, that triggers certain subsidiary rights. However, if a movie of a play is made 10 years after it has been staged, that connection is no longer direct and subsidiary rights may not be triggered.
Additionally, during a production contracts often grant rights to a producer–stage production, tchachkes, souvenirs, albums (ancillary); but there are rights that you reserve.
For the explicit record, a playwright owns his/her play.
During any production the producer gets limited license; as the playwright you own the right to re-license; tabloid productions; derivative works; subsidiary rights are rights subsequent to a production and do not have anything to do with the main rights—or Grand Rights, of ownership of the script property.
Producers make profits from the production, as do investors. But often it may not be enticing enough for the investors to simply back a play; so they are enticed by participating in a revenue stream that goes beyond the production; that is, by promotions, souvenirs, etc., producers assert that “we have added value that goes beyond the original production” (producer) – and that investors will get a piece.
Sevush notes that this line of thinking was important when shows had to pay for themselves; but that as time goes on there are changes, especially with non-profit “producers” entering the picture. Further, that it is not the same rationale for NonProfit theaters to advance the initial rationale (revenue stream); that ForProfit producers advanced.
Broadway model of subsidiary rights: 40% of revenue for 18 years subsidiary rights share (model from broadway) just to open (that is, the play opens one night and then closes). Think “The Producers” begging for a flop.
Sevush proffered an equation: %, duration, territory = parameters get negotiated (how much, for how long, where). That is, the percent of the revenue share, the amount of time over which that share will persist; the scope of the territory or domain in which that rule applies.
Broadway producers get the greatest commercial share of subsidiary rights, usually descending (40% 10 years, 35% next year, 30% next, etc.); get a certain percentage for film over the lifetime of the deal.
40% for 10 years (off broadway); 21 performances with a press opening gets 10%; 32 performances gets 20%, etc. scales. Industry standard
LORT = 5% for 5 years (standard) concession by DG; though a concession based on not fighting about it; this is being re-considered now by the Guild.
For a show produced on Broadway the territory is US and Canada.
Sevush encouraged those in attendance to think of subsidiary rights as a rock in a pond (broadway is a big rock). There are different rights based on the venue and purpose of the event: equity showcase; LA equity waiver for spaces with less than 99 seats, etc.
Sevush posits the question: what value have the producers added? reviews? etc
Sometimes they’ll ask 2-3% equity showcase; what does the author get on the front end? if the producer gives you no $$ / royalty, etc. then they should not be asking for $$ on the back end. If you paid me nothing, why am I paying you?
What has troubled Sevush is the expansion of this approach to taxing subrights for developmental workshops and festivals; as Sevush points out, theaters haven’t even produced your work, you have self-produced (in a festival) fee to apply, likely a participation fee, pay a chunk of the box office (if you get anything), and you don’t control the schedule, location, press, etc. AND these theaters want subsidiary rights, perhaps something like 2% for 7 years.
Sevush is even more incredulous when looking at Not-for-Profit; that these theaters get the benefit of tax exemption and exist for charitable purposes so they should be taking the risk of a for-profit theater w/o sticking it to the artist.
I both agree and disagree with this perspective; having received a Certificate of Non-Profit Management at Case, I know that the notion that Non-Profits not profit from something is misconceived. The signature point of Non-Profit status being that any financial benefits may not “inure” to any individual. That is, money that goes into a Non-Profit must, by law, go to the organization and not to any individual, i.e. shareholder, as in a For-Profit corporate model. I do agree with Sevush that there is a charitable purpose for which these organizations exist and that the “shareholder” who should benefit (or one of them) from the operations of the NP is the artist; and that NPs that gouge artists are looking in the wrong place; as Sevush points out in his article in the Sept/Oct 2010 issue of The Dramatist. (However, I will point out that PBS has suffered for never adequately taking steps to recoup %ages from Sesame Street back in the day.)
Some definition was given to theater classes:
1st class (broadway 1,000 seat theaters, actors, etc at top of their rates)
2nd (500 seat houses, etc)
Middle tier theaters tend to be non-profit; often plays will be produced with regional theatres and those theaters will take the hit but a certain % will be loaded into contracts so that they benefit from future rights in NY if it goes to Broadway, for instance. Pay option rights for future.
Must keep in mind the question “What is the value added?” Not just perception, but the actual amt of $$ they’ve invested in the production. For instance, Sevush asks, “If you’re produced in Peoria are you getting the same value as if you’re produced in NY?” For instance, Samuel French will not publish the print copy of a play if the show has not been produced at a commercial or Non-Profit theater in NY.
Goal for contracts will try to get the larger production share to be picked up by the next producer up–so if you option 5% of your subsidiary rights to Peoria and the show goes to Broadway where they take 40%, you want to get a contract that has the initial 5% absorbed into that 40%.
Probably one of the most troubling things that Sevush pointed out is that there are works can get encumbered to the point that they are unproduceable. This led Sevush to caution that playwrights must pay attention to what is happening at the front end of the process. For example, a play gets produced in 2 LORT theaters at 5% each and has an equity showcase at 5% and a director has attached some % to it; by the time the show gets to NY there is already upwards of 15%-20% taken off the top. This may result in not enough of a %age left to make a producer interested and the show: and so it never gets produced. That is frightening.
You own the property; if they want a piece they have to come to you.
Examples of when %ages might be requested: Actors where there is an improvisational component; Directors might want; 0-10% based on a “good production”; Dramaturg might want a piece (RENT case).
The Playwright licenses the play to the producer who then hires the director; so you as a playwright should NEVER sign any agreement with the director.
Scenic designers can get re-use fees if the design is re-used, but the producer should pay this fee and it should not come out of the playwright’s contract based on %ages.
Book doctors/script doctors. Commmercial. Producer can replace the author if the work is based on an underlying original work. The producer owns the underlying rights of the work.
SDC (society of directors and choreographers) they are a union; they are employees; they get paid fees, have health insurance, etc. That is, a writer runs the risk of never getting anything (no read, no produce, etc) but a writer is not similarly situated with a director–who has certain benefits.
Article — DG is attempting to role back some of the rights that np theaters have presumed to take with regard to subsidiary rights. For instance, the NY Public has waived its interest in the first $75,000 the author makes after the production. Still 10% over 10 years. “Windfall”. There’s other ways, fees up front and % of the door to the theater, with no subsidiary rights. LORT 5-7%.
Publication rights (Sam French) if the play wins the festival. When you sign up for the festival there are certain things that you agree to.
